Regulation and competition driving lending transformation
Robert H. Kahn, managing director, global banking, Automated Financial Systems, Inc. (AFS®) talks about the impact of regulatory change as a driver for core credit and lending transformation.
With constantly evolving regulatory requirements, how does AFS stay at the forefront of the evolving global regulatory environment?
AFS has always had one focus, delivering quality industry-leading credit and lending solutions. We are immersed in the industry, allowing us to stay at the forefront of all regulatory and accounting changes.
AFS monitors and meets frequently with regulatory agencies and experts as well as speaks at and attends regulatory conferences to anticipate current concerns and future requirements. Lately we have heard talk around IFRS9, operational resilience, progress towards a European banking union, and BCBS 239 compliance. AFS was fortunate to be invited by the BCBS 239 Working Group to provide our informed perspective of what changes would be necessary to promote compliance. Intelligence from all these activities is analysed to form our product roadmap and allows AFS to architect our solutions to address evolving global regulatory requirements well in advance of the required effective date.
As a leader in the area of credit and lending, can you share your insights on what is necessary to achieve the required data for regulatory compliance while better managing loan portfolios?
To be compliant while competing in this historic low interest rate environment, “business as usual” is no longer sufficient. Credit/lending transformation is a critical component for most European banks, due to outdated legacy systems. These platforms cannot provide the accurate, accessible data required to respond to fast-changing business needs and regulatory mandates (IFRS 9, AnaCredit, a common EU definition of default etc). There is a real necessity to replace these “patchwork” systems with a fully integrated, straight-through processing (STP) solution.
It is clear that the separation between “regulatory” and “business” processes, decisions and risk strategies is no longer viable. Banks require a cohesive transformational approach combined with a focused implementation strategy of new technologies for increasingly digital bank ecosystems that provide both the bank and its clients new options for optimising the business relationship. The “ideal credit and lending process” depicted here combines these into one seamless solution providing the required data integrity, revenue enhancement, and increased efficiency, while also lowering operating costs and enabling a faster time to decision and funding.
How does AFS address concerns around project implementation risk and regulatory impact from problematic implementations?
Successful project implementation is one element of demonstrating operational resilience, which is top of mind among European regulators. Resilience is also defined by technology solutions that are architected with industrial strength and 24/7/365 operability.
With the experience of hundreds of system conversions AFS uses four key elements for successful implementations:
1) a disciplined project implementation methodology;
2) precise project planning, organisation, and management;
3) active client-side executive sponsorship and engagement throughout the project; and
4) minimising customisations to the system.
A year ago, we delivered a major implementation to a client over a two-day weekend [please make it bold/colour in the layout so it stands out] that impacted 100 business applications, 130 interfaces, 1,489 data fields, and 4,536 business processes – on time and on budget – with no issues during the project or since. This success was due to using our key elements of implementation, and a robust discovery exercise that defined the desired target state to set expectations and identify important dependencies.
Our level of planning and execution coupled with solution architectural excellence provides successful implementations and a level of system availability that delivers operational resilience. AFSVision® has the agility, scalability, and built-in functionality to meet the banks’ requirements “as is”. Following the key elements of success, a tested methodology, and delivering a solution that does not need customisations means taking risk out of implementation.
Can banks achieve current and future regulatory compliance with solutions that provide a competitive market advantage?
Absolutely, as long as banks are prepared to meet the challenge of transformation, adopting a solution with real-time technology that provides quality, accurate information with efficiency and straight-through processing. Strategic transformation must be built for the future and address real-time management of accurate and complete data that meets current and future regulatory drivers and business goals – with no customer disruption. Regulatory and business requirements need to be assimilated into a single, digitally enabled, STP as depicted in this article’s diagram.
AFSVision was built to minimise risk and is designed with the agility and built-in functionality to meet any bank’s requirements, while integrating, as needed, to any bank system for STP lending. AFSVision provides the foundation for accurate and reliable reporting, data quality, and controls to obtain “one version of the truth” necessary to achieve regulatory compliance and maintain a competitive advantage in the marketplace.
The key to success is a solution that provides effective data management to position banks for current and future regulatory mandates while achieving their business objectives around revenue growth, client experience, scalability, enhanced risk management, data quality and operating efficiency.
This article is also featured in the November 2018 issue of the Banking Technology magazine.
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