Peter Ku
Basel III, Financial Reform – Information Architecture Implications For Future Compliance
Response to the global financial crisis is in full gear as European bankers and industry authorities propose far-reaching new rules for the global banking industry that are designed to avert future financial disasters, but could also dampen bank profits and strain weaker institutions. If adopted by the G-20 nations later this year, the rules will require banks to bolster the amount of low-risk assets they hold in reserve as a cushion against market shocks. Referred to as Basel III, these requirements will demand banks hold top-quality capital totaling seven percent of their risk-bearing assets, more than triple what they do now. But the new capital ratio is significantly lower than what banks feared earlier this year and a long lead-in time, extending in part to January 2019, eased fears of a rush to raise capital. Many countries are just getting their act together to comply with Basel II yet alone start planning for Basel III and have faced challenges to comply over the years caused by traditional business silos, unsupervised data management activities, limited business involvement, and years of hand coding in IT to access required data. All of which have subjected financial institutions from increasing fines, higher operating costs, and growing public distrust of the banking industry. (more…)
Financial Reform: Do You Have The Right Data To Ensure Compliance?
These days, most of the conversations on Wall Street are about the recent passage of the financial reform bill which some are saying represents the most ambitious and thorough regulatory reform of the laws governing the financial industry since the Great Depression. According to Financial Reform Watch ,the new legislation adds several new corporate governance and disclosure requirements applicable to companies listed on U.S. stock exchanges and in some instances, other publicly-traded companies, including:
- Requirement for having a non-binding shareholder vote on compensation of specified executive officers and in certain instances golden parachute provisions;
- Requirement for more stringent rules and disclosure applicable to compensation committees;
- Requirement for additional disclosure requirements related to executive compensation;
- The elimination of discretionary voting by brokers in connection with the election of directors, executive compensation issues or other significant matters;
- Authorization for the SEC to adopt rules related to proxy access; and requirements to adopt claw back policies with respect to employment arrangements of executives of companies seeking to list on a U.S. stock exchange. (more…)
The Cost Of Bad Data In Combating Global Money Laundering And Terrorist Financing
I recently attended the 15th Annual Money Laundering conference to learn about recent trends, regulations, and challenges in combating financial fraud, money laundering, and complying with domestic and international laws including OFAC, BSA, AML, EU Directive on Money Laundering. At the end of the day, these are all inter-related to help locate and track the movement of funds for illegal purposes including terrorist financing, drug, and human trafficking. I was in a room packed with folks whose titles included Head of BSA/AML, VP of Compliance and Financial Fraud, Financial Securities Analysts, and wondered what kept them up at night. (more…)
Are You Getting What You Expected From Your Anti-Money Laundering Software?
According to a recent FT.com article, US lawmakers are seeking to expand the reach of anti-money laundering regulations after a Senate investigation found that hundreds of millions of dollars in suspect foreign funds have been able to land in the US. As we can see, money laundering and terroristic financing continues to rise despite the huge investments banks have made in packaged Anti-Money Laundering (AML) software, custom built solutions through global system integrators, re-engineered business process, people, and policies. How can this be? Were these bad investments to begin with or is there something else causes these issues? (more…)
Solving FAS 166 And 167 Compliance With Data Integration And Data Quality
Back in June 2009, the Financial Accounting Standards Board (FASB) published Financial Accounting Statements No. 166, Accounting for Transfers of Financial Assets, and No. 167, Amendments to FASB Interpretation No. 46(R), which changes the way entities account for securitizations and special-purpose entities. The new standards will impact financial institution balance sheets beginning in 2010 and will require substantive changes to how banks account for many items, including securitized assets that had been previously excluded from these organizations’ balance sheets. Banks affected by the new accounting standards will be subject to higher risk-based regulatory capital requirements. So what does it all mean and how much will it cost banks to comply? (more…)
Attracting and Retaining Customers Requires Being Data Driven
According to a 2008 Forrester Research study, attracting and retaining top customers remains one of the highest priorities for CEOs today. Here’s why:
- The cost of losing one customer is four times higher than the cost of obtaining that same customer (Return on Behavior Magazine)
- Satisfying and retaining current customers is 3 to 10 times cheaper than acquiring new customers, and a typical company receives around 65 percent of its business from existing customers (McKinsey, 2001)
- A 5% reduction in the customer defection rate can increase profits by 25% to 80% (Return on Behavior Magazine)
- 7 out of 10 customers who switch to a competitor do so because of poor service (McKinsey, 2001) (more…)
Basel II Compliance Is Still A Big Deal – Are You Prepared?
The Basel Committee on Banking Supervision of Switzerland-based Bank for International Settlements (BIS) updated the conditions to the Basel II accord this year to further strengthen banks’ regulatory and capital framework. The amendments include the provision of more capital for exposure to structured investments such as collateralized debt obligations and asset-backed securities that have been blamed as the root cause of the financial crisis. The committee also imposed higher standards for determining the risks of such instruments. It also required banks to disclose their holdings of these instruments to prevent speculation among market players on the strength of banks’ finances in relation to their capital market activities. (more…)
A Wave Of New Mergers And Acquisitions – Are You Prepared to succeed?
I was driving to work this week when I heard about Walt Disney Company’s announcement to buy comic book giant Marvel Entertainment (MVL) for US$4 billion. I started thinking about what it would be like to see the X-MEN hanging out with Snow White’s Seven Dwarfs the next time I take my kids to Disneyland. At the same time, I was wondering if an increase mergers and acquisitions were a sign of an economic recovery? (more…)
Can Organizations Afford Not To Adopt Data Governance In A Recession?
According to Ovum, “Organizations need to protect their most valuable information assets during the current recession in order to be prepared for recovery.” The analyst firm warned that economic downturns could disrupt organizations’ operations and lead to the waste of information assets in the inevitable downsizing process. It continues to say that, “Loss or leakage of information may cause a violation of legal or regulatory compliance requirements that may have consequences beyond the immediate penalty imposed on the organization.”
Therefore, can organizations afford not to adopt data governance in the current recession? Absolutely NOT! It is even more important in a tough economy to ensure the availability of proper, accurate, and consistent data as companies invest scarce resources in customer acquisition and retention marketing, merge and acquire other companies, manage risk, and ensure regulatory compliance. Despite budget cuts, investment in data governance is expected to grow over the next few years as shareholders and consumers alike will benefit as data governance emerges as a required discipline, giving rise to greater trust, better transparency and reduced risk. So what can organizations do to ensure success?
Demystifying Data Governance
Demand and interest for data governance continues to grow, despite current macro economic conditions and shrinking technology budgets. What’s driving interest? Well, I can sum it up to three main categories which include:
- Increase in regulatory oversight, corporate transparency, and accountability
- Need to reduce costs and improve operational efficiencies
- Improve visibility and relationships with customers and partners
Over the past several quarters, I have met with companies across different industries about data governance which has generated some interesting myths I would like to address including:
- Myth #1: Data governance has to be done across the company all at once
- Myth #2: Data stewardship practices require outside experts
- Myth #3: Data governance is all about MDM and MDM is all about Data governance (more…)
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