Lloyds TSB is using high-performance computing (HPC) technology to improve its risk management and valuation capabilities while the banking industry comes to terms with the turmoil across the sector.

These two key areas of wholesale banking will be among the main priorities for the financial services giant in the coming year, as it seeks to adjust to fundamental structural changes in the industry caused by the downturn.

The introduction of HPC to support the bank's global derivatives infrastructure has been accelerated as it faced increasing pressure to simulate a growing number of risk scenarios, said Ricky Higgins, IT director in the products and markets group at Lloyds TSB corporate markets division.

"The determining reason to introduce a high-performance environment was the need to add scale to the [derivatives] platform and rapidly bring new products to market," he told Computing.

"One of our most complex products uses a tree-like structure to generate valuations and is very memory intensive, so if you are limited on that front, you will see a slowdown in your competitive performance."

Lloyds TSB's decision to roll out Microsoft's Windows HPC Server 2008, as opposed to Linux - which is used by most financial services firms - was based on its long history as a Microsoft customer, said Higgins.

"If I were to use Linux, I would need a different skill set and it would add to the number of tools we have, therefore increasing costs rather than decreasing them," he said.

The implementation of Windows HPC Server for the bank's derivatives platform was carried out overnight, followed by a two-week pilot preceding the switchover of production loads to the new environment.

The migration follows an IT infrastructure upgrade at Lloyds TSB, which includes the consolidation of its risk management and simulation platforms to be completed by the first quarter of next year. By that time, the use of HPC will be extended to other areas of the corporate markets division, such as fixed income.

By using the technology, the bank has achieved a 50 per cent increase in trading volumes through the reduction in time spent on risk valuations, said Higgins.

"The response has been positive so far. Our head of trading and chief executive were impressed by the fact that we have managed to deliver an innovative solution very rapidly and increase revenue to the business," he said.

Financial services firms are set to increase investment in risk management initiatives in 2009, and software platforms to help integrate and manage their efforts will be crucial to their success, according to research by risk and compliance specialist OpenPages.

"Companies are focused on converging disparate risk management efforts to improve their visibility into the risk inherent within the business. Further, despite the economic slowdown, companies are willing to invest in technology to improve risk management capabilities," said the report.