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Misys Treasury & Capital Markets

Misys Treasury & Capital Markets. Achieving STP in Commercial Lending Ken Katz Misys Commercial Lending Division Product Manager Loan IQ. What is STP?.

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Misys Treasury & Capital Markets

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  1. Misys Treasury & Capital Markets Achieving STP in Commercial Lending Ken Katz Misys Commercial Lending Division Product Manager Loan IQ

  2. What is STP? • Straight Through Processing (STP) is the substitution of automated tasks and processes for manual ones so that a business process or service (e.g. the origination, servicing and disposition of a commercial loan) can be entirely automated from beginning to end. • All original information (e.g. customer and loan term information) is entered only once in the process and ‘reused’ throughout the loan lifecycle • Central database is sole repository for information • Processes and workflow events are tied together seamlessly and performed without unnecessarily repetitive data entry or manual transition Source: TowerGroup Harnessing the Network of Banking Intelligence

  3. Critical Components of STP • Real-time data processing • Common database • Business logic rules • Automated workflow management • Seamless integration of processes Harnessing the Network of Banking Intelligence

  4. Full STP Value Proposition to Commercial Lending Internal Integration Documentation Perfecting GeneralLedger CreditApproval InternalSystems Sales Force Automation Risk &Compliance Workflow & Data Management LoanProducts Origination Booking Servicing Reporting &Portfolio Mgmt. Core Loan Processing Cycle Regulators Remote / Wireless ServiceBureaus SecondaryTrading LegalCounsel SyndicateMembers Customers External Integration Source: TowerGroup Harnessing the Network of Banking Intelligence

  5. Current Lending Market Drives STP • STP is a Necessity due to current commercial lending environment • Banks no longer hold large deposits for long periods at high interest rates • Highly liquid market due to secondary trading, non-bank investors and sophisticated derivative instruments • Banks need to coordinate increasingly global information flow and work flows • Need for a single platform to host and standardize data across different locations, time zones, currencies • Banks need to comply with increasingly strict industry and government regulations • Basel II, Sarbanes-Oxley Act • Banks pressured to cut costs through improving operational efficiencies • Net interest margins are at 20-year historical low Harnessing the Network of Banking Intelligence

  6. US Bank’s Net Interest Margin (1996-2006) Net Interest Margin (%) Net Interest Margins are a 20 year low, forcing banks to reduce costs through operational efficiencies. Source: TowerGroup Harnessing the Network of Banking Intelligence

  7. Increasingly Liquid Loan Market Europe in2006 Multiple players in the market and more ways for loan assets to be held means banks no longer hold loans for long periods at high interest rates. Harnessing the Network of Banking Intelligence Source: LSTA

  8. How can STP benefit financial institutions? Straight Through Processing Seamless Integration of Processes & Workflow Once only Data Entry Single Source Database Single Source Database Harnessing the Network of Banking Intelligence Source: TowerGroup

  9. STP Technology Trends • Business Process Management Systems (BPMS): Manage workflow—automate data gathering from host systems, apply standardized underwriting rules and policies, centralize reporting, and support on-going portfolio monitoring • Electronic Content Management (ECM):Manage & deliver content– electronic and paper based documents, multimedia files, email, images, web pages and other communications • Service Oriented Architecture (SOA): Web services used as a ‘wrapper’ around legacy system integration points to provide standard interface protocol • Business rules management system (BRMS): Manage business rules, enforce policies, make decisions, standardize processes Source: TowerGroup Harnessing the Network of Banking Intelligence

  10. Why have banks not fully achieved STP? • Increasingly complex loan transactions with multiple parties • System has to be able to link to clients, vendor systems, credit bureaus, databases • Consolidation of front and back office processes and workflow is costly and requires organizational change • Difficult for banks to define clear workflow and information flows needed for full STP • Lack of industry standards in fast developing commercial lending industry Harnessing the Network of Banking Intelligence

  11. Achieving STP Efficiency • “Policy and process first” approach before making major technology investment • Technology should not lead the solution but rather enable the solution • Bank’s internal front and back office divisions need to be aligned Optimization Pathway Technology People Process Policy Benefit 70% 90% 100% Source: Benchmark Consulting International Harnessing the Network of Banking Intelligence

  12. Questions and Answers Harnessing the Network of Banking Intelligence

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