O R A C L E F A Q

Frequently Asked Questions

Oracle Financial Services Liquidity Risk Management

Introduction

This document provides answers to pertinent questions

for Oracle Financial Services Liquidity Risk

Management.

Questions and Answers

Q: Key Features of Oracle Financial Services

Liquidity Risk Management?

A: The key features of OFS Liquidity Risk

Management are:

i. Pre-configured regulatory scenarios and

Runs

The application provides out-of-the-box

regulatory scenarios and Runs for BIS Basel

III liquidity ratio calculations, US Federal

Reserve's liquidity coverage calculation,

liquidity reporting requirements and intraday

liquidity monitoring metrics.

ii. Extensive set of business assumptions

for behavior modeling

The application supports an extensive set of

business assumptions to model a wide range

of scenarios that affect the liquidity position

of a bank.

iii. Addresses Home/Host issues

Liquidity risk metrics are calculated at a solo

and consolidated level taking into account

asset restrictions and other regulatory

guidelines around consolidation

iv. Enterprise-wide consistent stress testing

The applications provides the ability to define

and maintain stress assumptions and

forecast forward projections in a single

repository and use them across multiple

Runs in a consistent manner by leveraging

the stress testing capability of Oracle

Financial Services Enterprise Modeling

Framework.

v. Define and apply counterbalancing

strategies

The application provides the ability to define,

apply and view the impact of multiple

counterbalancing strategies on contractual,

business-as-usual and stress results to aid

the creation of a robust contingency funding

plan.

vi. Parameterized user interface with

workflows and versioning

The user interface is completely

parameterized which allows business users

to easily create regulatory and risk

management scenarios without overwriting

existing definitions. A single level of approval

workflow is supported to ensure that the

input data is correct.

vii. Detailed reporting with extensive drill-

through

The application supports an extensive set of

pre-configured dashboard reports with

granular drill-throughs to enable detailed

analysis of various metrics.

Value Proposition:

Q: What is the product value proposition?

A: Oracle Financial Services Liquidity Risk

Management provides a robust and

comprehensive solution to ensure enterprise-wide

regulatory and managerial compliance by

managing large data volumes, addressing

computational complexity and providing accurate

results while achieving extreme performance.

O R A C L E F A Q

2 | ORACLE FINANCIAL SERVICES LIQUIDITY RISK MANAGEMENT

Q: Key Benefits of Oracle Financial Services Liquidity

Risk Management?

A: Key benefits provided by the application are:

Quick product implementation to meet

regulatory guidelines with minimal

customization

Provides ready-to-use regulatory scenarios

and pre-packaged methods to design intricate

scenarios and assess their impact on multiple

liquidity risk metrics

Improves liquidity risk governance by aiding

the process of developing contingency

funding plans through multiple

counterbalancing strategies

Easily address home/host requirements

through pre-configured processes for solo and

consolidated calculations

Helps avoid duplication of efforts by providing

the ability to define and maintain a repository

of time bucket definitions and business

assumptions

Helps achieve quick turnaround times for

regulatory reporting compliance

Improves risk reporting practices and

addresses the varying demands of multiple

stakeholders

Improves accuracy, security, accountability

and auditability through access controls and

approval workflows

Competitive Position:

Q: What are the business pains that this application

addresses?

A: The application addresses the following business

pains:

i. Compliance with stringent regulatory

guidelines around liquidity risk

management

The application helps banks meet the

stringent regulatory guidelines around

liquidity ratio calculation and stress testing

and tight deadlines imposed by the US

Federal Reserve and BIS to meet these

guidelines through pre-packaged rules,

computations and scenarios.

ii. Reducing cost while improving

performance

Oracle Financial Services Liquidity Risk

Management running on the Oracle Exadata

Database Machine X3-2 calculated

contractual liquidity gaps for 2 billion cash

flows across 40 million accounts in just 1

hour 46 minutes 33 seconds. Stressed

liquidity gaps and LCR was then calculated

in a mere 34 minutes 15 seconds.

iii. Need for enterprise-wide comprehensive

scenario analysis and stress testing

The application provides the ability to define

and maintain multiple stress business

assumptions and apply them across time

and across Runs. It leverages the stress

testing capability of OFS Enterprise Modeling

to create stress Runs by replacing existing

assumptions with stress assumptions in an

enterprise-wide consistent manner.

iv. Increase in the volume and complexity of

the data required to be reported

The application supports pre-configured

dashboard reports that help address the

reporting requirements of multiple

stakeholders, each with different demands

relating to data volume and granularity and

reporting speeds, metrics, formats, and

frequency.

Q: How does the product work with the rest of the

OFSAA suite/platform?

Oracle Financial Services Liquidity Risk

Management is delivered through the Oracle

Financial Services Analytical Applications

Infrastructure and the Oracle Financial Services

Enterprise Modeling. This ensures that it can

easily interact with all OFSAA applications.

Additionally, cash flows can seamlessly flow from

Oracle Financial Services Asset Liability

Management.

Pre-requisites:

Q: What are the pre-requisites for Oracle Financial

Services Liquidity Risk Management?

A: The pre-requisites are:

Oracle Financial Services Analytical

Applications Infrastructure

Oracle Financial Services Enterprise

Modeling

O R A C L E F A Q

3 | ORACLE FINANCIAL SERVICES LIQUIDITY RISK MANAGEMENT

Regulatory Compliance:

Q: Which jurisdictions are covered out-of-the-box by

the application?

A: The application covers regulatory requirements

prescribed by US Federal Reserve, RBI, EBA and

BIS. Additionally, it provides the ability to modify

current rules and assumptions to meet

requirements of other jurisdictions.

Q: What are the regulatory computations supported

by the application?

A: The application supports the following regulatory

requirements:

US LCR and modified LCR calculations

US FR 2052a and b reporting compliance

US Regulation YY compliance

BIS LCR calculations

BIS NSFR calculations

BIS Intraday liquidity calculations

RBI LCR calculations

EBA(CRR) LCR, NSFR and LMM

calculations

EBA (Delegated Act) LCR calculations

Q: Are both the liquidity ratios, the LCR and the

NSFR computed in a single Run?

A: Both the ratios can be calculated together as well

as separately. The contractual Run for the ratios is

common. The user can choose to compute both

ratios or a single ratio at the time of defining a

Business-as-usual Run. This option is useful since

the frequency of reporting for both the ratios are

different.

Q: Does this application help with regulatory stress

testing requirements?

A: Yes, the application supports pre-configured

regulatory scenarios prescribed by BIS, RBI, EBA

and US Federal Reserve for computing LCR.

Additionally, it provides a framework that allows

users to create their own scenarios, modify them

and use them across multiple Runs as well as

forecast forward projections.

Time Bucket Definition:

Q: Can I create multiple time bucket definitions?

A: The application allows users to create multiple

time bucket definitions, each with 5 bucket levels,

through a user interface. These definitions can be

used in business assumptions for various

purposes.

Q: Is there any restriction to the number of bucket

levels?

A: Yes, the application allows users to create a

maximum of 5 time bucket levels.

Business Assumptions:

Q: How many business assumptions does the

application support?

A: The application supports over 20 types of

business assumptions. These include rollovers,

run-offs, draw downs, downgrades, delinquencies,

recoveries etc. Users can specify multiple values

for each business assumption type across various

dimensions and save these as different

assumptions to be applied across time and Runs.

Q: Can I edit a business assumption? If yes, does it

overwrite existing values?

A: The application allows users to edit business

assumptions. This does not result in a new

assumption, but is saved as a new version of the

assumption with a different version number. It can

be used in computations once it has gone through

the approval process.

Q: Can I revert back to the earlier version of the

business assumption for computations?

A: Yes, you must make a previous version of the

business assumption the active version. This will

update the latest record indicator for the earlier

version as Y as it will be used for further

computations.

Q: I just need to change the parameter values of an

assumption to create a stress assumption. Do I

need to create the assumption from scratch?

A: No, the application provides the ability to copy an

existing business assumption and re-save it with a

new name and description. All the parameters of

the earlier assumption will be copied as-is. Users

only need to edit the relevant parameter values

and re-save it.

O R A C L E F A Q

4 | ORACLE FINANCIAL SERVICES LIQUIDITY RISK MANAGEMENT

Counterbalancing:

Q: Does the application support counterbalancing?

A: OFS Liquidity Risk Management allows users to

define and apply multiple counterbalancing

positions to their contractual, business-as-usual or

stress results and assess the impact of such

positions on their liquidity gaps.

Workflows & Versioning:

Q: Does the application support workflows? Are they

configurable?

A: The application supports a single level of maker-

checker workflows for business assumption

definition and Run definition. The access to

various roles and tasks can be configured.

However, the workflow levels are not configurable

in v8.0.2.

Reporting:

Q: What does the split between ALM and LRM

reporting imply?

A: The split between LRM and ALM reporting means

that the liquidity risk related dashboard reports are

packaged along with Oracle Financial Services

Liquidity Risk Management itself from v8.0

onwards. Some basic reports which were being

updated by ALM earlier will continue to remain as

part of OFS ALM Analytics. Some reports will be

common to OFS LRM and OFS ALM Analytics.

Others, such as liquidity ratios, interim liquidity

metrics, contingency funding which are

specifically supported by OFS LRM will no longer

be available as part of OFS ALM Analytics.

Q: Is a user required to license Oracle Financial

Services Asset Liability Management Analytics

separately for liquidity risk reporting?

A: Banks are no longer required to license Oracle

Financial Services Asset Liability Management

Analytics separately for liquidity risk reporting.

The liquidity risk specific reports are packaged

along with Oracle Financial Services Liquidity

Risk Management itself from v8.0 onwards.

However, ALM specific reports will still be

available as part of Oracle Financial Services

Asset Liability Management Analytics.

Oracle Corporation, World Headquarters Worldwide Inquiries

500 Oracle Parkway Phone: +1.650.506.7000

Redwood Shores, CA 94065, USA Fax: +1.650.506.7200

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