TRILLIUM SOFTWARE INSIGHTS

Financial Executives have Data on the Brain: My Thoughts on FIMA Boston 2013

Michael Hutnyan, EVP Sales & Solution Strategy, Harte-Hanks Trillium Software

I had the pleasure of attending the Financial Information Management Association (FIMA) event in Boston this week. As always, the conference was equal parts educational and inspirational. It’s exciting to learn from so many smart people dedicated to realizing the value of information.

A “Self Service” Option for Business Stakeholders Accelerates Regulatory Compliance

Jon Asprey, Vice President, Strategic Consulting, Harte-Hanks Trillium Software

The ever-changing nature of financial regulations is putting increased pressure on IT resources, making it critical that business stakeholders have control over their data and reporting processes. 

FATCA train starts rolling again!

Jon Asprey, Vice President, Strategic Consulting, Harte-Hanks Trillium Software

With the recent release of both the final IRS regulations for FATCA as well as recent guidance notes from the UK tax authority (HMRC) on data collection and provision, it seems as if the FATCA train is finally starting to pick up momentum and financial firms can all make progress with clarity. But how do these recent publications impact foreign financial institutions (FFIs) from a client data management perspective?

Don’t Stop Now: Capitalize on the FATCA Deadline Delay

Jon Asprey, Vice President, Strategic Consulting, Harte-Hanks Trillium Software

In recent weeks, many people have asked if they can breathe easier and delay their FATCA programs now that the initial compliance deadline has been pushed back to January 1, 2014. My answer is consistently the same — NO. I was at a FATCA conference in London last week and the overriding sentiment from the financial firms attending was that the delay is helpful, but there is still no time to waste. Let me tell you why.

The bottom line is that identifying, reporting, and classifying all clients that need to be assessed under FATCA guidelines is a complex and time-consuming task. Financial institutions will be unable to determine the size of the challenge they face until they dig deep into their client data.

Establishing a Single Client View – A Critical Step to FATCA Compliance

Jon Asprey, Vice President, Strategic Consulting, Harte-Hanks Trillium Software

Financial institutions working to comply with the Foreign Account Tax Compliance Act (FATCA) must ensure they have a single view of client information across business lines and, in some cases, geographies — or risk damaging important client relationships.

Accurately identifying, reporting, and classifying all clients subject to FATCA guidelines are not easy tasks. This situation is complicated by the web of geographically distributed systems and databases that are relied upon to collect and store a firm’s client information, as well as the complex client relationships that often exist for high-net-worth individuals and commercial entities.

Data Quality – The Core Enabler for FATCA Compliance

Jon Asprey, Vice President, Strategic Consulting, Harte-Hanks Trillium Software

The draft regulations for the Foreign Account Tax Compliance Act (FATCA) have been further refined in a February 2012 IRS update release. Foreign financial institutions (FFIs) now have improved guidance on how U.S. customer and entity data should be inspected and classified for withholding and reporting purposes. It’s clear that the IRS is seeking to improve transparency in the process. But does it go far enough?

The updated regulations propose to reduce the burden on financial institutions when conducting due diligence procedures for accounts with U.S. indicia. (For example, how to treat depository vs. custodial accounts) But, these procedures still present a nightmare for compliance officers and tax professionals in financial institutions when data is outdated, flawed, or inaccurate.

Insurance Models Everywhere – but is their Beauty Just Skin Deep?

Ed Wrazen, Vice President Marketing International, Harte-Hanks Trillium Software

Speaking a couple days ago on the BBC Radio 4 Today programme (BBC radio’s flagship news and current affairs programme), Robert Hiscox – stepping down from the helm at Lloyds underwriting – talked of the dangers of an over-reliance on insurance risk models. Models and directives like Solvency II are aimed at improving risk management practices to define required capital and manage risk – and to help ensure that insurers can pay up if bad things happen.

Models, Mr Hiscox pointed out on the programme, are critically important and entirely sensible, but they are, well, only models (Hiscox Insurance has a mannequin in the office to remind its underwriters, said Mr Hiscox). Rely entirely on modelled estimates, he suggested, and you’re heading for trouble. He said you’ve got to use your brain…in addition to management information…common sense, intuition and vision to make risk assessment and insurance decisions.

Data Quality in Financial Services: Keep it Simple for Success

Michael Hutnyan, EVP Sales & Solution Strategy, Harte-Hanks Trillium Software

As a supplier of data quality business solutions for financial services organizations, Trillium recommends best practices for our clients - but we also learn so much from them as well. Whether we’re collaborating on best practices for regulatory compliance, credit risk data management, or KYC efforts, I consider myself lucky to have received some excellent advice from clients over the years.

But, you know the most important thing I’ve learned from my clients? “Simplicity equals success.” Anybody who knows me, knows that I’m a simple guy, so this approach works for me.

Regulatory Data Management – The Gift that Keeps on Giving

Michael Hutnyan, EVP Sales & Solution Strategy, Harte-Hanks Trillium Software

After reflecting on the recent holiday season, now that many of us have recovered from some extensive gift-giving (and are now paying the resulting bills), it occurs to me that my financial services clients are receiving a more troubling gift – one that only promises on-going costs and a possible deviation from growth and service - new and ever-changing regulatory requirements.

I’m referring primarily to those government-sponsored, mandated regulatory demands that involve a significant data management component. Newly defined regulations such as FATCA and the yet-to–be-unveiled LEI (legal entity identifier), will require an extensive and proactive data management strategy by banks. They’ll need to clearly demonstrate knowledge and control over data and its quality in order to achieve compliance.

The Impact of Basel III Readiness & Data Challenges on your Bank

By Shameka Simmons, Banking Attorney, Financial Solutions, Harte-HanksTrillium Software

Banking firms expect that the Basel III framework will be published and implemented in the United States by the end of first quarter 2012. Basel III imposes additional capital surcharges, and mandates liquidity standards, both of which trigger data elements that deserve your attention. Although some US banks have expressed opposition to Basel III capital requirements, the banks are in fact overcapitalized and are trying to prepare for the new capital thresholds demonstrated by the positions on their call reports. 

But, the unspoken question remains…”are banks really ready for Basel III?”

Some banks have already begun internal preparation for implementation of Basel III by participating in qualitative impact studies (QIS) that analyze and measure the affect the new framework may have on a bank’s business model, balance sheet, and product mix. Project setup and working groups will assist with the technical realization and data preparation/data quality management of the new framework relevant to the liquidity ratios. Yet, banks are facing many challenges including the treatment of missing data, comprehensive data consistency, extensive data warehouses, and numerous data sources. 

In particular, the liquidity coverage ratio (LCR) will require banks to have sufficient high-quality liquid assets to withstand a 30-day stressed funding scenario that is specified by regulators. The net stable funding ratio is a longer-term structural ratio designed to address liquidity mismatches. It covers the entire balance sheet and provides incentives for banks to use reliable sources of funding. This liquidity framework mandates consistency in data based on manual or automated calculation of the ratios or different evaluations (book value vs. market value) of assets.

The liquidity framework may introduce a significant challenge to financial services firms because banks will have to integrate their existing liquidity risk systems into their Basel frameworks, which is likely not yet done as U.S. banks, for example, are still anticipating implementation of Basel II

In addition, adoption of a new framework will require a substantial budget for banks to transition and remain in compliance. So, banks may believe they are addressing their financial data issues in advance of Basel III, but they may not be working out the right problems to ensure compliance. A deeper and more specific data assessment may be needed to find the data inaccuracies you may not know about yet. The consequences of mistakes will be costly. 

Is your data ready for Basel III?

Shameka Simmons is a Banking Attorney with Harte-Hanks Trillium Software.  She offers a wealth of knowledge about the inner workings and processes of financial institutions, retail/commercial lending, and complex loan transactions.  She gained this expertise through her experience at GMAC (now Ally Bank), the Legal Division of the FDIC Enforcement division, and her active role in the Illinois Attorney General subpoena/investigation of Countrywide at the height of the foreclosure crisis.