Back in 1992 when ALMIS International was founded, spreadsheets were very much the norm for calculating balance sheet risk. The need to do calculations at all was a ‘nice to have’ but certainly not an essential part of managing a Building Society. The regulatory financial landscape has changed considerably since then, both in terms of the technology toolbox now available but also in terms of the need for comprehensive, reliable, auditable and reportable analysis.
Building Societies now need to analyse their financial risk profiles in numerous ways, providing their Executives and Boards with accurate information on current and forward looking positions to help them proactively monitor and plan capital and liquidity requirements, profitability and interest rate risk. Not only is this information crucial for managing a sustainable business model it is now part of a complex regulatory regime. ALMIS has provided FSA reporting capability since 2010 but with the implementation of CRD IV and the subsequent demands of COREP and FINREP, the advantages of an IT platform for both ALM and Regulatory Reporting are evident.
The ALMIS regulatory reporting module has been extensively developed to include an effective and time saving solution for FSA, COREP, FINREP and BoE reporting providing effective workflow management, validation routines, comparatives and full audit trails to allow for efficient management and full compliance. But all this reporting data can also be used to monitor and manage financial risks and help manage the balance sheet in a forward looking way.
The new regulations are placing significant strains on finance and treasury departments in Building Societies. As a result, there is a need to be as efficient as possible in how information is processed and interpreted, together with a requirement for consistency with assumptions and data models used to produce the analysis.
Whist some Building Societies have installed a combination of dedicated ALM software for asset liability management and separate regulatory reporting tools, there is a growing trend towards synergy – utilising the same IT platform for both activities. This consolidation of departments and management of regulatory reporting and balance sheet as an integrated activity is proving to be a successful strategy in managing resources and the complexity of data.
The reporting needs of prudential regulators and senior management are not so far apart and the detail of the new regulatory reports now required means that the same regulatory data can be used for balance sheet management purposes.
So the question even for the very largest Building Societies is, “Why have separate, disconnected products for these activities when they can be effectively delivered in one system”?
The advantages of a single system for Balance Sheet Management and Regulatory Reporting:
– A single version of the facts
– Increased scrutiny and therefore reliability within a single version
– Consistency of the assumptions applied
– Time savings loading and reconciling data
– Understanding the impact decisions have and the interplay between liquidity and capital, profitability and interest rate risk
– Building both the regulatory and economic requirements into forward plans
With increasing complexity of data, the growing need for proactive future planning and the continual demands of regulation, the adopters of a system that manages, monitors and reports in a fully integrated and auditable way must surely give those Building Societies a distinct advantage.