Treasury Management integrated with ALMIS

In 2017 we will be introducing our Treasury Management System, currently being developed in collaboration with clients, to ensure we are offering as comprehensive a solution as possible working off a single source of data. Our current core offering spanning Regulatory Reporting, ALM and Hedge Accounting is already unique in the UK.

Clients benefit from key advantages of our single platform including:

  • Reduced cost and resource requirements.
  • Consistency across all outputs with one dataset driving all ALM, Regulatory Reporting and other needs.
  • Synergy of a holistic view, with the regulatory matrix integral to ALM & business planning.

Feeling over regulated? Don’t forget to make a healthy interest margin in 2015

The new regulations that came into force last year and continue into 2015 are a significant challenge particularly for Banks and Building Society finance departments.

The new prudential regulations focus on capital and liquidity. It is widely accepted that Building Societies and Banks have strong liquidity positions and control capital resources well and many close to the detail will find many of the new regulations not only resource consuming and expensive to comply but also not all that helpful. The concern though is we do not want these regulations to take focus away from making a healthy and sustainable interest margin. Managing interest margins needs to be the focus.
In 2015, Interest rate risk and margin management is getting more complex and needs constant scrutiny and analysis, particularly if margins are to remain healthy in the medium term.
Bank base rates have not have changed for years but finance and treasury departments know that Interest rate risk and margin management is probably now the most important financial issue for building societies in 2015.
In the last few months we have seen 10yr swap rates fall by over 50 bp, SwissFranc rates have turned negative and whist this may not effect building society and banks financials straight away, it is a signal of a fundamental change to capital markets.
These market rates are an expression of what the market believes shorter term rates are going to be over the medium to long term, and there is no doubt the market has modified its expectation of an early rise in interest rates. On the other hand competition for funding is increasing and the mix of interest basis on assets and liabilities is changing as building societies face the challenge of market and regulatory pressures. There are however, opportunities to build healthy margins and the finance department with skilled treasury and asset liability management expertise and analysis will be best placed to navigate this.
This involves a good FTP technique where the true cost of liquidity is calculated – a liquidity charge that is right for the particular firms and not based on assumptions only relevant to large firms that access wholesale capital markets. It needs good margin variance analysis to understand margin movements and the relative contribution of that different lines of business provide and most importantly a forward looking analysis that can provide management with a vision to implement the right business strategy. The good news is that it is also far more interesting than filling in COREP returns!
Wishing you all a prosperous 2015.


New CRD IV Liquidity rules are going to be a challenge for both small and large banks

We are beginning to see some clarity for liquidity under CRD IV. The PRA have recently published a consultation paper CP27/14 and this is based on the EU Delegated ACT published on 10th October 2014.

So what does all this mean for Banks and Building Societies?

  • LCR reporting – the detail of COREP LC is an intricate reporting requirement and differs in complexity from the FSA 047 and 048. All banks need to produce BOTH and the PRA look like demanding the capability to report the LC daily. Firms will need to maintain reporting of FSA 047 and FSA 048 for up to two years after the introduction of the full suite of COREP liquidity returns in 2015.

  • LCR reporting is to become mandatory also for UK Branches of third country firms and UK designated investment firms.

  • Revoke BIPRU 12. This includes revoking the simplified ILAS regime and the requirement on firms to undertake standardised stress testing. Chapter 1.14 says the PRA recognises that the removal of the simplified ILAS modification will increase the compliance costs for those firms that previously benefited from it. Simplified ILAS firms such as small banks and building societies will also need to apply the same stress testing approach as other firms.

  • Carry forward the broad principles established in BIPRU 12 into the new regime.

  • Apply a transition to 100% LCR on 1 January 2018 in the following steps: an 80% requirement from 1 October 2015, rising to 90% on 1 January 2017. Table A at chapter 2.7 shows the PRA is applying higher percentages than the minimum path set down by Article 460 of the CRR.

  • Carry forward existing add-ons not covered in the LCR as the new Pillar 2 add-ons, until each firm’s next liquidity review.

  • Require that firms integrate fully the operational requirements outlined in Delegated Act Article 8.

  • Propose that if pre-positioned assets are not eligible for inclusion in the HQLA buffer, they cannot be used to meet the PRA’s quantitative liquidity guidance.

ALMIS is particularly well placed to assist firms meet these regulations. We have a completely automated approach to producing the LCR and NSFR from source data and this will be particularly valuable in helping firms meet the daily requirement. Our sticky rules table is highly configurable and can be set up to meet the exact requirements of the Delegated ACT. Also from the same source data firms can set up and run a whole series of idiosyncratic and market-wide stress test. All this can also be forward looking to firms can see what their LCR is in say 7 days’ time or what the stress tests might look like as a result of its business and financial plans.

For further information please visit or contact Jenna Haston to arrange a demonstration.

Why Synergy matters – getting the best from your ALM and Regulatory Reporting Systems


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.

Forward Looking Regulation

The Bank of England and FSA have announced a new more forward looking approach to Bank regulation.

The joint paper The Bank of England, Prudential Regulation Authority – Our approach to banking supervision sets out the current thinking on how the future Prudential Regulation Authority (PRA) will approach the supervision of banks, building societies, credit unions and investment firms.

Hector Sants, FSA chief executive and PRA chief executive designate, said:

“The PRA’s purpose is fundamentally different from that of previous regulatory regimes and will lead to a significantly different model of supervision to that which was in use pre-2007. In designing this new model we have incorporated both the lessons learned from the last financial crisis and those from firm failures of the past.

“The new regulatory model will be based on forward looking judgements and will be underpinned by the fact that the PRA has a single objective to promote the stability of the UK financial system and in consequence will be a very focused organisation. The new supervisory approach will build on the more intensive approach adopted by the FSA since the crisis.”

ALM Good Practices Seminar

ALMIS International ALM Good Practices seminar was attended by industry experts, regulators, and representatives from over 40 Banks and Building Societies.

This seminar explored how to make ALCO more effective in small and medium sized banking institutions, and addressed specific areas such as:

  • Interest rate risk in the banking book

  • Making ALM more forward looking

  • FSA perspective

ALMIS International also released their findings from extensive research into the ALM Good Practices at small and medium sized banks.

Some of the feedback from the seminar was that the range of speakers and particularly the FSA input on theri thinking on this area was particularly beneficial.

Our expert speakers are:

Joe Di Rollo

– Director and Founder, ALMIS International Limited

William Webster

– Director, Barbican Consulting Limited

Jonathan Pyzer

– Treasury expert, FSA Retail Firms Division



Making ALM function more effectively

On the 17th January 2011, the FSA sent a letter to all banking chief executives on what constitutes good practice within ALM. Following the FSA’s recent observations and recommendations, ALMIS International is carrying out further research to find out the views of small to medium size banks.

These observations and recommendations can help banks improve their ALM effectiveness and some of the key points made by the FSA are outlined below.

Observations & Recommendations made by FSA

1. Structure of ALCO

The FSA recommend that all business heads, the CFO, Group Treasurer, the Chief Risk Officer, the Head of Market Risk, the Head of ALM, Head of Internal Audit and Chief Economist attend ALCO meetings. Along with this, it was observed that the more often the CEO attended meetings, the more effective they were.

2. Forward Looking

There has been much more focus within the sector to monitor emerging risks and base decisions on the future and it was observed by the FSA that ALCO meetings that focused on proactive management, rather than focusing on the past, were more effective.

3. Liquidity & Funding

It was uncovered that ALCO meetings which focused on the maturity profile were not as effective as firms that considered all risks such as changing competitive landscape, and different behavioural assumptions.

4. Interest Rate Risk in the banking Book (IRRBB)

The FSA states that it is good practice to account for varying behavioural assumptions and non interest rate drivers such as competition. They also recommend that banks use a number of different risk measures such as EVE, VaR, NII, Basis Risk and Scenario Stress Testing.

5. Reverse Stress Testing

Another recommendation made by the FSA is for banks to carry out reverse stress testing and report these outcomes as it allows banks to stay within their risk appetite.


ALMIS International will be releasing the results from their research shortly.