Category: News

ALMIS® International launches New ALMIS® Hosted

Posted on by Julie Duncan

Introduction

The ALMIS® Hosted platform, offered in partnership with Microsoft Azure, has been available to clients for several years. A significant proportion of our client base is now on ALMIS® Hosted, with uptake increasing steadily. Another well-established trend is the increased focus on information security, driven in part by heightened regulatory focus.  We have therefore conducted a review of our Hosted offering, with an emphasis on security and resiliency. The outcome of the review is an upgrade to the ALMIS® Hosted platform which is now available to existing hosting clients, roll out starting w/c 19 August 2019 and is expected to complete in Q4 2019.

New/refreshed objectives 

The basic benefits remain unchanged: matters such as infrastructure, software installation, server maintenance become our responsibility, leaving our client’s IT resource to concentrate on other business activities. In developing the new platform, we are delivering various additional benefits, in particular several new security features: SSL encryptions for data-in-transit, BitLocker encryptions for data-at-rest, market leading AI-powered Endpoint protection with synchronised heartbeat, malware scanning, file and boot record protection, exploit protections and active adversary mitigations.

Technical spec 

Using the fastest CPU and storage currently available on Azure, the new platform can deliver material improvement in computational speed and file handling. A detailed technical specification can be made available on request.

Cost considerations 

The new platform has been designed to be fully scalable, to meet clients’ changing requirements. The pricing model, based primarily on user count, reflects this scalable approach. Full details are available on request.

Conclusion 

Compliance is constantly uppermost in the thinking at ALMIS® International, and we regard this upgrade as an essential step in that context. The roll out of course comes at the same time as various other major developments for ALMIS®/Cobalt® clients this year, not least MO+® and FO+: RR®. This is all part of our determination to offer clients the best comprehensive offering of ALM and related solutions in the domestic market.


Colin Johnson joins ALMIS® International as Non-Executive Director

Posted on by Julie Duncan

ALMIS® International is delighted to announce the appointment of Colin Johnson to its board as Non-Executive Director.

Colin is the Head of Prudential Risk for Charter Court Financial Services, a fast-growing challenger bank, with Risk responsibility across Liquidity, Interest Rate and Capital. He was previously the Chairman of UK ALMA, an industry wide association covering the ALM risks across the UK Banking and Building Society sectors. Colin has also worked in senior roles within Santander UK and Lloyds Banking Group, having previously spent 10 years managing Treasury, ALM and liquidity issues within the Building Society Sector.

ALMIS® International CEO and Founder Joe Di Rollo commented: “Asset Liability Management remains the core of our offering, so bringing someone like Colin onto our Board is a great step forward for us …”

Notes

David Sinclair, Aberdeen Standard Investments, remains on the board as a Non-Executive Director. David is a Chartered Management accountant and MBA. David has broad financial and general management experience in a number of sectors including IT, publishing and financial services. Commercially-focused, recent roles have incorporated finance business partnering and support and board-level reporting.

About ALMIS® International

ALMIS® International, founded in 1992 by Joe Di Rollo, identified the need for an Asset Liability Management system to calculate total balance sheet interest rate risk. Since then, the ALMIS® system has been developed into a comprehensive, flexible and regulatory compliant software solution covering; Margin Management, Market Risk, Liquidity, Financial Planning, Capital Adequacy, Hedge Accounting and Regulatory Reporting.

For further enquiries please contact

Cameron Stephen by email or call on 0131 452 8898.

Treasury Management integrated with ALMIS

Posted on by Julie Duncan

In 2017 we will be introducing our Treasury Management System, currently being developed in collaboration with clients, to ensure we are offering as comprehensive a solution as possible working off a single source of data. Our current core offering spanning Regulatory Reporting, ALM and Hedge Accounting is already unique in the UK.

Clients benefit from key advantages of our single platform including:

  • Reduced cost and resource requirements.
  • Consistency across all outputs with one dataset driving all ALM, Regulatory Reporting and other needs.
  • Synergy of a holistic view, with the regulatory matrix integral to ALM & business planning.

Fair value accounting: an open and shut case

Posted on by Julie Duncan

For the first time this year many financial institutions will have included derivatives at their fair value on balance sheets and, in many cases, this will have been a major headache.

Although fair value accounting became mandatory for larger banks and building societies in 2005, it has only become a requirement for smaller firms recently and must now be evident in their accounts. There is also a lot of evidence that all ‘big 4’ accounting firms are tightening up their procedure for auditing hedge accounting for both new FRS 102 transition clients and established IFRS clients.

Fluctuation in interest rates from one period to another causes the fair value of interest rate swaps to change materially and, as a result, there is potential for large volatility in reported earnings and profits. The numbers are often material and so the accounting is very important.

The accounting standard IAS 39 was amended back in March 2004 to specifically allow a portfolio approach to hedge account for a fair value portfolio of derivatives used to hedge interest rate risk. This was particularly helpful to banks who hedge interest rate risk in the banking book (IRRBB) on a portfolio basis. IFRS 9 (IAS 39 replacement) has not yet replaced portfolio or macro hedge accounting and so currently the only way to account for a portfolio of derivatives rather than individually is to adopt IAS 39.

However, in order to follow the relevant guidelines (AG114 – AG132) many banks have adopted this portfolio hedge accounting approach where constant, eg monthly, amortisation adjustments for de and re designation are required.

The complex guidance requires that the hedge item amount is fully tracked between the prospective and retrospective stage, the only way to keep track is to amortise off all the hedge adjustments and amortise on all the hedge adjustments every month, and that way you know you have it right.

If your portfolio has 60 time periods, this means 60 new adjustments every month, leading to many thousands after a few years. These adjustments are often made on large spreadsheets, introducing the risk of human error. Importantly the adjustments can cause the value on the balance sheet to become distorted from the true economic fair value and the accounts can also distort what is actually happening between the hedge and the hedged item.

The example below shows the treatment for a simple theoretically perfectly hedged bullet loan with no expected pre-payments. The example shows how the carrying amount is amortised out each period and we can compares this to its true economic value. In this simple example, the balance sheet value and the true economic value are materially different, and even a theoretically perfectly hedged scenario shows material P/L volatility. Surely this is not the best way to perform hedge accounting.

Fair Value Accounting Figure

It is however difficult but perfectly feasible to adopt open portfolio hedge accounting, allowing a firm to take an open portfolio of interest rate swaps and apply the concept of dynamic hedging without the need for constant adjustments.

With this in mind, the ideal software will properly calculate the value of the designated hedged item while following the very specific rules laid out in AG126 and AG 127.  It will include the individual loans and have the ability to calculate their fair value based on expected cash flows and can track actual pre-pre-payments between the prospective and retrospective stages.  If it can’t then we go back to the headache of de designating every month and amortising the fair value out.

Surely adopting a cleaner approach to hedge accounting, that doesn’t require all of these adjustments, is essential, where the hedged item amount reported always reflects the economic value of that hedged item without any distortion?

For more information on ALMIS® International and our solution go to Hedge Accounting or contact us T: +44 131 452 8898

IRRBB to remain PILLAR 2

Posted on by Julie Duncan

Basel Committee on Banking Supervision have published its latest paper on Interest Rate Risk (IRRBB). This paper details Interest Rate Risk principals updated since the consultation paper was published last year. The Committee has concluded that the heterogeneous nature of IRRBB would be more appropriately captured in Pillar 2.

Nevertheless IRRBB is set to become an increasing priority for regulators and risk managers as the Committee is recommending an enhanced Pillar 2 approach.

Banks are expected to implement the standard by 2018.

https://www.bis.org/bcbs/publ/d368.pdf

FTP – Exploring a ‘Best Practice’ Approach

Posted on by Julie Duncan

Funds Transfer Pricing used in banks and building societies has evolved significantly since the banking crisis and particularly with the introduction of the strengthening liquidity standard and new CRD IV & BASEL III standards

Our FTP White Paper is now in its second publication and is aimed to help our clients implement their own individual approach to Funds Transfer Pricing (“FTP”).

This paper is based on the views and experiences of both our own expert consultants and also from detailed consultation with our bank and building society clients who use our ALMIS® software and also industry experts.

Our aim is to provide some guidance as to the structure and what needs to be considered when client Firms are developing their FTP policies, methodologies and models. It is particularly aimed at the needs small and medium sized institutions that do not access the international capital markets for their funding.

In this paper, we give some background, explain the definition and objectives of FTP and then provide a technical road map for calculating pricing, taking account of the main components as identified. It will be particularly of relevance to banking institutions that are predominantly funded from retail / SME sources.

Request FTP White Paper – 2016 Update

The following links give valuable insight on this evolving subject – published by global, European, US and UK regulatory bodies.

The Bank for International Settlements published a paper written by Australian regulator Joel Grant.  This paper was a reaction to the lack of liquidity pricing post-crash and looks at liquidity pricing in some detail.

http://www.bis.org/fsi/fsipapers10.pdf

The EBA published a very high level paper on guidance over liquidity pricing in October 2010

https://www.eba.europa.eu/documents/10180/16094/cebs18_Guidelines.pdf

The FSA send a dear treasurer letter to all banks following a thematic review of 10 UK banks and highlighting general weaknesses in FTP

http://www.fsa.gov.uk/pubs/international/ftp_treasurer_letter.pdf

Following the thematic review the Bank of England publish a very informative paper on approaches and techniques for FTP on banks written by Fabrizio Cadamagnani of the Banking and Insurance Analysis Division, Rashmi Harimohan of the Bank’s Monetary Assessment and Strategy Division and Kumar Tangri of the Risk Infrastructure, Liquidity and Capital Division.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2015/q204.pdf

In March 2016 the Federal Reserve System published Interagency Guidance on Funds Transfer Pricing Related to Funding and Contingent Liquidity Risks.

https://www.federalreserve.gov/bankinfore.g./srletters/sr1603.htm

As part of Building Society regulation, the Bank of England include for the first time FTP in the building society source book and specific guidance included in consultation paper CP1216.

http://www.bankofengland.co.uk/pra/Documents/publications/cp/2016/cp1216.pdf

ALMM Update

Posted on by Julie Duncan

The PRA has finalised the date of changes to liquidity reporting rules. On 22 April 2016, FSA 050-053 will be switched off and the EU requirements to report additional liquidity monitoring metrics introduced. Firms will not be required to report both sets of returns simultaneously. Note the first reporting date for returns C67.00, C68.00, C69.00, C70.00 and C71.00 will be 30 April for monthly reporters, and 30 June for quarterly reporters.

C66.00 (Maturity analysis) has been dropped

For the months from April 2016 to October 2016 only, the reporting remittance date for monthly reporters is the 30th calendar day after the reporting reference date. Afterwards it reverts to 15 calendar days. Quarterly reporters have 30 calendar days to remit returns.

Reporting remains monthly – but quarterly for institutions that are not part of a group with subsidiaries or parent institutions located outside the UK and the “balance sheet total of the institution represents only a small proportion of the sum of individual balance sheet totals of all institutions in the respective Member State and the institution has total assets which are not significant”. This means almost all UK banks and building societies are quarterly.

http://www.bankofengland.co.uk/pra/Pages/publications/ps/2016/ps1516.aspx

Navigating COREP Taxonomy Changes

Posted on by Julie Duncan

The much-anticipated update to the current (version 2.3.1) taxonomy (the set of definitions published by the EBA which precisely interpret the meaning/value of numerical data entered into COREP and FINREP returns) has been published. This new version (2.4.1) currently does not have an implementation date but has already superseded version 2.4 which was never implemented.

The EBA has also issued a version 2.5 which will supersede all previous versions to become the definitive taxonomy from December 31st 2016. Amongst others, one of the first reports affected will be the monthly LCR for period ending Dec 2016.

To complicate the situation even further, the recent European LCR Delegated Act, implemented by the UK regulatory authorities, requires dual reporting of the monthly COREP LCR. As version 2.3.1 does not cover the Delegated Act’s requirements, in practical terms this will mean firms using both the existing COREP taxonomy version 2.3.1 and a manual Excel spreadsheet work around until such time as version 2.4.1 (or version 2.5) is implemented.

This complicated and uncertain environment is a challenge for both financial firms, many of whom are still finding their way through the rigours of COREP and FINREP, and for service providers like ALMIS® International who must ensure their software is always compliant, regardless of the frequency and uncertainty of regulatory directives from the EBA.

ALMIS® International will continue to develop its Regulatory Reporting module to comply with the now published ‘gold standard’ of version 2.5. However, we will continue to work closely with the EBA and the PRA at UK national level so that if version 2.4.1 is implemented between now and December 31st, our software, training and support will ensure your returns remain compliant and help you navigate a smooth course.

For more information contact Jenna Haston [email protected] or call +44 131 452 8898

COREP Taxonomy Updates

Posted on by Julie Duncan

There have been some recent press releases issued by the EBA regarding updates to the Data Point Model and the XBRL Taxonomies according to the Implementing Technical Standards (ITS) on Supervisory Reporting.

The first of these is a corrective update, taxonomy 2.4.1, which is to be used in place of the previously published taxonomy 2.4. This taxonomy will apply for submissions with reference dates 6 months from the point of their publication in the Official Journal- provided that this is prior to December 2016. At the time of writing, there has been no publication relating to taxonomy 2.4 or 2.4.1 in the Official Journal.

The second press release is related to the publication of taxonomy 2.5. It is explicitly stated that this will be used for reference dates from 31 December 2016 onwards.

In the interim, the active taxonomy continues to be 2.3.1.

We will continue looking out for further news on the situation, and liaise with contacts in the industry in order to keep our clients updated with the most recent regulatory developments.

Almis Strengthen Core Team

Posted on by Julie Duncan

Almis International have continued their growth strategy with two senior appointments.

Simon Garrett joins as Head of Implementation, having previously worked in a similar role with Oracle.  He  will manage software implementation using the respected ‘ALMIS® Implementation Methodology’ (AIM), delivering projects on time and within budget.   He brings 20 years experience in the financial services industry as both a customer and software vendor and is already adding value to the team.