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Gearing Up For Basel III

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Stringent data reporting and risk management requirements will compel banks to significantly overhaul their IT infrastructure to comply with sweeping regulatory change, power new operational …

Stringent data reporting and risk management requirements will compel banks to significantly overhaul their IT infrastructure to comply with sweeping regulatory change, power new operational efficiencies and create market differentiation.

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  • 1. • Cognizant ReportsGearing Up For Basel IIIStringent data reporting and risk management requirements will compelbanks to significantly overhaul their IT infrastructure to not only complywith sweeping regulatory change but also to power new operationalefficiencies and create market differentiation. Executive Summary operations. Given the pressure on margins, In its depth and scope, Basel III is unlike anything we believe that banks need to go beyond the the banking business has seen. A combination of standard applications of the new technologies. micro- and macro-prudential norms, the global By building strong capabilities in the areas that regulatory mandate (which rolls out this year are the focus of these regulations, banks can through 2018) 1 requires banks to increase their differentiate themselves from their competitors. quality of capital by focusing on liquidity and Key imperatives for banks as they prepare for common equity; improve supervision of firm-wide Basel III include: risk management; and provide detailed report - ing on regulatory capital and the calculation of • Undertake a fundamental analysis of individ- capital ratios. It mandates adherence to ratios ual businesses to identify growth drivers. such as liquidity coverage and net stable funding, • Strengthen data management practices to which are aimed at strengthening banks’ short create a single source of truth for all functions. and long-term liquidity. Most prominently, Basel III • Embed key functions such as liquidity and risk is transforming risk management into a function management into related processes across the that fortifies banks’ sound functioning. organization. • Invest in technologies that can free up These changes will necessitate a fundamental resources to focus on core activities. review of each bank’s operating model. Many • Improve project management capabilities to banks will need to decide which businesses realize greater benefits from IT investments. and geographies to focus on and which to exit. Almost all banks will need to invest in technology Overall Impact capabilities to meet Basel III’s stringent data The impact of Basel III on banks is manifold, reporting and risk management requirements. ranging from capital (see Figure 1, next page) and liquidity requirements to technology and While these investments will strain bank bal - strategy implications. The new key capital ratio ance sheets, they will also create opportunities is set at 4.5%, more than double the current to extract additional efficiencies from day-to-day 2%. In addition, there is a new buffer of 2.5%; cognizant reports | march 2013
  • 2. banks with capital within the buffer zone will counterparty is likely to default. Surveys haveface restrictions on dividend payments and dis- found that several banks are not in a position tocretionary bonuses. According to an estimate by calculate CVA instantaneously.4McKinsey & Co., the capital requirements underBasel III could reduce return on equity (RoE) for Global systemically important financialbanks by about 4% in Europe and 3% in the U.S.2 institutions (G-SIFI) will incur a 1% to 2.5% capital surcharge. These banks willBasel III’s liquidity ratios constitute a “first of need to meet the enhanced One estimateits kind” attempt at regulating bank liquidity. Its capital requirements by suggests thatliquidity coverage ratio (LCR) will require banks using retained earnings, rais-to maintain cash-like assets in the short term; the ing fresh equity or reducing G-SIFIs will neednet stable funding ratio (NSFR) will determine a their risk-weighted assets to raise anotherone-year-horizon liquidity buffer. For banks that (RWAs), as the risk weight- $566 billion toare unaccustomed to holding high-quality capital age for certain assets willin the short term, adjusting to these requirements rise under the new regime. meet Basel III’swill entail significant costs, which may be further One estimate suggests that capitalinflated by the increased market demand for such G-SIFIs will need to raise requirements.capital. another $566 billion to meet Basel III’s capital requirements. One outcomeBasel III will also create technological challenges. of this has been a shedding of non-core assetsFor one, the proposed rules require banks to by banks globally, particularly in Europe (seereport their liquidity metrics on a daily basis. Figure 2, next page). For example, Citigroup’sBanks will, therefore, need to begin collecting data non-core assets declined from 34% in 2009 topoints, which could run into several thousands, 10% of total assets as of June 2012.5across the organization. The mandated enhance-ments to banks’ risk management infrastructures Banks operating in multiple countries will alsowill also pressure their technology infrastructure. have to deal with other regulations, such asBasel III also includes a credit value adjustment the Dodd-Frank Act in the U.S. (for more on this(CVA) charge that must be calculated over and regulation, read “Implications of Dodd-Frank forabove the default counterparty risk charge that the U.S. Banking and Financial Services Indus-was proposed in Basel II.3 This calculation needs try”), European Market Infrastructure Regulationto be carried out on a real-time basis; it involves (EMIR) and the Markets in Financial Instrumentanalyzing various trades and determining which Directive (MiFID) in the EU.Basel III Capital Requirements Present the Biggest Challenge 18% 16% 16.5% 14% 14.5% 13.0% 12% 13.0% 11.0% 10.5% 10% 9.5% 8.5% 8.0% 8% Minimal Capital Requirement 7.0% 6% 6.0% Conservation Buffer: 2.5% 4.5% Countercyclical Buffer: 0.0% — 2.5% 4% G-SIBs Buffer: 1.0% — 3.5% 2% 0% Common Equity Tier 1 Total CapitalSource: “The Road to Basel III Implications for Credit, Derivatives & the Economy,” Deutsche Bank, 2012.Figure 1 cognizant reports 2
  • 3. Investment Banks as corporate lending, private banking and retailThe financial crisis exacted a heavy toll on stock brokerage.8 While such moves are feasiblethe investment banking business, effectively for large banks, the combination of a weak econ-ending an era of record profits. Five years later, omy and stringent regulations make it difficultit remains a rollercoaster ride for these orga- for mid-size and smaller banks to juggle all thesenizations (see Figure 3, page 4). In the face of initiatives.declining revenues and risk-averse investors, sev-eral large banks have responded by slashing their Corporate Bankinginvestment banking business. Regulations such Basel III’s impact on non-capital market entitiesas the Volcker Rule — a part of the Dodd-Frank is expected to be milder, but it will neverthelessAct in the U.S. that restricts proprietary trading alter corporate banks’ lending practices. Higherby banks — have added to the pressure on invest- capital ratios and liquidity requirements couldment banks (for more on the Volcker Rule, read increase lending costs and force banks to reduce“Volcker Rule Compliance: Preparing for the Long their lending to large corporations and/or stopHaul”). Similar laws are likely to be enacted by lending to certain heavy industries altogether.European countries.6 Several signs indicate that this may be already happening. France’s Société Générale and BNPAs Basel III dawns on the investment banking Paribas announced plans to scale back theirlandscape, it is expected to usher in additional aircraft and shipping financing operations. Thechallenges. The trading business, for one, is Royal Bank of Scotland sold its aircraft leasingexpected to be impacted significantly. Basel III’s business in January 2012.9 There are rumblings ofmarket risk and securitization framework will similar moves in the U.S., as well. Meeting Baselforce banks trading in OTC derivatives to hold III’s capital requirements is expected to be toughmore capital (2% of total exposure to counter- for banks with assets of less than $500 million.10parties7) for market and counterparty risk provi- The rules are expected to adversely impact mort-sioning. Banks will be forced to shed lower-rated gage and real estate lending.11assets, which will impact their trading businesses. Such moves could, however, open opportunitiesThese factors are forcing a rethink of the role of for banks from relatively better-off regions,investment banking in organizations with diversi- such as Asia, to expand into new markets. Forfied business models. This reassessment comes example, Société Générale exited the Egyptianas many large banks undertake across-the-board market after selling 77% of its stake to Qatarreductions in variable costs. Some wholesale National Bank, allowing the state-backed lenderbanks have made a move into businesses such to expand into new markets.Growing Non-Core Asset Market in the EUNon-core asset transactions have increased by more than three-fold between 2010 and2011 and have made a strong start in 2012. €36.0 bn Other, ¤4.0 bn €26.6 bn Portugal, ¤4.2 bn Other, ¤2.0 bn Italy, ¤1.9 bn Ireland, ¤15.0 bn Spain, ¤3.7 bn UK, ¤3.6 bn €10.8 bn Germany, ¤4.3 bn Other, ¤1.2 bn Spain, ¤4.0 bn Switzerland, ¤2.1 bn France, ¤11.1 bn UK, ¤8.8 bn UK, ¤7.5 bn 2010 2011 June 2012Source: “A Growing Non-Core Asset Market,” PricewaterhouseCoopers, July 2012.Figure 2 cognizant reports 3
  • 4. Hedge Funds have declined, would make these accounts moreFor hedge funds, Basel III — combined with the expensive for retail banks to maintain.16Volcker Rule, the EMIR and MiFID – will createconsiderable challenges. The additional CVA Custodian Bankscharge under Basel III is expected to increase For custodian banks, the unfolding regulationsthe cost of trades and affect trade volumes. present an opportunity to play a larger role forMandatory trading of OTC derivatives through buy-side clients. Basel III, the U.S. Dodd-Frankexchanges will also increase the cost of OTC Act and the EMIR are expected to boost demandderivatives trading.12 for higher quality collateral. According to the Tabb Group, the clearing mandate would requireAdditionally, LCR and NSFR are expected to between $1.6 trillion and $2 trillion in additionalinflate costs for hedge fund clients. As a result, collateral.17some banks are separating their hedge fundsoperations into standalone entities13 or winding As institutions that hold billions of dollars indown operations to focus on core businesses.14 collateral, custodians are in a position toGiven that most of these regulations are still in capitalize on the growing demand.18 In fact, orga-flux, the prolonged uncertainty is believed to be nizations such as BNY Mellon, BNP Paribas andhampering many firms’ decision-making. the U.S. Depository Trust & Clearing Corporation (DTCC) have launched initiatives that enable aRetail Banks smooth flow of collateral across borders.19The impact on retail banks will be similar to thaton corporate banks. Nevertheless, compliance will Dealing with Basel IIImean allocation of resources and planning for the The double whammy of stringent regulationsshort term. The requirement to maintain greater and weak economic growth is forcing banks tocapital reserves will hamper lending. review every aspect of their businesses. While compliance remains the top priority, banks areIn the U.S., several community and small banks continuously seeking to enhance efficiencieshave expressed concerns that Basel III capi- in their day-to-day operations to prepare for atal norms could undermine their ability to prolonged period of tight margins and high costs.issue mortgages.15 Banks with substantial retaildeposits will no doubt find it easier to comply As regulatory capital increases its presence onwith the higher capital requirements. For others, banks’ balance sheets, the focus is likely to shiftbuilding a larger deposit base could entail higher toward initiatives to increase return on equity.costs. Also, the ensuing competition for deposits, RWAs are set to increase under Basel III’s newwhich have grown only modestly as saving rates regulatory regime, prompting banks to reduceTough Times Not Over Yet for Investment Banks -18% HSBC -24% Citi -27% JPMorgan -30% Barclays -57% Average -60% Goldman Sachs -65% RBS Pretax profits -73% Deutsche Bank 12 months to Q2 2012 vs. -73% BNP Paribas 12 months to Q2 2011 -76% BofA Merrill Lynch -77% Morgan Stanley -80% Credit Suisse -130% Société Générale -179% UBS -202% NomuraSource: “Institutions are Struggling to Find a Sustainably Profitable Model‚” Financial News, August 13, 2012.Figure 3 cognizant reports 4
  • 5. such assets. Banks with strong internal ratings- Among Basel III’s efforts to mitigate risk are based models for rating assets could apply them various micro-prudential regulations, including to quickly and effectively reduce RWAs. capital, liquidity and leverage control through various ratios; CVA charges; rigorous data report- Banks are exposed Industry estimates suggest ing requirements; and restrictions on leverage that several banks are falling and counterparty exposures. These are supple- to multiple risk short of the required levels mented by macro-prudential regulations, such types, and an of capital.20 Few banks have as mandates to enhance firm-wide supervision overhaul of risk issued fresh capital to fill and governance of risk management practices this gap, suggesting that the and regular stress testing. In anticipation of the management markets might not respond impending regulations, banks have already begunpractices is crucial if positively to attempts to assessing their approaches to various functions they are to survive raise capital. Banks are, and processes, such as collateral management therefore, left with no choice and calculation of counterparty risks. future shocks. but to take a hard look at their businesses and scale back in areas that can- Basel III also requires banks to fundamentally not contribute to the maintenance of the required review their trading books. The first step in this levels of RWAs and deliver return on equity. direction is the requirement for banks to hold sig- nificantly more capital against risky instruments It is also becoming imperative for banks to extend such as securitized and structured products. operational efficiencies wherever possible. This More recently, regulators have proposed changes could be achieved through a combination of to the boundary between banks’ trading and strategies, such as partnering with third-party banking books. The proposed changes include: experts, pursuing M&As or creating shared ser- vices platforms. Banks that have invested heavily • Linking the inclusion of an instrument in a in creating IT infrastructure to support processes trading book to its tradability, followed by such as counterparty risk management internally daily valuation and quarterly reporting of the could even provide these platforms as a service to instrument. other players in the industry. • Basing capital requirements on risks that threaten banks’ solvency. Nonetheless, compliance with Basel III will drive many banking processes from silos into a more By any measure, these regulations are significant integrated, collaborative and efficient operat- and, when implemented, will change the way risk ing model. Functions such as risk management, management is perceived which have hitherto been comparatively isolated, and practiced by banks. The While Basel III will now have a say in nearly all bank decisions. need for a firm-wide view compliance means Banks may also choose to invest in advanced data of risk will mean that banks higher costs in the analytics to find and implement ways to optimize will have to embed the risk high-value business processes. Risk analytics, function into all of their form of technology for example, can be deployed on data collected processes, which will require investment from various execution environments to enhance technology to collect and and process risk-related processes, such as credit risk model- analyze data on a daily basis ing and calculating risk indicators. to monitor various levels of reorganization, it exposure and arrive at more also presents banks Expanding Role of Risk Management informed decisions. with an opportunity Banks’ enterprise risk management capabilities were found lacking in areas such as liquidity risk While Basel III compli- to assess their in the days leading up to the global financial cri- ance means higher costs operations and look sis. Basel III is perhaps the largest effort under- in the form of technology for opportunities to taken by global regulators to make banks more investment and process secure. In today’s globally connected markets, reorganization, it also pres- create efficiencies. risk has also become global. Banks are exposed to ents banks with an opportunity to assess their multiple risk types, and an overhaul of risk man- operations and look for opportunities to create agement practices is crucial if they are to survive efficiencies. In the long run, it will influence banks future shocks. to move to a culture of risk and evidence-based cognizant reports 5
  • 6. decision-making. Research firm Celent expects processes that banks will be required to under-organizations across the capital market spectrum take will revolve around aggregating, standard-to spend $35 billion in 2012 on risk management izing and analyzing data to derive high-qualityand risk-related compliance. Meanwhile, a survey insights for internal and regulatory consumption.by American Banker Executive Forum found Regulatory data reporting has become stringent,that a growing number of small banks (with less and in some cases, ad hoc reports will be requiredthan $100 million of assets) wish to implement to respond to random checks by regulators. Theenterprise risk management in 2012.21 quality of the underlying data, therefore, will become highly important from the bank, regula-Technology Implications tor and market perspectives. Inconsistencies inAlmost all the regulations under Basel III have data could attract further regulatory scrutiny anda direct or indirect technology implication for also affect a bank’s credibility.banks. Most of the subsequent technologyenhancements will be focused on improving Take for example, collateral management underdata management practices. Many activities/ Basel III. Banks that use internal models for Quick TakeBasel III Implementation Timeline 2011 2012 2013 2014 2015 2016 2017 2018 2019 Parallel Run Leverage Supervisory Migration Jan. 1, 2013 - Jan. 1, 2017 Ratio Monitoring to Pillar 1 Disclosure starts Jan. 1, 2015 Minimum Common 3.50% 4% 4.50% 4.50% 4.50% 4.50% 4.50% Equity Capital Ratio Capital Conservation 0.63% 1.25% 1.88% 2.50% Buffer Minimum Common Equity plus Capital 3.50% 4% 4.50% 5.13% 5.75% 6.38% 7% Conservation Buffer Phase-in of deductions from CET1 (including amounts exceeding 20% 40% 60% 80% 100% 100% the limit for DTAs, MSRs and financials) Minimum Tier 1 Capital 4.50% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00% Minimum Total Capital 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% Minimum Total Capital plus Conservation 8.00% 8.00% 8.00% 8.63% 9.25% 9.88% 10.50% Buffer Capital instruments that no longer qualify Phased out over a 10-year horizon, beginning in 2013 as non-core Tier 1 capital or Tier 2 Capital Liquidity Coverage Obser- Introduce Ratio vation minimum period standard begins Net Stable Funding Obser- Introduce Ratio vation minimum period standard beginsSource: Basel III New Capital and Liquidity Standards, FAQs, Moody’s AnalyticsShading indicates transition periods. All dates are as of January 1 of the given year. cognizant reports 6
  • 7. calculating collateral will need to set up a Banks are aware of the imperative to improve collateral management unit. This unit will be data management. Many have set in motion responsible for calculating and making margin organizational changes to calls, managing disputes and reporting margins realign their businesses with Banks that succeed on a daily basis. For this, banks will need to source emerging regulations. A in the highly data from different functional areas across survey22 by the Professional regulated future product and exposure types and eliminate dis- Risk Managers’ International crepancies to ensure data integrity. Moreover, Association and SunGard will be those that the bank, or a unit therein, will need to report the found that banks are slowly not only ensure data to senior management and conduct annual but surely moving away their systems reviews to mitigate margin disputes. If discovered from the exploratory phase by regulators, this would incur financial penalties. to implementing systems meet regulatory Clearly, in addition to the investment involved, to improve risk manage- requirements creating such a process will require organization- ment. However, banks that but also, in wide buy-in and cooperation. succeed in the highly regu- lated future will be those doing so, unlock However, the reality at several banks is that data that not only ensure their opportunities continues to be managed in silos. Bank depart- systems meet regulatory to drive down ments use systems that suit requirements but also, in According to a 2011 department-specific needs doing so, unlock opportuni- costs and create ties to drive down costs and technology-ledreport by the Tower and store data in varying, incompatible formats. Inte- create technology-led differ- Group, mid-tier grating these disparate sys- differentiators. entiators. banks’ data output tems will be a time-consum-grew 150 times over ing and costly undertaking, Benefiting from Technology especially since the amount Investment the previous seven of data generated by banks As the impacts of Basel III fully take shape, banks to eight years. has exploded in the past face a paradox: They need to make technology decade. According to a 2011 investments for regulatory compliance, even as report by the Tower Group, mid-tier banks’ data margins are squeezed and budgets constrained. output grew 150 times over the previous seven to In such a scenario, banks need to find ways to eight years. extract more from their IT investments. Basel III and the other upcoming regulations offer banks Eliminating data silos will be central to achiev- an opportunity to review and enhance their ing compliance. This, in turn, will require banks business processes and change management to rebuild their aging infrastructures. Stopgap programs. As they invest in technologies man- or minimal efforts might work in the short run, dated by the regulations, banks can identify ways but they will have adverse consequences over to use them for purposes beyond compliance. time as individual regulations come into effect. Banks need to draw up blueprints on the basis of The first step would be to create enterprise-wide their current levels of preparedness and the time- views of key factors such as liquidity, risk and line for Basel III implementation. In the case of data by eliminating silos across the organization. collateral management, foresight and planning This could help banks identify processes and will allow banks to utilize their assets optimally systems that have similar underlying technology and manage collateral schedules more efficiently. to introduce operational efficiencies and enhance decision-making. Moreover, banks that achieve the integrated data management levels required under Basel III will Liquidity and Capital be able to deploy advanced analytics to mine Strong liquidity management, for example, insights that can drive efficiencies in various will not only help senior management better processes. Cloud-based solutions under the understand the bank’s liquidity position and pay-per-use model can help banks turn Cap-Ex prepare for adverse liquidity situations, but it to Op-Ex and create savings through server and would also offer insights into related process software virtualization. optimization initiatives, such as portfolio cognizant reports 7
  • 8. management and loan origination. Embedding decision-making. Such a system will not only be a liquidity perspective into processes such as able to present a consolidated view of histori- product management can help banks enhance cal activities, but it will also forecast impending their offerings and exploit niche market opportu- scenarios within a set of parameters. The ability nities. Similarly, embedding their capital require- to predict future scenarios will aid in regulatory ments into their pricing engines can allow banks reporting, as well as other areas. For example, by to allocate capital optimally. analyzing customer data related to credit cards and deposits, banks can deduce ways to improve Merge Similar Risk Types various offers and marketing initiatives. Converging different risk management systems that share common underlying processes onto The Road Ahead a single platform can help banks increase oper- Banks face the daunting task of meeting stake- ational efficiencies. For holder, regulator and customer expectationsEach bank will need example, anti-fraud and while complying with stringent new regulatory to undertake a anti-money-laundering sys- requirements that are gradually taking effect, tems can be merged. By compliments of Basel III. This will force them to deep-dive analysis consolidating these data seek more innovative ways of creating opera- of its businesses sources, banks will also be tional efficiencies and market differentiation.and extract benefits able to deploy analytics more efficiently and cost- Each bank will need to undertake a deep-dive to satisfy all effectively and improve analysis of its businesses and extract benefits to stakeholders. data reporting. satisfy all stakeholders. Top management will be under pressure to make prudent IT investments. Leverage In-house Capabilities Clearly, there is no one-size-fits-all approach. For banks that have built capabilities to sup- Existing business models will dictate the approach port in-house operations (in areas such as risk that banks adopt. The optimal solution could well management), the stringent regulatory lie in a combination of strategic decisions that environment offers a chance to capitalize on revolve around creating operational efficien- these investments by offering them as a service cies and collaborative work environments that to smaller and emerging market players.23 optimize cross-functional processes. Stress Testing Moreover, industry participants can find Banks that have invested in stress-testing additional avenues for complying with Basel technology can use these methods to improve III by partnering with third-party experts, their crisis management techniques. delivering cloud-powered services to smaller and emergent players, divesting businesses that Big Data for Big Efficiencies drag down capital or merging with synergistic Collating and consolidating large chunks of data institutions. Such measures can help organiza- across data types (such as documents, images, tions succeed in a risk-averse marketplace that is video, etc.), as well as applying meta data manage- increasingly driven by complex global regulations. ment and predictive analytics, can help improve cognizant reports 8
  • 9. Footnotes Basel III will be implemented between 2013 and 2018, with key milestones revolving around capital1 requirements, leverage ratios and liquidity requirements. The conservation buffer is expected to be implemented by 2019.2 “Basel III and European Banking: Its Impact, How Banks Might Respond, and the Challenges of Implementation,” McKinsey & Co., 2011.3 Basel II was the second of the Basel Accords issued by the Basel Committee on Banking Supervision in 2004.4 Brooke Masters, “Few Banks Able to Calculate CVA Swiftly,” Financial Times, July 22, 2012.5 “Fitch Affirms Citigroup Inc.’s Ratings; Outlook Stable,” BusinessWire, July 18, 2012.6 Leigh Thomas and Lionel Laurent, “France Pledges Crackdown on Banks’ Proprietary Trading,” Reuters, November 15, 2012.7 Brooke Masters, “Banks to Hold More Capital Under Basel III,” Financial Times, July 25, 2012.8 “Dream Turns to Nightmare,” The Economist, Sept. 15, 2012.9 Michael Watt, “Basel III Blamed for Aircraft Financing Drought,” Risk.net, May 9, 2012.10 Richard Suttmeier, “Changing Basel and FDIC Rules Present Challenges for U.S. Banks,” The Street, June 13, 2012.11 Ted Carter, “Strong Reaction from Community Banks Cited for Basel III Delay,” Mississippi Business Journal, Nov. 16, 2012.12 Ben Gunnee, “Soapbox: Preparing for Basel III,” The Actuary, Aug. 1, 2012.13 Kelly Bit, “Barclays Said to Plan Spinoff of Arbitrage Team as Hedge Fund in January,” Bloomberg, Nov. 23, 2011.14 Katharina Bart, “UBS to Cut 10,000 Jobs in Fixed Income Retreat,” Reuters, Oct. 30, 2012.15 Ted Carter, “Strong Reaction from Community Banks Cited for Basel III Delay,” Mississippi Business Journal, Nov. 16, 2012.16 “Liquidity: A Bigger Challenge than Capital,” KPMG, May 2012.17 Michelle Price, “Industry Looks to Ease Collateral Crunch,” Financial News, Dec. 17, 2012.18 Dominic Hobson, “Custodians Are Afraid to Exploit the Looming Collateral Shortage,” Thomas Murray, Aug. 14, 2012.19 Michelle Price, “Industry Looks to Ease Collateral Crunch,” Financial News, Dec, 17, 2012.20 Brooke Masters, “Banks Face €350 bn Basel III Shortfall,” Financial Times, Dec. 15, 2011.21 Penny Crosman, “Nine Trends Reshaping Risk Software,” American Banker, January 2012.22 “SunGard/PRMIA Survey Finds Basel III is Driving Focus on Risk, But Implementation Is Limited,” Sungard, June 6, 2011.23 Nina Mehta, “UBS Starts Unit Providing Services for Quantitative Hedge Funds,” Bloomberg, Aug. 20, 2012. cognizant reports 9
  • 10. References• “Progress Report on Basel III Implementation,” Bank for International Settlements, October 2012.• “The Road to Basel III: Implications for Credit, Derivatives and the Economy,” Deutsche Bank, January 2012.• “The Markets in 2012: Foresight with Insight,” Deutsche Bank, Dec. 6, 2011.• “Wholesale & Investment Banking Outlook: Reshaping the Model,” Morgan Stanley, Oliver Wyman, March 23, 2011.• Philipp Härle, Matthias Heuser, Sonja Pfetsch, Thomas Poppensieker, “Basel III: What the Draft Proposals Might Mean for European Banking,” McKinsey & Co., April 2010.• “Basel III Proposals Could Strengthen Banks’ Liquidity, But May Have Unintended Consequences,” Standard & Poor’s, April 15, 2010.• “Principles for Sound Liquidity Risk Management and Supervision,” Bank for International Settlements, September 2008.CreditsAuthor and AnalystAkhil Tandulwadikar, Senior Research Associate, Cognizant Research CenterSubject Matter ExpertAnshuman Choudhary, Director, Cognizant Business Consulting, Banking and Financial ServicesDesignHarleen Bhatia, Creative DirectorSuresh Sambandhan, DesignerAbout CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business processoutsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquarteredin Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep in-dustry and business process expertise, and a global, collaborative workforce that embodies the future of work. Withover 50 delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is amember of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among thetop performing and fastest growing companies in the world.Visit us online at www.cognizant.com for more information. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 207 297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 207 121 0102 Fax: +91 (0) 44 4209 6060 Email: inquiry@cognizant.com Email: infouk@cognizant.com Email: inquiryindia@cognizant.com©­­ Copyright 2013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.

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