How Oracle Helped a Top 10 US Regional Bank Implement Liquidity Risk Monitoring in Six Weeks

Brad Bruckschen, Director, Balance Sheet Management Product Strategy

Sanjay Naga, Consulting Director, Oracle Financial Services

The Federal Reserve's FR 2052a (Complex Institution Liquidity Monitoring Report) regulation, instituted in 2014 to better monitor liquidity risk and potential funding weaknesses, has forced US financial institutions to shift from a static liquidity report to one that is more dynamic, with a granular data structure. Many banks found their existing solutions incapable of producing granular, instrument-level cashflows promptly. Since then, banks have either built out a solution or looked to technology vendors for faster processing for heavy data loads.

One of the 10 largest regional banks in the US, with over $120 billion in assets, faced the challenge of quickly complying with FR 2052a, due to the frequency and volume of records that needed to be reported. The bank's existing cash flow engine couldn't report down to the contractual level and didn't have enough data lineage. The bank reached out to Oracle for help.

Over two-and-a-half months, Oracle worked closely with the bank to execute an end-to-end, fully functioning project. The team conducted a data gap analysis and worked with the bank to source the necessary data within a two-week window. Because the bank was an existing user of funds transfer pricing, profitability, and general ledger reconciliation solutions from Oracle, much of the data was readily available. The industrial norm is for such endeavors to takes several months or years to accomplish.

The bank also wanted to integrate its regulatory and management reporting environment. During this integration, the bank wanted to ensure that when installing the asset-liability management (ALM) application, there would be no impact to its existing management reporting setup and monthly processes. Through these existing solutions and an integrated cash flow engine, the bank achieved this feat. The bank reached regulatory compliance in record time.

Complete coverage of liquidity risk tools and financial instruments

Oracle then took on the additional coverage of liabilities and derivative instruments out of the original scope. The bank found Oracle's ALM solution sufficiently equipped to handle cashflow modeling of term deposits, CASA, OD accounts, and derivative products. Including these contracts enabled a 100% coverage of all its instruments in a single application. Additionally, the bank realized a substantial decrease in the total cost of ownership due to having a single system to source data once to support both management and regulatory reporting.

Liquidity risk compliance at speed and scale

The bank expedited compliance by using the data and processes existing with their current Oracle solution and quickly installed the ALM cash flow engine in the integrated environment. A key challenge for the bank was to process over 1 billion cashflows daily. With Oracle's help, the bank could complete this process for the entire set of financial instruments, both on and off the balance sheet, in a little over 3 hours utilizing Oracle's ALM multiprocessing capabilities. The bank can now run cashflows at the contract level, process large volumes of data daily, and have clear visibility into the model and assumptions for reporting.

Accurate and connected liquidity risk reporting

The bank's auditors were very impressed with the project's accomplishments within the tight deadline. With a focus on data lineage, governance, and the report production process, the bank was able to show alignment to the regulatory requirements and consistency in use throughout their liquidity reporting. As a result, this US regional bank has leapfrogged ahead to become a leader in 2052a regulatory compliance and modernize its reporting process.

The Oracle team helped to expedite, in record time, a liquidity risk solution that surpassed the bank's specific regulatory requirements and delivered a connected reporting ecosystem. Throughout the implementation, the team ensured the integrity of the bank's operations, delivered quick wins, and ultimately helped the bank lower its total cost of ownership.

Customer’s key takeaways:

  • Expert interpretation of the regulatory guidelines and recommendations on actions for product categories based on industry peers
  • Gap analysis to comply with cashflow engine and liquidity risk requirements
  • 2-month time to market for new ALM solution
  • Integration of management and regulatory reporting without impact to current processes
  • Target SLA of four hours processing daily to generate over 1 billion cash flows