A. P.:“ Several banks we have talked to have plans to remove their static data warehouses in favour of direct connection to the source. This is because they are finding data warehouses made aggregation hard or produce delayed data. So for anything related to BCBS or SA-CCR we are seeing banks go straight to the source.”
Cost is of course a big concern. How would you suggest banks approach this issue?
A. P.:“ I think there are two ways that banks can look at the cost of building the capabilities they need for treasury optimisation. The first is to leverage it in terms of the return on your investment for regulatory budget such as Basel LCR, BCBS 239 or IFRS especially when the bank needs to show return on investment in the next twelve months. On the face of it these are high-cost projects with no return other than compliance. By quantifying the value for treasury optimisation, for example, of leveraging new data and infrastructure, new queries of data aggregation on the contract level for the banking book and the trading book, and so on, banks can start to show ROI for major regulatory projects. We have clients who have justified their compliance budgets to achieve these improvements.
The second approach in terms of costs is to look at each part of the workflow on an item-by-item basis, such as funding, liquidity management, capital management, and you can exactly measure the improvements you will be making for each. At Misys, we have been working with many customers to find a pro-active way to help them justify how their workflow in each of these areas would be improved, and exactly by how much to be totally transparent to their management. So say if the project is more on efficient liquidity management, for example, it will significantly impact the bottom line and easily finance the software investment needed to achieve it. Similarly, good capital management can also be quantified and improvements here can also contribute toward financing the project. This way you can cost and measure improvements at each stage, and show the potential pro t for each business line.”
D. D.:” Yes, and another way to see the cost is to look at the profitability by business line, by that I mean the cost by trade, by capital, by funding that gives the bank a real view of where they can optimise and then they can look at the overall banks’ profitability and by having this view, they can find the return on investment really rapidly. Maybe there are some businesses that are not running with a high level of return but they still benefit from the same funding level as other business lines. So by having this view, the bank is able to reallocate and enhance the profitability of the bank and enhance the return and that can fund the return on investment and analysis of the deployment.
This will allow the treasury department to get the right level of investment and thus be able to handle properly these complex questions. Before the financial crisis, it was the front office that received a first class treatment. Since the financial crisis, it was first the risk department and now it is the turn of the treasury function that is under the biggest pressure to bring value to the bank, they are the ones who need to be looked after.”
Denny Dewnarain is the Solution Lead for Capital Markets at Misys, Arnaud Picut is the Global Head of Risk Practice, Misys;
Inquiries on this article can be addressed to Caroline Duff, Senior PR Manager, caroline. duff @ misys. com, www. misys. com