Federal Reserve Enhanced Prudential Standards Implementation

Background

The client was the US affiliate of a Foreign Banking Organization (FBO) and Global Systemically Important Bank (G-SIB), and subject to the Enhanced Prudential Standards (EPS) regulations adopted by the Federal Reserve Board in 2014. These standards became effective on July 1, 2016, imposing US capital and liquidity rules by requiring FBO’s to establish an Intermediate Holding Company (IHC). This holding company is composed of the aggregate financial data of its subsidiaries, and is the source of consolidated regulatory reporting for US regulators. The FBO selected a regulatory and liquidity reporting vendor system as the IHC’s reporting platform.

The US broker dealer was the FBO affiliate with the broadest array of financial products, and the most complex data challenges. They selected Delv to program manage delivery of the data aggregation and file generation streams of the initiative.

Challenges and Solutions

There were multiple challenges that Delv provided solutions to resolve. At the outset, senior stakeholders of the broker dealer were not yet meaningfully engaged about the breadth of the regulations and the demands they would add to the client’s technology infrastructure, especially its data warehouse strategy. To remediate, Delv implemented a program structure with a clear governance model and communication framework.

Next, a detailed analysis of business processes was necessary to scope the extent of change requirements for the company’s data warehouse, in particular determining which additional data elements needed to be sourced from upstream systems. Delv responded by deploying an Agile product backlog solution to meet the deadline.

Finally, there was no vendor or client capability for managing post-transaction adjustments such as price, position quantity, or valuation breaks, which would have produced incorrect regulatory reports. Delv responded by initiating another project stream to develop an automated means of managing break adjustments on the general ledger and its supporting data elements.

With stakeholder approval, Delv moved to the execution phase of the project.

Execution and Delivery

Delv defined the data files that the vendor system consumes to produce the reports, and validated those files against source system data. Delivering these objectives required a combination of our business analysis services, quality assurance solutions, and program management capability.

Our business analysts identified the requisite data elements and mapped them to the appropriate endpoints on the vendor platform. There were over one thousand such elements, many of which required additional transformations depending on the underlying financial products and business processes.

Validating this data against source systems, including the client’s general ledger, required Agile collaboration among our quality assurance team, business analysts, and the client’s development team to build a new reconciliation tool. Prior to this point, there was no automated GL-to-trade position reconciliation capability, though the need for one had been established long before the FRB regulation was enforced. Delivering this tool not only ensured accurate reporting and data veracity during testing, but added permanent value by modernizing a critical product control business process.

All deliverables were produced to the highest standard, and received by the client on time or ahead of schedule.

Result

Delv’s program management, business analysis and quality assurance ensured that the broker dealer could deliver timely, accurate data to the vendor reporting platform ahead of the regulatory deadline. In addition, the project added lasting value by establishing new data standards and documentation that serves as a foundation for subsequent reporting obligations, such as FRB 2052A (5G) and BCBS 239.

"Delv landed their team of business and systems analysts and hit the ground running. Their deep knowledge in regulatory reporting and ability to spec out data requirements is top notch."

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