Category: Uncategorized

The onslaught of regulatory requirements has forced purpose driven technology buildouts.  Meeting regulatory requirements is, and will always be, the critical objective.  As a result, valuable data has been developed in project silos and Financial Institutions are missing an opportunity to realize the potential of this information.

These regulatory driven IT buildouts generate tremendous amounts of data – Big Data – however, due to the challenging nature of rushed technology buildouts, Financial Institutions are not realizing the strategic benefits of this information.  Bringing this data together is crucial for generating important and actionable insights.

In order to leverage this information, institutions must:

• Ask the right questions
• Develop the capability to bring the data together across silos
• Build the reporting necessary to generate actionable insights

Financial Institutions have an opportunity to break the complacency of analyzing last month’s data in order to make next month’s decisions.  Big Data powered analyses can be used to develop important insights for making near real time strategic decisions.

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Nextgen Strategic Advisors has a detailed vision on how to unlock the power of regulatory driven data.  Please contact us to schedule a meeting.

The regulatory creation of the Intermediate Holding Company has ignited an evolution in the role of the IHC CEO.  The emerging trend in the IHC CEO role is the transformation from an oversight and business development role towards a strong strategic and business management role.  The primary driving forces of this evolution are being driven by the increased focus on the CEO due to:

• Federal Reserve oversight of the consolidated US entity as a result of the Dodd-Frank enhanced prudential standards for foreign banking organizations.
• Headquarters Senior Management’s new found ability to review the consolidated IHC financial performance and their demand for growth and profitability.
• Scarce resources constraints requiring U.S. centric decision making.

The Regulatory and Headquarters focus on the IHC’s financial performance is empowering CEOs to overcome the historical challenges of managing across a matrix organization and breaking down the silos of business dominant U.S. buildouts.

CEOs are beginning to demand the enhanced management information required to make strategic decisions that will drive increased profitability and scarce resource optimization.

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NextGen Strategic Advisors has a detailed vision on the evolution of the IHC CEO role.  Please contact us to schedule a meeting.

The post crisis regulatory environment has dramatically changed the strategic premise of all financial institutions.

Regulators have required Financial Institutions to capture and analyze data at increasingly granular levels.  These implementations have typically been completed in functional and technology silos with the primary objective of meeting regulatory deadlines.  Bringing this data together can create powerful management information that can provide actionable insights for decision making at the transaction, product, customer and BU levels.

The opportunity exists for firms to leverage these regulatory implementations into comprehensive management information enabling fully-allocated enhanced views of profitability, analysis, and decision support including:

• Business Unit Profitability
• Customer Profitability
• Transaction Profitability
• Improved Risk Reporting
• Superior Legal Entity Governance
• Enhanced Board Risk Committee Reporting

Integrating data sets across silos will lead to more accurate management information that can be used to make better informed strategic decisions necessary to improve profitability.

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NextGen Strategic Advisors has developed a detailed vision on leveraging the regulatory investment.  Please contact us to schedule a meeting.

The Republican led Congress has been vocal about “dismantling” and “repealing” the Dodd-Frank Act (DFA). The reality is that many of the requirements will remain in place. That said, it is possible to obtain clues into the key aspects of DFA that the new Congress will target by looking at the House Financial Services Committee’s Financial Choice Act (FCA). The FCA was approved by the Committee on 9/13/16. The FCA provides Financial Institutions that maintain a 10% Supplemental Leverage Ratio relief from: constraints on dividends; maintaining “total loss absorbing capital”; complying with liquidity coverage and net stable funding ratio constraints; and submitting living wills. The FCA repeals the Volcker Rule and significantly diminishes the authority of the FSOC. Importantly, the FCA does not change Title VII (derivatives) other than requiring the SEC and CFTC to harmonize oversight to relieve compliance burdens.

Jeb Hensarling (R), Chair of the House Financial Services Committee, has said that he is interested in working with the new administration on the FCA version 2.0. With a Republican controlled Congress, it is likely that DFA constraints will be loosened. As one lobbyist said “this is the first time that the banks have been on the offensive in years.” However, Senate Minority Leader Chuck Schumer (D) says that he will block DFA reforms. While the FCA provides clues on the regulations targeted for reform, it will take time for any reforms to be approved. This means Financial Institutions will need to continue implementing and managing to existing DFA regulations.
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The recently issued Interagency Guidance on Funds Transfer Pricing presents challenges for meeting requirements:

Extensive Challenges:  FRB, FDIC and OCC Guidance on Funds Transfer Pricing

The FRB, FDIC and the OCC issued an Interagency Guidance on Funds Transfer Pricing (FTP) practices for Large Banks and FBOs with CUSO assets of >$250BB (expected to be applied to banks with assets >$50BB over time).  The Guidance identified four principles that define the requirements firms are “recommended” to follow.

The implications for implementing the recommended FTP principles are wide-ranging and pose challenges depending upon the comprehensiveness of the firm’s current practices.  In order to comply, firms will need to formalize their FTP controls and practices regarding governance structure, policies and procedures documentation, firm-wide consistency, methodology documentation, model validation, detailed reporting, IT improvements and management oversight.

Determining the appropriate level of compliance will be challenging, while implementing the recommendations will be far-reaching, complex and costly.

Successful implementation could result in strategic benefits including: more effective risk-adjusted profitability analyses at the business unit, customer and transaction levels; increased Treasury empowerment; enhanced asset and liability risk management; and, better alignment of funding and risk taking activities.

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NextGen Strategic Advisors has developed a detailed approach for Meeting the Interagency Guidance FTP Challenges.  Please contact us to schedule a meeting.