R Systems - BFSI Center of excellence

22/10/2014

30/07/2014

The Value of Innovation Lies in Continuous ImprovementVinayak Potnis       July 30, 2014      Technology     No CommentFew days ago, I met a group of IT professionals on my flight back home. After the initial Hi’s & Hellos the conversations swayed from one topic to another. After sometime the discus…

09/07/2014

R Systems attended the recently concluded Fiserv Client Conference at Las Vegas, USA. Vinayak Potnis from R Systems presented two sessions to a large audience which included heads of various banks across the United States of America. R Systems' session were on General Ledger Reconciliation and ATM Debit Card Dispute Tracker, which were well received by the audience.

26/02/2014

Team outing

31/12/2013

Wishing you a very Happy New Year 2014

08/08/2013

How high? Re-setting the KYC bar

2013 has been a busy year for both rule-makers and financial institutions as far as KYC requirements go. Aside from the finalization of a vast array of trading rules (Dodd-Frank, EMIR etc.), the FATCA final rules were released in January. This was closely followed by the proposal for the 4th Anti-Money Laundering Directive. And in the US, Fin CEN is still in the process of updating its CDD rules. The result of all this, for many institutions, will be a vastly expanded client base now requiring new documentation, checks and screening with a variety of new and enhanced control requirements. Regulators are setting the bar high.
New EU proposals – such as the Bank Account Directive, Network and Information Security Directive, and Euro crime Directive – will all have a significant impact on the way firms manage their customer data in 2014. In addition, the consequences of non-compliance are much, much higher. A move toward the competition law standard for sanctions means firms can expect to be fined up to 5% of their global, worldwide turnover for both AML and data protection breaches.
Coming off the back of a year of unprecedented fines, it is guaranteed that regulators will be keeping a close eye on firms’ compliance with the new requirements. The FCA are beginning their thematic review of the UK financial services industry’s anti-money laundering (as well as anti-bribery) systems and controls in the second half of this year.
Taken in isolation, complying with each new rule that focuses on financial crime is not an impossible task. New standards, processes, systems and training will have to be put in place, all of which can be achieved with time and money. However, if a piecemeal, regulation-by-regulation approach is taken to managing client data, firms will be forced to collect a vast array of information manually (i.e. directly from the customer) on a case-by-case basis (e.g. ‘I need this information for AML, that information for FATCA and this information for MiFID’) all of which will lead to an increase in costs, suboptimal solutions and annoyance for the customer.
Many are hoping that new vendor software will be able to provide the solutions. However, the potential that new technology and systems can provide is not always possible without huge budgets and extended implementation timelines. The complexity of legacy systems across disparate silos means building an integrated view of KYC data across a global bank is a long and arduous task. The sheer scale of the new requirements means that it is increasingly difficult to align work streams across these regulations, forcing a continual, iterative approach to KYC compliance. Without a clear idea of which requirement affects what system, process or data set, isolating problem areas and aligning internal objectives becomes that much harder.

11/07/2013

The Impact of Dodd-Frank on Community Banks

The purpose of Dodd-Frank was to protect consumers and the stability of the financial system. Community banks provide vital services to millions of Americans, many of whom would be underserved if the community bank model were broken or if community banks abandoned lines of service. If community banks are forced to merge, consolidate, or go out of business as a result of Dodd-Frank, one result will be an even greater concentration of assets on the books of the too- big-to-fail banks. Another result will be that small businesses and individuals who do not fit neatly into standardized financial modeling or who live outside of metropolitan areas served by larger banks will find it more difficult to obtain credit. Neither of these outcomes will protect consumers, the financial system, or the recovery of the American economy.

More broadly, Dodd-Frank exacerbates the broken model of American financial regulation that fails to differentiate between small banks engaged in traditional relationship banking and modern, complex financial services firms. Meaningful reform of the financial regulatory system, reform that would actually reduce systemic risk and protect consumers, would establish a two-tiered regulatory framework. Community banks operating on the traditional model would be subject to less stringent regulation and examination. This is appropriate because the success of their business model depends on the quality of their underwriting and their long term relationships with repeat customers. Freed of unnecessary regulatory burden, and allowed by examiners to engage in true relationship banking without fear of criticism, community banks would strengthen their ability to serve their customers. The largest financial institutions would be subject to regulations and examinations appropriate to their size, complexity, and role in the American economy. Staff of existing regulatory agencies could more appropriately and efficiently address the unique challenges that these large banks pose to the stability of the financial system if they could focus less on community banks.

Much remains to be settled under Dodd-Frank, which means that there is still opportunity, through comments to regulatory agencies and remedial legislation, to reassert the value of community banks to the American consumer and the American economy and to work to maintain the viability of the community banking model within the Dodd-Frank framework. But more meaningful reform consistent with the goals of Dodd-Frank would require the implementation of a two-tiered regulatory system.

08/07/2013

Federal Reserve adopts tougher rules on bank reserves :-

The Federal Reserve adopted tougher requirements for bank balance sheets, sending a message to the financial industry that it will cost much more to remain an institution that's considered too big to fail. The new standards, part of the so-called Basel III accord, require all banks to hold more and higher-quality capital to offset potential losses.
Fed officials said the tougher rules to come would be imposed on the nation's eighth largest banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Those banks were designated as systemically important financial institutions after the 2010 Wall Street reform law.
The Basel agreement set a 3% minimum ratio of high-quality capital to a bank's assets, but Fed Governor Daniel K. Tarullo said regulators believe that so-called leverage ratio is too low for the eight largest banks. The Fed is considering doubling the ratio to 6%. As of the end of the first quarter, only Wells Fargo had a leverage ratio above 6%, according to an analysis by investment bank Keefe, Bruyette & Woods.
Fed Chairman Ben S. Bernanke said the changes mean banks "will be better able to withstand periods of financial stress, thus contributing to the overall health of the U.S. economy."
The Fed's Board of Governors approved the new rules unanimously.
Note: Two other banking regulators, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, also must give their approval, which is expected next week”

05/07/2013

Vostro and Nostro Accounts:

Vostro (means "yours" in Latin) account is a local currency (of domestic bank) account which is maintained by foreign bank within a domestic bank that facilitate the foreign bank to avoid currency conversion. Account hold by a domestic bank in foreign bank is called Nostro account. A nostro (means "ours" in Latin) account is an account maintained by a Local bank with a foreign bank that facilitate the Local bank to avoid currency conversion... If Bank of America opens an account in Bank of England in England, this is Vostro account for Bank of England and Nostro account for Bank of America. The system of nostro and vostro accounts facilitates foreign exchange dealings and settlements and allows the settlement of currency transactions between the Country's (Local) Bank and foreign banks.

04/07/2013

"BASEL III - Fed Addresses Community Banker Concerns in Basel III Revisions"

ABA staff yesterday identified several ways the Basel III rule was improved to address concerns raised by ABA and its members and to ease the burden on many institutions -- particularly community banks.

In particular, the risk weights for residential mortgage loans that apply under current rules will continue to apply. In addition, banking organizations with less than $15 billion in assets may continue to count existing trust preferred securities as capital, consistent with the grandfathering set by the Dodd-Frank Act.

ABA had been particularly vocal about the initial plan to require a phase-out of TruPS for all banks and noted that many community banks would have had trouble replacing their TruPS with new sources of capital.

ABA also raised major concerns about the original plan to require banks to recognize in their capital the value of unrecognized gains and losses in “available for sale” securities. That proposal would have placed banks in the position of facing major hits to capital when interest rates rise, as they have already begun to do, just when the economy is emerging from recession.

The final rule addresses this problem, but only in part. Most banks will be able to choose whether or not to adopt this treatment of their unrecognized gains and losses, while large internationally active banks will be required to do so, reducing but not removing the likely negative impact on the overall economy as bank capital contracts.

No material changes were made from the original plan with respect to the treatment of mortgage servicing assets, which must be deducted from capital under the rule. Also, no relief was afforded savings and loan holding companies with assets less than $500 million from the capital rule. The Fed declared that more work with regard to these firms remained to be done.

Aspects of the rules that significantly interfere with the ability of banks to serve their customers in a safe and sound manner will be the subject of further ABA advocacy efforts.

02/07/2013

“Repo 105” – A tool to mislead the investors”

Repo 105 transaction is typically used to temporarily improve one’s leverage position at financial reporting period ends. Repo 105 is an accounting maneuver where a short-term loan is classified as a sale. The cash obtained through this "sale" is then used to pay down debt, allowing the company to appear to reduce its leverage by temporarily paying down liabilities.

Assets are sold typically just before a reporting period ends for (say) 5% less than their current balance sheet value with an agreement to buy them back shortly after the financial period ends i.e. shortly after company’s financial reports are published, for the amount borrowed plus interest. The difference between the cash received and the asset values is known as the “Haircut”. The cash received is used to either pay down debt or improve the net debt position specifically to make period end figures look better.

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28/06/2013

Correspondent bank -

Correspondent bank act as a domestic bank's agent abroad. Correspondent bank serves domestic banks in order to service transactions originating in foreign countries. Correspondent bank support international trade by offering correspondent account. Correspondent account is an account (often called a Nostro or Vostro account) which is established to receive deposits from, make payments on behalf of, or handle other financial transactions for other financial institutions.