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Solving Regulatory and Operational Needs for Today AND Tomorrow
June 18, 2014
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How Stable Is Your Risk and Finance Process?
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Market Travels
• Over the past 3 years, have visited ~83 of the top 250 banks, or 33%.
• Primarily spoken to CFOs, CROs, CCOs, and Controllers
• Topics included our space, primary bank challenges, future initiatives
Category # of banks Visited Banks %
Banks/GSEs >$50b of loans 25 18 72%
Btwn $10b - $50b of loans 50 18 36%
Btwn $2b - $10b of loans 175 47 27%
Top 250 banks 250 83 33%
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1. “Tsunami of Change” --- Today and Future
2. Making Money
3. Integration of Risk / Finance Functions
4. Need for Greater Analytical / Forecasting Capabilities
5. Process Inefficiencies / Long Close Cycles
Top Challenges
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What are the Common Elements Preventing You from Dealing with These Challenges?
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Data1
2
3
4
Models / Model Execution + Skills
Accounting / Reserving Automation
Reporting
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Challenges and Initiatives
Data1
Challenges Initiatives
1. Chief Data Officer
2. Servicing System Upgrades
3. Loan Risk / Finance Centralized Data – ONE COMMON SOURCE
4. Operational Procedure Changes (SHOULD NOT BE TABOO!!!)
1. Data History
2. Data Quality / Gaps
3. Decentralized Data
4. Data Not in Digital Form
5. Data Governance
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Challenges and Initiatives
Challenges Initiatives
1. Model Estimations (Tier 1)
2. Third Party Model Provider Implementations (Tier 1 and Community)
3. Model Validation Efforts
4. Model Teams
1. Lack of Models (Community Banks)
2. Lack of a Centralized Model Execution Platform (Tier 1 Banks)
3. Model Relevance to Concentrations (Community Bank)
4. Lack of Skilled Personnel with Model Backgrounds
2 Models / Model Execution + Skills
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Challenges and Initiatives
Challenges Initiatives
1. Investment in Automation to Eliminate Spreadsheets
2. Outsourcing
3. Unified Reserving Projects
4. Separation of Operational Accounting vs. Specialty Loan Accounting
1. Manual Loan Accounting
2. Manual Reserving
3. Recons, Recons, Recons
4. Disaggregated Loan Basis
5. No True Sub-ledger
3 Accounting / Reserving Automation
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Challenges and Initiatives
Challenges Initiatives
1. Who Doesn’t Have a Data Warehouse Project Going?
2. The Dreaded Reporting Data Mart Project
1. All Manual / Time-Consuming
2. Level of Granularity Not There
3. No Ability to Drill / Analyze
4. Multiple Perspectives, Unreconciled
5. Too Late
4 Reporting
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So What Can’t I Do?
1. Reconcile Risk vs. Finance Perspectives
2. Adequately Explain My Reserves
3. Scale My People
4. Stop the Firedrills
Current Stuff
Future Stuff1. Unprepared for Stress Testing
2. BASEL
3. CECL
4. Acquisitions
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What Type Of Architecture are Banks Contemplating to Address All This?
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04/11/2023 13
Sources
Transaction Data
Risk Data
Views
Current (GL and
Regulatory)
Future (Forecast)
Core Banking / Servicing Systems Cash and Operational
Entries
CRE Mortgage Consumer C&I
Op
erat
ion
al
Lif
ecyc
leR
isk
and
Fin
ance
L
ifec
ycle
Data Enrichment
and Management
Common Data Layer for Risk and Finance
Credit / Reserving Automation
Loan Accounting Automation
Loan Level Risk and Finance
Reporting
Models / Model Execution
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M&A Accounting
Integrated Risk / Finance
Data1
2
3
4
Models / Model Execution +
Skills
Accounting / Reserving
Automation
Reporting / Disclosures
CECLStress TestingCurrent
Reserving
One Platform architected to address the four primary components can serve as the one solution for all loan risk and finance needs.
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Rule #1: If every room has a leak due to a crack in your main water line, don’t patch each room…..FIX THE CRACK!
Point Solution = NO!!! Integrated Solution = YES!!!
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Rule #2: Putting in a Data Warehouse simply to enable every group to do their own thing is like building your house on sand
Data SQLs with Offline Spreadsheets = NO!!!
Common Data Layer with Integrated Solutions = YES!!!
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Rule #3: Saying that an “Accounting Problem” should be solved for by an “Accounting Firm” is like hiring a home inspector to build you’re new extension
Accounting Experts Only = INCOMPLETE!!!Experts + Integrated Software= YES!!!
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Strong Foundation + Smart Integration = More Profitable Inn
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This document is protected under the copyright laws of the US and other countries as an unpublished work. This document contains information that is proprietary and confidential to Primatics Financial LLC, and by accepting receipt of this document the recipient agrees not to disclose, or to otherwise duplicate or use, this document or its contents in whole or in part for any purpose other than in connection with services or deliverables to be delivered by Primatics Financial LLC. Any use or disclosure in whole or in part of this information without the express written permission of Primatics Financial LLC is prohibited. © 2014 Primatics Financial LLC – All rights reserved.
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Contact
NameJeff SantCo-Founder and EVPPrimatics Financial8401 Greensboro DriveSuite 300McLean, VA 22102