Sumitomo Bank Ltd., the world's fourth-largest bank, is installing asset-liability and interest rate risk management software from Risk Management Technologies, Berkeley, Calif.
The deal is significant in that Japanese banks typically purchase their software from companies also based in Japan.
Deborah Williams, a technology analyst with the Tower Group, a Wellesley, Mass., consulting firm, called it a "coup" for a U.S. vendor to crack the Japanese bank market.
"Japanese banks are suddenly deciding that they can buy U.S. technology," she said. "Traditionally they have either developed it themselves or have had it custom developed for them by Japanese vendors."
Terms of the deal were not disclosed.
The Risk Management Technologies software is designed to help banks manage the interest rate sensitivity and liquidity of their assets and liabilities. By balancing ideal combinations of assets, liabilities, and risk, banks aim for a stable flow of net interest income.
Sumitomo's move to new software comes as part of the $575 billion-asset bank's response to the crisis affecting the Japanese financial system.
The country's stagnant economy has forced Japanese banks to contend with a lot of so-called "hollow assets" on their balance sheets, including overinflated real estate holdings and loans that are either shaky or nonperforming.
The Bank of Japan, the nation's central bank, is encouraging its major banks - many of whom rank among the world's largest institutions - to be more aggressive in valuing their assets.
To shore up its ability to measure interest rate risk, Sumitomo sent a large team to the United States earlier this year to gather firsthand accounts from several American bankers who use risk management software. They visited Chemical Banking Corp., Citicorp, Banc One Corp, and Huntington Bancshares.
These "systems in the United States are better than Japanese systems," said Kenji Aono, an assistant manager with Sumitomo's corporate planning department.
He said the bank needed to "catch up with the management of interest rate risk ... as soon as possible."
Alan Tobey, a manager with Risk Management Technologies, said that although many of Japan's large banks are "generally in good shape, most of them have some real owning up to do about the real value of their assets."
Sumitomo "has been much more forthcoming about writing off their problem assets than other banks," Mr. Tobey said.
David LaCross, chairman and chief executive officer of Risk Management Technologies, called Sumitomo's purchase "a very significant project that is sponsored at the most senior levels of the bank."
"It's quite remarkable," he added, because of the level of attention that the bank has placed on the implementation.
"They have assembled people all over Sumitomo Bank to form a new organizational structure that is involved not only with this project, but with the overall risk management process of the institution."
Officials said Sumitomo is investigating whether it will run the Risk Management Technologies software on a symmetric parallel processing system or a massively parallel processing system. The decision will come soon, however, since the bank plans to have fully installed the software by December.
Massively parallel systems are a tightly woven cluster of multiprocessors that house hundreds of central processing units. The Tower Group said symmetric multiprocessors perform many different tasks in parallel; massively parallel machines "break down each task into many independent subtasks and operate on them simultaneously."
Risk Management Technologies has 18 installations, the most notable being Credit Suisse, Zurich. It is also developing a customer-level profitability system, which will be available some time next year.
Although none of the company's clients operate on massively parallel machines, "the hardware and the data base technology are coming together," Mr. Tobey said.
The bank plans to use hardware from International Business Machines Corp., Hewlett Packard Corp., and Digital Equipment Corp., and data base software from Informix Inc.