Post Trade Forum & Trade Show NH Danube City Hotel, Vienna

Kerry Evans – 11th September 2015

Technology Challenges of the new Regulatory Environment

Seem Familiar? Technology Web for the good times

How about this?

And then came?

Regulatory impact analysis We’ve all got one of these.

9

2015

7 3 6 5 1 12 4 10 2 10 11 6 7 8 7 9 8 3 8 10 4 12 9 11 9 5 7 11 12 1 6 2 6 11 5 2 3 1

2017

1 4 2 3

2018 2016

4 12 5 10 8

31/8/16 FSB Phase 3 31/7/15 FSB Phase 2

1/1/18 IFRS 9 implemented

15/2/15 LCR deadline templates

30/6/16

AnaCredit Pilot 31/12/16 AnaCredit Compliance

30/6 /15 Remedial actions

AnaCredit

31/3/15 PoA DIV 31/1/15 PoA DNB

At least 1 a year At least 1 a year

Stress testing

Regulatory Topic

1/1/16 BRRD Minimum Required own funds and Eligible Liabilities

1/1/16 BCBS #239 compliance BCBS #239

AQR Rem Actions*

Liquidity reporting 1/1/16 Daily LCR

FSB**

IFRS 9

30/6/15 New templates ALMM

FTP

BRRD

28/2/15 CRD IV aftercare

1/1/16 Set up IT/Information System

31/12/16 Equity Framework

30/4/15 LGD changes

30/9/15 CRM & Netting

1/7/15 Asset calculation IHC EPS

FINREP

1/7/16 Compliance with EPS requirements

31/12/15 Stress testing UAH 21/7/15 Collins Amendment

Reporting on solo level (expected)

DPM 1/1/16 DPM 2.4

31/12/17 Securitisation Framework

1/1/17 DPM 2.6 1/7/16 DPM 2.5, 1/7/15 DPM 2.3 1/1/15 DPM 2.2

COREP

1/7/16 Full MMS reporting 1/4/16 Partial MMS reporting

1/10/15 New templates LCR

1/1/16 Apply SREP guidelines

At least 1 a year

SREP 13/4/15 SSM SREP

MMS 1/7/18 Net Stable Funding Ratio

At least 1 a year

* Solution DIV tbd ** Extension phase 1 tbd

Regulatory milestone Regulatory milestone, no fixed date Legend

What Changed

Connect to new market places

Pre-trade checks

Transaction

reporting

Clearing

House

connectivity

Financial Reporting

Revenues and Regulations Increased pressure on IT budgets

Technology debt observed in 2015 was largely caused by the application of a series of tactical bolt-ons or hacks to existing software platforms, often exacerbated by regulators failing to articulate, complete, unambiguous, quantitative, verifiable requirements in good time. In addition, our clients are in an environment where business leaders demand increased reliability, flexibility and the ability to quickly react to requests. * Greyspark

JP Morgan, Citi, Morgan Stanley, Goldman Sachs, Wells Fargo, Barclays,

RBS, Lloyds, HSBC, Standard Chartered

2008 -2015 –competing drivers Cost saving and regulation

Regulators Required :

Collect and consolidate information, cross asset and cross business lines

More complexity, more systems, more costs.

Business Required :

• Reduce costs,

• Cut surplus systems,

• Restore profitability

• Support new business

models

Know More Know It Better

Know It For Less

Crunch Point How much can we consolidate ?

Front Office

Back Office

Front to Back

Risk

Finance

The whole lot ?

• Set your project up to succeed

• Senior management support

• The right delivery team

• Business IT Partnership

• Stages for funding and delivery

• Strong project disciplines

• Short delivery cycles

• BE PREPARED TO CANCEL

• Pick your vendor carefully

• Product scope

• Credible road map

• Accessible skills in market

• Focus on the benefits

• It’s not all about IT – 95% is good enough

• Business processes – fit the system

• Business compromises (out of the box functionality)

• IT - 95% is NOT good enough

• Actually retire your systems.

• Focus on the quality

• Management reporting

• Decision making

• Deployment and support

• Plan, measure, report, replan

What do I need to consider? On average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted. * McKinsey

• Change lifecycles for the future

• Front office changes vs. Risk System changes

• Avoid Version Drift

• Adopt Vendor releases and adapt business processes

• Rebalance of system ownership

• More partnership (& more committees)

• Wedded to one supplier

• 20 year relationship

• Concentration of suppliers

• Not many offering credible options

• Price of entry for competitors

• Standardisation

• Common business processes

• Common technological skills

• Common risk models

What are the implications? How could a monolithic IT architecture impact my business?

For My Firm For the Industry

Standard platform

Discrete flexible components (open source ?)

Standard inter-process communications

No-one is offering – although some of the elements exist

Is there an alternative? Can I fight the fashion

Outsourced entirely

Fully standardized platform

Fully standard processes

The utility solution

Coming soon from a vendor near you