Competence Center Finan-
cial Services

Our Competence Center Financial Services (CCFS) focuses on regulatory motivated projects. Here we mediate between specialist and IT departments, and in doing so minimize the risks involved in the operational implementation of compliance projects. To ensure they are on a level technical footing with our customers, our CCFS

 

consultants all have one thing in common: they are bankers. The combination of banking expertise and technological excellence is the decisive added value that is really appreciated by our customers.

 

THINGS TO KNOW:

  • Even though regulatory requirements have been accompanying banks for some years, recent developments in the financial markets have resulted in a sharp rise in the importance of compliance. It is noticeable that alongside national initiatives (such as MaRisk, BDSG, WpHG, etc. in Germany), international regulations at EU (MiFID, Basel II, VKRL, etc.) or global level (e.g. SOX), for instance, are having a growing impact on banks' business activities. The same is true of industry standards (such as PCI DSS), even though these are not stipulated by the legislator.
     
    Not only that, but in this age of global markets, national legislation may sometimes have less relevance than foreign regulations (as in the case of SOX), which especially affects global players in the banking sector. This makes day-to-day business activities exceedingly complex. Usually, new regulations result in the need to modify existing process landscapes.
     
    BDSG, Basel II, SOX, MiFID: this list can be continued at will. The ever growing number of national and international regulations, which have to be complied with by you as a global player in the banking sector, are becoming more and more relevant. Trivadis supports you with your compliance projects in two respects. On the one hand we make your everyday business activities less complex, while on the other we organize your infrastructure so that future law amendments can also be implemented in a timely, efficient and flawless manner.
     
    We have bundled our profound technical know-how and practical experience for you in so-called architecture blueprints. This knowledge lead enables us to significantly cut your project time requirements. Our knowledge of your needs results in state-of-the-art IT structures, shorter processes and future-proof solutions that sustainably secure your investments. Consequently, you will even gain a telling competitive edge from implementing legal requirements.
  • Basel III: is the next installment already just around the corner?
     
    Back in December 2010, the Basel Committee issued the Basel III regulations, which foresee stricter equity requirements and a new global liquidity regulatory framework.
     
    The adopted rules stipulate that the capital base of finance institutions, alongside a number of other measures, is to be improved to establish a greater resistance to unfavourable developments in both the economic and financial sectors. Financial institutions should be able to stabilize (i.e. 'save') themselves in times of crisis and return to normal business operations through their own efforts and without external aid.
     
    This is nothing new (Basel II), but the past (and in particular the 2007 financial crisis) has shown that the quality of the various components was not yet sufficient. All the Committee members therefore agreed to implement the new regulations as of January 1, 2013. The capital and liquidity requirements are to be gradually brought into line.
     
    The defined scenario envisages the partial withdrawal of investments, unscheduled usage of unused credit lines, and the loss of unsecured refinancing plans. A differentiation is made, for instance, between those assets where the tangible assets are counted at 100% of their market value, and such assets that can have a tangible proportion of up to 40%. The liquidity cover ratio (LCR) is due to be introduced on January 1, 2015.
     
    However, the Basel Committee on Banking Supervision scrapped this schedule on January 6, 2013. Instead of having to meet the LCR in full in 2015, 60% of the reserves will suffice by this date. This figure will then be increased in annual increments until 100% is attained in 2019.
     
    Basel III calls for the introduction of new indicators in addition to the new requirements governing the equity position of financial institutions. This stipulation has a significant impact on the IT landscape at banks and banking systems. Additionally, an indicator management system has to be defined and implemented in an internal and external reporting system.
     
    A situation analysis was first required before the new regulations could be implemented. The findings should show the networking and interrelations of the various IT systems in deployment at the financial institution. At the same time, the available data are to be determined for the calculating the ratio. The open and considerable need for action was then derived from the perceptible difference between both analyses, which were compared with one another.
     
    But what sounds so simple requires spending the corresponding time and costs on the implementation. To assure technical and procedural adherence to the prevailing time constraints, it is crucial that the granularity of the requisite data is made available to the national and international organizational units or subsidiaries. The current IT landscape and the findings of the all-round examination of the systems and business processes have a significant impact on the implementation burden.
     
    The short-term and high-quality implementation of the guidelines can be assured provided the parties involved adopt an overarching and coordinated approach.
     
    Avant même que les réglementations de Bâle III soit complètement mises en œuvre, les derniers développements ont révélé les bases pour une extension et une adaptation des règlements. Différentes Even before the Basel III regulations are fully implemented, recent developments have revealed foundations for extending and modifying the regulations. Various supervisory authorities have suggested that the risk modeling should be made less complex. This also concerns the reliability of the associated risk weighting in Pillar I. In the recent past, the Basel Committee has likewise instigated consultations and discussions that go beyond Basel III. At this point, we will publish more details in a separate document once they have been made known.
     
    Trivadis Competence Center Financial Services has occupied itself with the initiative and collated some interesting details, and above all addressed the impact on financial institutions and on IT in particular. We would be pleased to present our competence center in a personal meeting.

AML

  • AML (anti money laundering) and KYC (know your customer)
     
    We have sound and long-standing experience in the regulatory environment of the Money Laundering Act. We provide our customers with process design support in various theme areas including the following:
     
    - Initial collation of customer data
    - Efficient post-collation of customer data
    - Ongoing monitoring of customer data and/or transactions
     
    Especially in recent years, new guidelines or amendments to existing legislation have made it necessary to extensively modify the aforementioned processes.
     
    Compliance is therefore also becoming more and more a business enabler. Where customer data are obsolete or even incomplete, the Money Laundering Act stipulates that banks may not even establish the business relationship in the first place, or must terminate relationships with existing customers. Work instructions can be helpful in the first approach; but in the long term, however, IT systems in particular must support and thus assure compliance with regulations.
     
    In the aforementioned theme areas, we apply our experience throughout the entire cycle of your project (gap analysis, process design, process testing and implementation). Backed up by our in-depth knowledge, we identify the relevant customer groups, prioritize them, navigate the groups towards sales activities, or initiate customer communication through different communication channels. Additionally, we know which situations are suitable for purchasing data, assist in contract negotiations, and conduct data purchases from various credit agencies (including semi- or fully-automated data processing).
     
    On request, we can also bring our experience to bear in setting up a compliance warehouse to facilitate future implementation through the efficient and correct provision of data in the KYC environment by means of consolidated data repositories.
     
    Trivadis disposes of a high level of expertise in this field, and has successfully implemented many such projects during the past three years. Our Competence Center Financial Services can provide you with additional information material and further details at no obligation.
  • Digitization - now or never?
     
    The term 'digitization' is making the rounds in banking circles, and frequently implicates a total overhaul of existing infrastructures. But why right now?
     
    15 years ago, the New Economy was a huge hype on a slow road to success. In the meantime, the ideas put forward then have been turned into reality. Network infrastructures and internet access are today a commodity.
     
    Smartphones have brought the online world into our pockets, and customer wishes and market requirements have been transformed accordingly.
     
    Banking products are also digital and virtual, making them perfect for tech-savvy start-ups, so-called FinTech companies. From these market changes has emerged the need for modified processes. Digitization, however, is decided in back-end processes and the data storage, and not in the front-end processes.
     
    CCFS from Trivadis accompanies banks and insurance companies in the integral implementation of digitization strategies.
     
    Our Competence Center Financial Services can provide you with additional information material and further details at no obligation.
  • BCBS 239, risk data aggregation
     
    Following consultations in 2012, the Basel Committee on Banking Supervision subsequently published its “Core principles for effective risk data aggregation and risk reporting” in January 2013. The rules include requirements that have to be fulfilled for the organizational structure and processes of the risk function at banks. For the very first time, financial institutions are obliged to satisfy specific regulatory requirements pertaining to IT architectures and data management.
     
    Full implementation of the rules applicable to globally system-relevant credit institutions will be mandatory from January 2016, while progress of these measures has been monitored since 2013 and 2014 by the Deutsche Bundesbank and Germany's Federal Financial Services Supervision Authority (BaFin).
     
    With these core principles, the regulator wants to consolidate risk management at credit institutions, and further safeguard the ability of banks to handle stress and crisis situations through improvement of the decision-making processes and systems.
     
    The requirements that have to be met by credit institutions are formulated based on the principles, and are divided into five, closely intermeshed thematic areas:
     
    - Overall corporate governance and infrastructure
    - Risk data
    - Aggregation capacities
    - Risk reporting
    - Regulatory reviews, utilization of tools and international collaboration
     
    The fourth thematic area essentially includes recommendations aimed at national supervisory authorities or appointed overseers.
     
    As essential prerequisites for a functioning risk management environment, the focus has been shifted to data management and risk reporting systems through the definition of specific regulatory requirements addressed at IT architectures and management processes. In particular, the corporate and department-wide definition, collection and processing of risk-relevant data are now stipulated.
     
    The accuracy, flexibility, up-to-dateness and granularity of the data form the data basis. This is to be achieved with an extremely high degree of automation, which is also intended to minimize manual intervention and cut down error rates.
     
    Generally speaking, the core principles stipulated by the Basel Committee can be grouped into four fields of action, which serve as the basis for structuring an analysis of the as-is situation and the derivation of the implementation requirements up until 2016.
     
    - IT architecture
    - Organization incl. IT management
    - Data quality framework
    - Risk reporting
     
    One consequence of BCBS-239 is that more group-wide projects are required in order to fulfill the requirements by 2016.
     
    A not-to-be underestimated task list has to be worked off in the time remaining until then. Large gaps in IT systems and processes will have to be closed before they are capable of generating BCBS 239-compliant reports. The use of workarounds and Excel tables is currently still far too dominant; what is needed is the creation of a consistent and automated quality assurance system, as well as preparation and documentation mechanisms.
     
    These activities belong to one of the domains covered by Trivadis. A collaboration with our IT specialists and CCFS staff with their banking experience will guarantee a successful implementation of the stipulations laid down in the BCBS 239 rule code.
     
    Get in touch with us. We'll be glad to answer your questions.
  • The MiFID (Markets in Financial Instruments Directive, also referred to officially or abbreviated as the financial market directive) is a directive adopted by the European Union (EU) for harmonizing the financial markets within the single European market.
     
    Not only in Europe are securities markets subject to constant changes. Alongside resolving many open issues, this rule code is also intended to facilitate securities transactions executed by both private and institutional investors. The basic concept makes it easier for investors to invest within the EU as well as beyond its borders, for example by introducing equal conditions for all European trading markets.
     
    The reforms are also aimed at achieving a continuing harmonization of the EU's domestic markets, greater market transparency and integrity, and consequently a strengthening of confidence in the financial markets. Questions that are to be considered as to-do items can arise during the course of presentations or workshops. A list produced from workshops can serve as a member and be used as a basis for further activities.
     
    The 5 main areas of influence are taken into account:
     
    - Market structures
    - Transparency and consolidation
    - Investor protection and rules of conduct
    - Monetary benefits for consultants
    - Consolidation of supervisory authorities
     
    Competence Center Financial Services at Trivadis, with its know-how of the financial environment, can assist you with a rough analysis and initial recommendations for action. During the implementation phase, concrete measures are developed from the detailed analysis, and the first quick wins are quickly realized. We would be pleased to present our competence center and explain the latest new aspects of the legislative initiative in a personal meeting.
  • OECD AEOI/CRS Automatic Exchange of Information / Common Reporting Standard (CRS) against tax evasion
     
    Governments, the EU and the OECD have been focussing more and more in recent years on combating tax evasion.
     
    On October 29, 2014 in Berlin, representatives of the OECD's “Global Forum on Transparency and Exchange of Information for Tax Purposes” signed an agreement governing the automated exchange of data on financial accounts (or CRS - Common Reporting Standard, also called the AEOI - Automated Exchange of Information). With this treaty, the 48 participant states agreed to share (from 2017) data on financial accounts held by taxpayers who are resident for tax purposes in another state with that state. Three states (including Switzerland) will not begin sharing data until 2018, while some other states want to join the initiative at a later date.
     
    This marks a new phase of the OECD project, which was initiated by Germany, aimed at closing tax loopholes affecting income from foreign capital investments. More stringent reporting obligations on the part of financial institutions regarding accounts held by non-resident taxpayers, and the exchange of tax details between the participating countries, form the nucleus of the project.
     
    FATCA – in particular IGA Model 1 – delivered the blueprint for the CRS-compliant identification and reporting obligations. Financial institutions in the participant states must determine to what extent they are affected by the CRS. Reporting financial institutions are obliged to check their customer base (private individuals and legal entities) with regard to their liability to taxation in other participant states. The CRS likewise differentiates between new and existing accounts, while the rules differ in detail from those familiar from FATCA.
     
    Since this is a treaty between nation states, there is no compulsory registration as is the case with FATCA, nor is penalty tax levied on payments to non-participant financial institutions. The large number of participant countries, as well as the accession of further countries in the future, will pose an exacting new challenge.
     
    The timeframe for introducing the CRS is extremely ambitious. The new account process is due to begin for early adopters on 01.01.2016, while all existing accounts are to be analyzed by the end of 2017. The first exchange of data is set to take place in 2017. It is therefore to be hoped that legislators will anchor the agreements in their national legislation as soon as possible.
     
    Trivadis has accumulated extensive experience in the sharing of account data during the course of several FATCA implementation projects. We look forward to applying this experience on your CRS implementation project. Competence Center Financial Services will be pleased to provide you with more information.
  • Since July 1, 2014, financial institutions worldwide (e.g. banks, insurance companies, KVGs) are obliged to comply with the U.S. regulations laid down in the “Foreign Account Tax Compliance Act” (FATCA).
     
    FATCA was passed by Congress in March 2010 with the aim of increasing the transparency of taxation data with regard to American taxpayers who hold foreign investments. Foreign financial institutions are urged to implement advanced identification and reporting requirements for account holders who are subject to U.S. taxation. Institutions that refuse to release information would become liable to pay a penalty tax deduction of 30% on capital income and other certain payments from sources in the United States.
     
    In the meantime, several countries including Germany and Switzerland have signed bilateral agreements with the United States in order to effect a simplified FATCA implementation for members of the financial services industry established in the respective countries. Due to the numerous changes that have to be made to the processes, IT systems and organizational extensions, however, the impact of FATCA on a financial institution is still far-reaching.
     
    Trivadis disposes of a high level of expertise in implementing the FATCA obligations, and has successfully controlled several FATCA projects during the past three years. Our Competence Center Financial Services can provide you with additional information material and further details at no obligation.
  • FATCA review
    CCFS has supported various financial institutions in Germany and Switzerland in preparing technical concepts as well as several studies. Our experience of project management and the analysis of IT environments was held in high regard. Our purview included screening existing banking applications and evaluating the associated processes.
     
  • BDSG amendment
    The amendment to the Federal Data Protection Act (BDSG) pertaining to the storage and processing of personal data, which came into effect on April 1, 2010, requires that supplied information be supplemented with an explanation. Our approach brought together these two documents, which previously used to be created separately. The project showed a return in investment within just one year by virtue alone of the savings in postal charges.
     
  • Platform for automated performance figures
    CCFS put together a rough concept for a Swiss customer demonstrating how such a representation could be built up (modeling), and what has to be taken into consideration with regard to data quality, availability and delivery times, etc. Since the realization, automated performance numbers and KPIs can now be made available via the new platform based on daily time series.
     
  • Cash-flow calculations
    CCFS supported a customer in Germany in reorganizing the system architecture and consulting services for the overall architecture to make the previously time-consuming and flawed cash-flow calculations faster and more informative.
     
  • Safeguarding, stabilization, standardization
    For a foreign branch of a German financial institution, CCFS provided know-how backup in restructuring its IT systems for safeguarding, stabilizing and standardizing the overall operation. In preparation, CCFS also conducted software assessments (analysis and documentation) in an Avaloq environment as the basis for restructuring and standardizing the database operation.
     
  • Test coordination, customer communication, quality enhancement
    This involves management of the test coordination process, as well as identifying and communicating priority work packages and associated risks in the release management. CCFS takes over management of the sub-project, as well as supporting the planning and implementation of the release cycles of individual software and peripheral systems ('run the bank'). One partial aspect concerns developing and monitoring quality enhancement measures in the development process for the deployed software.
     
    Our Competence Center Financial Services can provide you with additional information material and further details at no obligation.
Trivadis, Mathias Walter, Head of Competence Center Financial Services

Mathias Walter

Trivadis, Head of Competence Center Financial Services