Project Description

FiRisk Consulting led an enterprise initiative to enhance the data quality for $600 billion in global cash positions in order to satisfy audit scrutiny, improve regulatory and financial reporting, equitably allocate regulatory and economic capital, and accurately monitor counterparty risk through exposure and limits management.

Business Case

Large banking institutions maintain billions of dollars in domestic and international banks and non-bank financial institutions classified as Due from Demand, Due From Placements, and Fed Funds Sold. These correspondent bank balances are placed to either facilitate the settlement or clearing of transactions or to generate an investment return on surplus liquidity. Regulatory and financial asset classification rules are complex, and in some cases conflicting, across US and international jurisdictions. In order to adequately manage, report, and capitalize the exposure, it is necessary to understand and consistently apply data definitions, data capture, and data transformation.

Project Objectives

Research domestic regulations (FDIC, FRB, OCC, FASB) and international requirements (FSA and central banks) to define and install a consistent definition of Due From Banks. Once defined, the population would be identified, and recommendations made for consistent origination and data capture. Data transformation requirements for the technology platform applied rules for ring-fencing enforceability, product exposure aggregation, and permitted netting practices.

Services Provided

FiRisk Consulting managed and executed the following:

  • Established an enterprise DFB definition based on regulatory and risk requirements
  • Identified the definition-based population across exposure types in risk systems
  • Identified the population in the ledger and documenting reconciliation barriers
  • Tested the risk system data for data integrity issues and remediation
  • Provided recommendations for target state data collection and provisioning
  • Provided recommendations for origination and onboarding consistency and controls