Data and strategic architecture in responding to regulatory demand, and increasing governance and oversight

Data and strategic architecture in responding to regulatory demand, and increasing governance and oversight

1. Wissam, can you please tell the Center for Financial Professionals about yourself and your experience within the industry?

I head up the Global Liquidity Product Management role at AxiomSL. I work with AxiomSL teams across departments and regions to provide clients with our leading Liquidity Risk Management solution covering key areas such as the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), Additional Liquidity Monitoring Metrics (ALMM), Interest Rate Risk in the Banking Book (IRRBB) and Funds Transfer Pricing (FTP). I work and support clients across EMEA making sure all our projects are delivered with quality and meet our clients’ expectations. I also participate in industry working groups and client workshops keeping track of all regulatory developments and evolving requirements relating to liquidity risk management and asset and liability management more broadly. I have been in my role for 2 years and prior to that I worked for 5 years at IBM Risk Analytics/Algorithmic as a Senior Business Analyst covering areas in Credit Risk Management.

2. At the Liquidity Risk Management Forum you will be discussing the role of data and strategic architecture in responding to regulatory demand, why do you think this is an essential topic to be discussed?

Data and architecture are the backbone and main building blocks of any regulatory system. Without these in place, meeting regulatory requirements will merely be possible. Data needs to be delivered with a certain level of accuracy, integrity, completeness and overall quality as well as in a timely manner. These are also the fundamental requirements and main principles of BCBS 239 compliance that institutions are already striving to ensure have been implemented effectively.

A strategic architecture needs to allow efficiency, automation, transparency and flexibility in order to generate the correct numbers on time and in some cases even on demand. This will in turn lead to the goal of enabling business departments and business users to leverage the information available in the active management of their business and the creation of value.

3. Why is agility key to keeping up with the pace of regulatory change?

It is evident that regulations are ever evolving at a pace faster than the industry likes and is able to efficiently keep up with. The historical spreadsheet based or predominately manual approach is just no longer sustainable. It is also too costly for institutions having to upgrade and maintain initial tactical solutions as in time they too become obsolete and the overall infrastructure becomes too complicated.

Agility can take many forms. A primary one is in the operational and business processes of an institution; Different departments need to be able to collaborate in an efficient manner to ensure all business and regulatory requirements are translated and implemented into an institution’s architecture and regulatory calculation and reporting engines on both an accurate and timely basis. This brings me to the agility required in the technology architecture; any underlying system needs to be flexible enough to cope with new calculation requirements and new data input feeds in multiple formats and from different systems without needing significant and expensive upgrades.

4. Why is it essential that senior managers increase monitoring and reviewing?

Meeting the constantly changing and evolving regulations is both costly and time consuming. Senior managers need to pro-actively manage, monitor, challenge and review the technology projects within their organizations. This will make sure business strategic expectations are met and resources are allocated optimally. Technology plays a key facilitating role for senior managers enabling them to more efficiently meet their business goals.

5. How do you see the industry evolving over the next 6-12 months?

Liquidity risk management regulations are fairly recently introduced and continue to evolve. We are expecting further updates in Europe in particular to ALMM, the EU LCR corrigendum, IRRBBfollowed by perhaps the most anticipated one being an update on the EU implementation of the NSFR.

From a technology perspective I see a significant focus pushing for greater integration between all the risk metrics and frameworks like LCR, NSFR, ALMM, IRRBB, FTP (Funds Transfer Pricing), BSRM (Balance Sheet Risk Management), and also across to Capital and broader Finance strategy and planning. Institutions will want to avoid duplication and aim for a “single point of truth” data warehouse.

I also foresee greater demand for cloud based offerings, “big data” compliant and more real time calculations, but maybe the one with most industry changing potential is SaaS (Software as a Service) coupled with Managed Regulatory Services. Institutions will be able to outsource most of their regulatory reporting infrastructure to a third party provider who will be responsible for hosting the software, maintaining it and upgrading it to the latest regulatory requirements. Institutions will be able to reduce costs, achieve high level of automation and significantly reduce risks and overheads.