September 22nd, 2008 by admin
The ructions on the world financial markets may seem remote from people’s everyday working lives, but, the impact will undoubtedly prove to be severe. Banks serve an essential purpose. They are the intermediary by which capital can be allocated to productive use and financial gain. However, for the present, banks appear to have forfeited the public trust upon which they depend by gambling with investors’ money.
Perhaps this will prove to be a squall rather than the perfect storm The Times refers to. The problem is, if the public loses confidence in the integrity of the financial system, what happens next?
In my view the only way to prevent confidence slipping away is to improve transparency through better not more regulatory practices, and due diligence into the balance sheets of the remaining banks. Policy makers seem to be “hoping for the best” and regulators have not been strong enough to demand open global systems. Financial reporting and risk management are often done by different departments with separate systems that do not talk to one another. In addition, there are still too many banking institutions that treat regulatory reporting as a chore, an afterthought. Many of the ‘systems’ that FRSGlobal sees in banks are manual (a combination of extract files, spreadsheets and manual intervention) rather than automated, global, secure regulatory reporting and risk management solutions. Regulators and the bank’s own financial teams should be demanding solutions which combine best risk management practices for asset and liability management with financial reporting solutions that enable them to drill back to individual transactions wherever they have been made anywhere in the world. At FRSGlobal we have been investing heavily in this area and have recently acquired IRIS integrated risk management a Swiss risk vendor that has been intimately involved in the Basel II committee’s deliberations on finding a fair and reasonable solution in exactly this area.
In this weekend’s Financial Times there is an article on the back pages entitled ‘I think, therefore I am increasing regulation’ by John Authers which, whilst it raises many interesting ideas, misses, I believe, the main point. Basel II was implemented in Europe in January 2008; this changed the regulatory landscape on credit risk. Are we saying now that this didn’t go far enough? I don’t think more regulation is the answer. Of course, we can improve liquidity and risk concentration reporting but what is really wrong is that it is often too complicated to get the total picture. Many of today’s banking institutions have extremely complicated legal structures which have been set up to enable trading in particular products (CFDs or CDOs are two examples that spring to mind) creating risks in silos that are almost impossible to monitor and/or gauge unless systems are put in place on a global basis.
At FRSGlobal we have been preaching that global regulatory systems are only as good as they are allowed to be. Don’t blame the tools when it is the approach that is wrong.
Whist I am on it, congratulations to the FSA and SEC for treating the symptom and not the cause of the current crisis. What appears to be happening is that we are taking a sledgehammer to crack a nut - targeting short sellers is a quick fix to resolve a problem that wouldn’t be there if senior management in these failing companies had done their jobs properly and not loaned recklessly to all and sundry in the hope of making large profits.
In The Sunday Times (21st September) on p13 Richard Woods points out that the practice of short selling needs owners of a firm’s shares to lend them out to speculators who then sell them and try to buy them back later at a cheaper price. By finding out the proportion of a company’s stock that is out on loan at any time a good assessment can be made of how much short selling is taking place. In the case of HBOS just 2.75% was on loan last Monday according to Dataexplorers.com. It wasn’t naked short-selling that caused the massive decline in the stock prices of HBOS, etc. it was a failure by management on a catastrophic scale to control the excesses of irresponsible lending without proper regulation that caused the markets to lose confidence in the integrity of their business models. What is required is a change in accounting regulations so that there is absolute transparency on a global basis as I have already said, and due diligence into the balance sheets of the remaining banks so that confidence can be restored to a battered banking sector.
What the FSA and SEC is doing is worse than short-selling - they are interfering with the daily ebb and flow of the market and as such making the markets less efficient. Markets are for trading, both buying and selling. By all means introduce transparency, but don’t introduce barriers to the cut and thrust of everyday market order flow because all that will do is stifle trade and as such make London and New York less competitive in the global markets. Again as they say in this weekend’s Sunday Times, this looks more like political expediency to find and blame the ‘bad guys’ than anything that will address the root of the problem.
August 21st, 2008 by admin
The Software as a Service (SaaS) model promises to transform the business of software development at FRSGlobal by moving from on-premises deployment of software to providing globally on-demand functionality via the Internet. It brings many benefits to the table, not the least of which includes reduced IT costs, adaptability and a faster way to respond to regulatory or market changes. This model of software delivery has the potential of benefiting both FRSGlobal as well as our customers, providing that it is used effectively. SaaS needs to provide value-add to our customers and partners, while protecting the value they currently enjoy from the more traditional development methodology.
FRSGlobal provides financial and regulatory reporting around the world, covering more than 30 countries and providing regulatory insurance to more than 1,500 customers. FRSGlobal has almost two decades of global regulatory experience and this key asset has been harnessed in form of a global financial data model (Data Foundation) and into its Center of Regulatory Excellence. Most customers value the security of having the regulatory solutions run within their own secure environment. Additionally, customers have repeatedly voiced a need to leverage the FRS Global infrastructure to fill their own internal financial reporting needs as well.
So the question we posed our developers was what value-add can FRS Global provide in the area of SaaS, while at the same time protecting the value of existing solutions?
The first area has been to start to provide a collaborative knowledge sharing centre that leverages CORE for part of its content, but open for customers and partners to provide content and comments, thereby providing a central place to find information, directions and interpretations for global regulatory reporting. This helps our customers be forewarned and prepared for regulatory developments and changes.
A second, is to provide the ability to easily build reports for the regulatory environment – both internal management reports as well as external regulatory reports not provided by FRS Global - on top of FRS Global’s extensible global financial data model. By leveraging the same data model as used for their regulatory reporting, customers significantly minimize their ETL efforts, which often constitute the largest cost component of reporting, and it also ensures consistency across different reporting solutions and countries. In addition, while these reports would be built in a SaaS environment, they would still be processed using the FRSGlobal Reporting tools in a secure customer environment, leveraging all of the existing features, such as security, audit trails and manual adjustments.
And last, but not least, SaaS allows us to provide a market place for financial and regulatory reporting that allows partners and customers to share reports with one another, minimizing cost, time and effort.
FRS Global is actively working with partners and customers to validate and refine this vision of how to best leverage SaaS to maximize the value to our customers and partners and bring it to the market.
March 19th, 2008 by admin
Some thoughts from an airport lounge as I head for another one of our offices and a meeting with clients
On a personal level the challenges of carrying the right clothes are paramount. Two weeks ago I was in the humid heat of torrential downpours in Singapore and this week I was slipping and sliding (literally as I went base over apex ) in the freezing temperatures of Montreal.
However, with oil hitting $110 a barrel, gold at $1,000 an ounce, the dollar in free fall and central banks cutting interest rates inflationary pressures are a global problem and it has got me thinking about how we can position ourselves at FRSG to help our clients. In order to monitor the effect this has for regulators and financial institutions alike FRSGlobal are addressing the issue of providing global regulatory reporting solutions. We are also, following expeditions to the Middle East, Turkey, India, Russia and China recently, expanding our coverage of the ‘E7’ - China, India,, Brazil, Russia, Indonesia, Mexico and Turkey . Continue reading ”
January 23rd, 2008 by shusk
Amid a shocking string of results in the run up to Christmas 2007 there were calls for the head of George Burley manager of Southampton Football Club. Now, based on his track record at Saints, Hearts, Derby and Ipswich he is being considered seriously for the country manager role with Scotland.. Two questions: How will further change and upheaval affect Southampton’s chances of promotion to the Premier League any time soon? And how will a third manager in three years affect Scotland’s chances of qualifying for one of the world’s major tournaments?
In the world of international banking the impact of the credit crunch will probably result in a reduction in IT spending of some 20%. However, there is renewed focus on understanding what the risks are that caused the initial problem. The key objective for many banks will be the need to develop a “single view” of risk across the bank. How will these changes affect FRSGlobal the risk management company with which I am involved?
In short there is plenty of upheaval, plenty of change - the question is:
Is change always for the worst? Continue reading ‘Is change always for the worst?’
