EY thought leadership on Investment bank transformation

1. Investment bank
transformation:
from ideas to
action

2. Ernst & Young’s Capital Markets Advisory practice is pleased to present our 2016 industry report, Investment
bank transformation: from ideas to action.
Capital markets and investment banking is an industry recovering from multiple setbacks in terms of productivity,
In our prior global report, Transforming investment banks
Best regards,
Contents
Be technology-led
54-59 |
legal entity management
60-65 |
66-71 |
Become client-centric
48-52 |
Transform culture
42-46 |
Optimize assets and operations
10-17 |
18-27 |
collateral management
28-33 |
34-40 |
Introduction
Principal, Capital Markets
Ernst & Young LLP Ernst & Young LLP

3. 1Introduction |
Pillars of change
Transforming investment banks
Introduction
Optimize
and radically
reducing costs
Opt
and
red
Transform culture
by providing
will deliver value
meeting regulatory
Tran
by p
will
mee
Become
client-centric
moving away from
business and
operating models
Bec
clien
mov
busi
ope
Be technology-led
by transforming
legacy processes,
support business
enabling a central
focus on clients
Be t
by t
lega
supp
ena
focu
by Jonathan Firester

4. 2 | Investment bank transformation: from ideas to action
cost bases.
•
•
•
•
Optimizing assets and operations
•
structural reform are to enable systemically important
•
in addition to a regulatory necessity. Successful
target operating models, implementing robust
collateral management.
•
•
•
•

5. 3Introduction |
•
•
and use of key metrics can make onboarding
differentiation.
transformations necessary to multiple capital markets
and industry utilities.
• Strategic transfer pricing is an important capability
arbitrage opportunities. In recent years, regulators are
•
costs by outsourcing appropriate functions to vendors,
functions to outsource can be based on strategic
function does not provide competitive differentiation,
or admits economies of scale, it may be a candidate
for a utility serving multiple banks. Banks must also

6. 4 | Investment bank transformation: from ideas to action
align culture to optimally support business models
volumes of capital markets
dramatically, many aspects of
capital markets professionals’
performance incentives,
as electronic trading, central clearing, and increasing price
opportunities.
Transform culture
• Engagement
• Incentives
• Controls
• Productivity

7. 5Introduction |
on capital markets product
constraints to resources
most valuable and strategic clients. Successful investment
banks will increasingly need to measure, manage, and
data, coordinate sales and service teams across different
Become client-centric
onboarding, documentation, content delivery, transactions,
product views of client activity, or differences in accounting
treatments across business units.
Clients are also demanding more transparency into
and combining data from multiple, sometimes disparate,
to inform, motivate and coordinate various sales teams, and
•
• Client metrics
• Segmentation
•

8. 6 | Investment bank transformation: from ideas to action
to innovate to drive revenues will be limited. Instead,
maintenance to strategic investment.
Banks must make coordinated strategic decisions about
Be technology-led
successful banks will stay abreast of relevant new
•
due to strategic, capital, or cost considerations. Bank
processed on a product or business basis – incongruent
data governance, processes, and applications around
capital environment.
•
and client service. Providing a competitive offering

9. 7Introduction |
•
potential for “leakage” of investors’ trade information,
may enable successful investment banks to differentiate
•
automate a wider array of repetitive activities.
•
interactions, successful banks will increasingly use
• Electronic trading platforms are playing an increasing
platforms will improve price transparency, lower
spreads and transactional costs, and increase trading
volumes.
• Successful investment banks must also develop
need to invest in building knowledge, forming alliances

10. 8 | Investment bank transformation: from ideas to action
Prioritization of investment bank transformation activities
Transform culture
• Engagement
• Incentives
• Controls
• Productivity
Optimize assets and
operations
• Business lines and
entities
•
•
•
sourcing and
locations
Become
client-centric
•
• Client metrics
• Segmentation
•
Be technology-led
•
• Legacy systems
• Business
transformation
• Controls and
defenses

11. 9Optimize assets and operations |
Optimize assets
and operations

12. 10 | Investment bank transformation: from ideas to action
by
Andreea Stefanescu, Ryan Bohn, Bridget Traynor, Ashley Kramer,
Jenny Cha and Petar Lovric
Structural reform and the
new age of the COO

13. 11Optimize assets and operations |
Abstract:
1
1
Structural reform and COOs

14. 12 | Investment bank transformation: from ideas to action
across multiple jurisdictions, legal entities, business lines
2
• Collateral management
•
•
•
•
commitments toward improving resolvability, ranging from
siloed processes, limited traceability and accountability,
and a lack of readily available information to support key
2
Structural reform challenges: balancing
regulatory expectations with competing
priorities, increasing project complexity, and
larger investments
responsibility to improve operational capabilities and
structural reform face an ongoing struggle to balance

15. 13Optimize assets and operations |
Collateral management
scenarios.
scenario.
Importance of a strong COO: understanding business operations and resolvability

16. 14 | Investment bank transformation: from ideas to action
business line.
Payment, clearing and settlement (PCS)
Funding and liquidity

17. 15Optimize assets and operations |
entity planning.
Management information systems
transactional and operational systems. It also spans across jurisdictions, legal entities, businesses and functional areas.
Shared and outsourced services
1.
2.

18. 16 | Investment bank transformation: from ideas to action
and testing.
Legal entity structure and strategy
Operational readiness
Governance and testing
Getting structural reform right

19. 17Optimize assets and operations |
and strategic projects.
Structural reform and the COO’s priorities
planned resolution strategies.
make decisions in a stress scenario.
Authors Title Phone number Email
Andreea Stefanescu Principal andreea.stefanescu@ey.com
Ryan Bohn Senior Manager
Bridget Traynor Senior Manager bridget.traynor@ey.com
Ashley Kramer Manager
Jenny Cha Manager
Petar Lovric Manager petar.lovric@ey.com
Author directory

20. 18 | Investment bank transformation: from ideas to action
by
Janina Polo and John Boyle
The imperative for
enterprise-wide
collateral management

21. 19Optimize assets and operations |
operational cost.
6
Historical, siloed collateral management
6
BIS report
Abstract:

22. 20 | Investment bank transformation: from ideas to action
Navigating the regulatory landscape
Current operating model Target operating model
Applications
Business
lines
Credit risk Credit risk Liquidity riskSettlement Other Settlement Pricing
Applications
Business
lines

23. 21Optimize assets and operations |
Table 1: Key collateral regulatory requirements by theme
High-level regulatory requirement
theme
Complexity8
BCBS-IOSCO
unclearedmargin
Clearing
Liquiditycoverage
ratio
Netstablefunding
ratio
Capital
RRP
Accountingstandard
(IFRS9/13andASC
860/815)
Tri-partyreporeform
(NYFRB)
TBAmargin
requirements
Minimumhaircut–
securitiesnancing
Execute legal agreements
Document and report netting and
rehypothecation activity
Review of material terms and
provisions of legal agreements
Mandatory central clearing for certain
asset classes of CDS and IRS
Daily/intraday collateral valuation
Restriction on eligible types of
acceptable collateral
Mandated haircut amounts and
assumptions
Integration of liquidity costs funding
value adjustment (FVA) in derivative
valuation
Two-way risk-based initial margin (IM)
Mandatory exchange of variation
margin (VM)
Collateral segregation model
Monitoring and reporting of collateral
activity (e.g., concentrations, liquidity,
risk
Report legal entity and physical
jurisdiction of collateral
Track collateral associated with credit
risk exposures between s
Stress and scenario calculations to
forecast changes in counterparty and
collateral performance and calculation
credit valuation adjustment (CVA)
HQLA for contingent liquidity risk from
derivatives portfolio
Capital effect from open disputes,
unsettled and illiquid collateral
Creation of policies and procedures for
governing collateral management
Key
= Medium

24. 22 | Investment bank transformation: from ideas to action
Key collateral management operating principles
1.
2.
jurisdictions and legal entities.
Ten principles for success
Securities borrowing
Sources of securities Uses of securities
Firm long
Global markets
Client long
Reverse repo
Collateral swaps
Firm short
Client short
Repo
Securities lending
Collateral swaps
Margin postings
Margin received
Central funding
Treasury and
market services
Internalization
Internal matching of short
positions against rm long
will reduce external trades
Netting
Cross-product and
counterparty netting
Booking strategy/CSA
rationalization
FCM/CCP order routing
strategy
Rehypothecation
Improved rehypothecation
decision based on internal
demands
Reduced opportunity for
rehypothecation related to
OTC derivatives
Substitution
Reduction in need for
collateral substitution
trades
Collect the sources and
uses of collateral across
business units/systems
Analyze each business
unit’s existing processes
for use of collateral
Aggregate the
collateral/cost of
funding information
across business units
De ne potential revised
allocation methodology
Assess revised collateral
approach against
current activities and
quantify results
Residual funding
Changes to the amount of
net external funding
External borrowings
Demand for hard-to-borrow
securities met through
internal pool
HQLA
Collateral
sources
Collateral
uses
Collateral
sources
Collateral
uses
Collateral
sources
Collateral
uses

25. 23Optimize assets and operations |
and jurisdictions
transactions.10
intended to cover.
controls is often underestimated, and controls are generally deployed
10

26. 24 | Investment bank transformation: from ideas to action
6.
and asset classes.
Technology and data for collateral management

27. 25Optimize assets and operations |
10.
11
High Quality Liquid
Asset uffer (HQLA)
Stress testing
Downgrades
(triggers in CSA/CCP)
Recovery
esolution lans
Funds transfer
pricing
Contingency Funding
Plan (CFP)
Treasury/finance
Governance
Business Risk Committee
Audit Validation
Committee
New Product Approval
Committee
Business Acceptance and
Documentation Committee
Credit Portfolio Management
Committee
Collateral Management
Liquidity buffer and
double duty
collateral
Initial margin (risk-
based model or
schedule)
Haircuts (model
based or schedule
Collateral eligibility
rules
Collateral projections
[sources uses]
VM/IM eligibility
checks
Collateral settlement
Substitution
reallocation
Portfolio
reconciliation
Dispute resolution
IM segregation
Client reporting
Regulatory reports –
SEC, FINRA, Basel
Intraday, EOD
collateral position
Cancel, exception,
fail reports
SEC lockup report
Board reporting
Independent
model validation
Credit limit
management
Market risk
management
Operational risk
management
Counterparty risk
Internal
external audits
Recovery
Resolution Plan
Dodd Frank
Act (Title VII)
Basel III (LCR,
NSFR, Intraday)
BCBS-IOSCO
Reg. W
(23 A and B)
FO trading/risk/quants/L&C
Enterprise risk
management
Risk management
Client onboarding
SEC lending/
borrowing
Prime brokerage
Shared basket/
monetized forwards
Front office (FO)
OTC derivatives
Functional Areas
Product Types
Regulations
Repos and reverse
repos
Late day trades
matching
Execute compliant
legal agreements
Margin call issuance
Collateral valuations
Collateral
concentration limits
Risk dashboard
Collateral
transformation
Trade pricing Intraday liquidity
Interagency CCR
Guidance
Collateral
optimization
Agency MBS
Reporting
Risk Management, Compliance and Audit
Client
onboarding
Compliant legal
agreements
Calculate margin
haircuts
Margin call
issuance
Booking
settlement
Capture
agreement terms
Reconciliation
dispute resolution
Stock loans
Un-cleared
OTC erivatives
Exchange traded
Repos and reverse
repos
Fixed income (Muni)
Cleared
Technology
Finance
Internal audit
Trade booking
Collateral data inputs
VM rehypothecation
Middle back office operations
Core functionsLegal compliance
(L&C)
Margin operations
11
Sample target operating model

28. 26 | Investment bank transformation: from ideas to action
Methodology and approach
•
management.
•
and anticipate demand.
•
•

29. 27Optimize assets and operations |
1. Global program
management office
Support the setup of an
integrated collateral
management framework.
Need to define program
scope, project charters and
plans. Actively manage
issues risk and monitor
progress toward key
milestones, etc.
3. Process redesign
and implementation
Process redesign and
system enhancements may
be required in order to meet
strategic, regulatory and
business needs, while
simultaneously focusing on
cost-savings and revenue
enhancement opportunities
2. Collateral capabilities
assessment
Adopt a framework that
compares the current
state of collateral related
processes and systems to
the organization’s forward-
looking needs as well as
industry-leading practices
4. Internal control
structure enablement
Provide oversight and
guidance for designated
areas of responsibility,
develop high-level policy
procedures, define internal
controls and validation,
confirm key metrics for
performance measurement,
define education program
Centralization
of
collateral
management
We have outlined an efficient industry-tested approach for identifying, designing, implementing, and sustaining
an integrated collateral management framework supporting the current regulatory environment and other
operational needs, such as technological architecture, degree of automation, and integration of workflows across
businesses.
Methodology and approach
Author directory
Authors Title Phone number Email
Janina Polo Senior Manager janina.polo@ey.com
John Boyle Senior Manager

30. 28 | Investment bank transformation: from ideas to action
by
Petar Lovric, Matt Fischer, Kimberly (Corcoran) Rhatigan and Nagaraj Swaminathan
T+2: shortening
the US settlement cycle

31. 29Optimize assets and operations |
Abstract:
12
12
Design and development Testing Go-live/post go-live supportReadiness assessment
Understand and identify
impacted areas/systems
Prioritize and plan for potential
changes, including phasing
Develop business cases
Identify specific projects and
develop road map
Build and internally test technology
and process-related changes, as
identified in road map
Execute internal and external (client)
outreach and training
Update impacted documentation
Coordinate with stakeholders for
preparation of industry-level testing
Execute industry-
level testing
Prepare and plan
for transition and
cutover with double
settlement date
Execute cutover and
transition support
Implement additional
changes in the spirit
of continuous
improvement
Completed industry-wide shortened
settlement cycle analysis
ISC publication of “Shortening the Settlement Cycle: The Move to T+2” whit
SIFMA and ICI recommended rule changes to regulators
Obtain regulatory support and priority for T+2
Regulators publish proposed rule changes
Complete industry testing
Regulators publish final rule changes and compliance dates
Firms complete internal builds

32. 30 | Investment bank transformation: from ideas to action
Background for T+2
timelines.

33. 31Optimize assets and operations |
between trade and settlement date.
trading activity.

34. 32 | Investment bank transformation: from ideas to action
constrained due to competing priorities and regulatory
investments, it is critical to conduct a rapid but robust
impact and readiness assessment.
prospectuses, policies and procedures, is a critical step in
any transformation project, it will be necessary to review
Importance of a readiness assessment
documentation, policies, operating procedures and training
materials.16
and custodians, as well as faster discrepancy resolution
in processing allocations and agreeing to settlement
clients’ ability to make funds available for settlement on an
Managing the change
16
completion.
and trade amendments. Securities lending participants will
securities out on loan and to locate securities between
degrees of manual processing will need to make more

35. 33Optimize assets and operations |
In summary, despite a lack of formal regulatory approvals,
will be critical, and will act as a second line of defense
Conclusion
Trade support
Syndicate
operations
Trade capture
Trader
reconciliations
Streetside
reconciliation
Middle office
Allocations
Affirmations/
confirmations
Trade
affirmations
Settlement
Clearing Settlement
Physical
securities
Fails
management
Securities lending
Mark-to-market
Inventory
management
Billing
Recalls and
buy-ins
Funding and treasury
Firm funding
financing
Cash
management
Projections
from financing
Tax/regulatory reporting
Tax reporting
Operational
management
reporting
Financial
reporting
Trade and
position
reporting
Client onboarding
Document
management
AML/KYC
Account
opening
Settlement
instruction
management
Asset servicing
Announcement
creation
Entitlement
capture
Payments
Election/
instruction
Collateral management
Agreements
documentation
Segregation
Margin
calculation
Margin calls
Enterprise functions
Position
keeping
Books and
records
Reference
data
Updates to security reference data
to reflect settlement calendar
correctly.
Updates to stock record and
accounting systems to reflect
change in settlement date.
Thorough end-to-end testing of all
reference data will be required to
all updates are captured
correctly.
Update triggers and aging logic
to accurate reporting for
management of settlement risk.
Counterparty credit exposure
reports may need to be updated
and tested accuracy within
the shortened settlement cycle.
Potential change in projection
process to incorporate activities
completed on TD.
Updates to systems used to
generate projections in order to
produce earlier estimates.
FX deadlines for cross-border
activity.
Leverage electronic fund transfers
vs. physical checks.
Updates to systems supporting the
margin calculation and processing
of margin calls.
Increased resources may be
required to handle the
documentation changes to support
the move to T+2.
Negotiate service level
arrangements with counterparties
regarding the timeline for providing
settlement instructions for new or
existing accounts.
Update the notification triggers for
new subaccounts received over
Oasys or other automated
allocation platforms to reduce lag
time.
Improve coordination with
upstream teams prior to key event
dates to reduce risk of unintended
elections.
Update corporate action and
dividend processing systems for ex-
dates and cover/protect expiration
dates.
Proactive matching and inventory
management to reduce/manage
fails and compliance with
the US Securities Exchange
Commission’s Rule 204
(SEC 204).
Increase focus on processing of
dually listed securities, American
depository receipts, exchange
traded funds, “when issued,” and
144a/Reg S products.
Negotiate arrangements with
counterparties for providing
allocations on Trade Date (TD).
Enable TD matching and
affirmation and maximize
affirmation/settlement rates.
Frequent communication with
clients.
Update the notification triggers and
modify controls to identify and
escalate aged breaks earlier in
settlement cycle.
Potential for system process
changes depending on existing
automation (e.g. batch timing
and break aging logic).
Expedite recall process to take place
on TD in order to minimize
settlement risk.
Revise and test billing calculations to
accuracy within the
shortened settlement cycle.
Eliminate manual activities impeding
efficient inventory management.
Impact key: High
impact
Medium
impact
Low
impact
Prospectus
fulfillment
Foreign
exchange (FX)
Authors Title Phone number Email
Petar Lovric Manager petar.lovric@ey.com
Matt Fischer Senior Manager
Kimberly (Corcoran) Rhatigan Manager kimberly.corcoran@ey.com
Nagaraj Swaminathan
Author directory

36. 34 | Investment bank transformation: from ideas to action
onboarding processes
by
Matt Pawlowski, Thomas Zaldivar, Anthony Goodwin
and Petar Lovric

37. 35Optimize assets and operations |
business needs and an increasingly competitive marketplace
positioning of onboarding, and use of key performance
source of competitive differentiation.
reporting going forward. It involves a set of regulatory, risk
Abstract:
source of competitive differentiation.
Onboarding keys to success
•
• Effective use of vendors/utilities
•
• Performance metrics
reporting or transaction processing, or undue risk
data policies.
Data
management
Client
experience
Interaction
layers
EY onboarding framework
Talent hub
strategy
Technology
Processes
Policy and regulation

38. 36 | Investment bank transformation: from ideas to action
certain business and processes. Applicable regulations add
Tools to manage regulatory complexity
also managing regulatory compliance across regulations
an important, early opportunity to make an impression
causes prospective clients to become frustrated, sever
Client experience starts at onboarding
Company reports, EY analysis.

39. 37Optimize assets and operations |
development and maintenance of proprietary applications
implementation solutions and greater ease in maintaining
cover legal entity data management, regulatory compliance
onboarding processes.
across banks and clients, in an effort to reduce costs and
onboarding and rolling review cycles, an institution need

40. 38 | Investment bank transformation: from ideas to action
It is not uncommon for a client being onboarded across
multiple business lines to be
subjected to multiple data
same data, from multiple
onboarding and operations
made accessible across
Gathering and managing client data
applications involved, developing or obtaining a golden
Online
Finance
Sales/Trading
CRM
Docs
Treasury
Risk
Compliance
ERP
Golden data
source
360o
customer
view
Origination systems
Onboarding channels
Enterprise-wide customer
entities and attributes are
maintained
Internal or external
omni-channel
access
Transaction systems enrich
the customer master data
Enterprise information integration
Mail Phone In-person Exchange

41. 39Optimize assets and operations |
management, regulatory compliance, operational account
locations to deliver onboarding services. Successful banks
is to differentiate between
added activities to improve
overall performance and
service models can also be
implemented to provide
processes are determined,
location strategy and
outsourcing strategy can be
assessed to reduce costs and
consolidate related processes
into a single location and/or
can be performed by skilled
organization
Define
Analyze
Select and validate
core KPIs
Develop reporting
requirements and
gap analysis
Run pilot and
KPIs
Finalize KPIs and
gap analysis
reports, and consistency and rapid report development can
decisions and increase customer retention. Cost savings
process and maintain data integrity.

42. 40 | Investment bank transformation: from ideas to action
management to allocate resources and funds to appropriate
increase brand awareness and reputation. KPIs also can
be used to identify and measure potential new business
by identifying and measuring documentation processes,
Improving client onboarding interaction strategies,
consistency and speed of client onboarding and life cycle
to improve troublesome processes, reduce costs and
redundancies and data costs, leading to increased client
onboarding for various types of clients and products will
Successful investment banks will move beyond just
client onboarding and overall client life cycle management a
competitive differentiator.
Managing to success with performance metrics Conclusion
Authors Title Phone number Email
Matt Pawlowski Senior Manager matt.pawlowski@ey.com
Thomas Zaldivar Manager
Anthony Goodwin Senior
Petar Lovric Manager petar.lovric@ey.com
Author directory

43. 41Transform culture |
Transform culture

44. 42 | Investment bank transformation: from ideas to action
by
Joseph Sommer and Jonathan Firester
The future of research

45. 43Transform culture |
interactions are often analyst presentations and discussions
Traditional research model is
relationship-driven
analysts can no longer receive more detailed or advance
Abstract:

46. 44 | Investment bank transformation: from ideas to action
as big data, cloud solutions, social media and predictive
Financial Times
operational practices to determine budgets and track
Potential forces of change in research
fundamental background information, top analysts are
communicating investor sentiment regarding a company
value to clients of a top analyst for a given company or
a company’s stock is being viewed by investors can make
global assets under management.20
21
to “institutions’ need to parse out trades and commission
22
Institutional Investor’s
20
21
22
Institutional Investor
FT Advisor

47. 45Transform culture |
26
globally.26
investors are strictly regional by tracking combinations of
are developing strategies, determining gaps and making
different locations to automatically format content or to
intelligence applications can even produce simple written
instant “clicker” audience response devices at conferences,

48. 46 | Investment bank transformation: from ideas to action
providers and consumers imply uncertainty. Successful
investment banks will need to create strategic options, in
model, to prepare for several potential future models.
•
•
•
investor sentiment data. Analysts continue to be valued
Creating strategic options for research
•
from publicly available data and investment bank
Successful investment banks will also become even more
Investment banks will also need to develop and support a
successful investment banks may invest strategically in
investments in relevant industry entrants. A cultural
of structured or unstructured data, proponents believe
price movements, tracking product transactions or gauging
Authors Title Phone number Email
Joseph Sommer Senior Manager
Jonathan Firester
Author directory

49. 47Become client-centric |
Become
client-centric

50. 48 | Investment bank transformation: from ideas to action
by
Alex Rathod and Jonathan Firester

51. 49Become client-centric |
Managing multi-product relationships
across many products, and most are open to conversations
include analyst calls and visits, conference invitations,
and corporate access provided, as well as transaction and
information, capital markets sales teams increasingly
Abstract:

52. 50 | Investment bank transformation: from ideas to action
positions may create a lending spread, incur a funding
funding costs, analyst calls or capital introduction services,
may be easy to measure and attribute to individual clients.
analysis.
Data and calculations
Most capital markets businesses receive large allocations
submissions, can create incremental costs to client service,
and service efforts.
senior sales or divisional managers.

53. 51Become client-centric |
a basic level to support strategic decisions about targeted
and clients, to differentiate clients for service coverage
levels or allocation of resources, to support individual client
management teams, and periodic client reviews.
revenue or product usage information.
Using the results and motivating behaviors
decisions must transparently and objectively reward
• Support strategic decisions about targeted
products and clients
•
clients
•
levels or allocation of resources to support
individual clients

54. 52 | Investment bank transformation: from ideas to action
Successful investment banks are currently addressing a
are restructuring client tiers, facilitating sales conversations
Actionable steps and continuous improvement
Continuous improvement areas
• Aggregation of client data
• Enhancement of client metrics and
drivers
• Actionable reporting and processes
• Client pricing, tiering and service levels
Authors Title Phone number Email
Alex Rathod Senior Manager
Jonathan Firester
Author directory

55. 53Become client-centric |
Be technology-led

56. 54 | Investment bank transformation: from ideas to action
by
Rethinking the data model to
support legal entity management

57. 55Be technology-led |
necessitate restructuring data governance, processes
by embedding legal entity data management as part of
broader, strategic bankwide programs centered on legal
entity structure, booking models and business resolution
Investment bank senior management continues to be
and management data in order to develop solutions
management processes in place to identify and assess
interconnectedness and separability among key legal
Abstract:
bankwide program around legal entity structure, booking models, governance and business resolution planning will confer
additional strategic and cost advantages.
How regulation created a data challenge
for banks

58. 56 | Investment bank transformation: from ideas to action
Managing legal entity-based data effectively
detail below.
1. Identify and categorize legal entity data
resolvability may be spread across different businesses,
functions, systems and databases. In addition, data
governance and controls may vary in different parts of
1.
data and associated systems
2.
applications, processes and controls
implementation

59. 57Be technology-led |
documentation of manual processes used to manipulate or
sources of legal entity data.
following activities are important to successfully complete a
•
resolve MLEs
•
•
•
are correctly linked and documented
processes and controls
consolidating feeds and sourcing from an appropriate and
•
•
•
around completeness, consistency and accuracy for
are designed and implemented to provide coverage by
trading product, book, desk or corporate business unit.
consistency and accuracy of its legal entity data.
applications, processes and controls, banks need to consider
•
•
•
•
•
3. Establish corporate-level sponsorship and
governance
Legal entity data projects must be sponsored at a
multiple businesses, operational groups, control functions
to support legal entity resolvability will need to be made

60. 58 | Investment bank transformation: from ideas to action
effectiveness of legal entity data management controls.
Legal entity data governance is an ongoing and integral
staff.
Key success factors at organizations
undergoing this transition
Testing and governing legal entity data controls
businesses to implement local governance routines in
order to communicate among legal entity data providers
for relevant documentation to be easily and systematically
solutions.
Key legal entity data success factors
•
data initiatives
• Create sustainable data collection, lineage and
control processes
•
•
and distribution

61. 59Be technology-led |
business strategy, regulatory compliance, operations and
and resolvability. Legal entity structures may evolve
business strategies.
Making legal entity data part of a legal entity
strategy
Production, transmission and controls around legal entity
managers and resources must be made available to address
issues and remediation.
Authors Title Phone number Email
Jaruwat Rujipornwasin jaruwat.rujipornwasin@ey.com
Rui Bao Manager rui.bao@ey.com
Manager
Author directory

62. 60 | Investment bank transformation: from ideas to action
by
Thomas Zaldivar, Barry Kraver and Rachel Elgawly
The road forward for futures
commission merchants

63. 61Be technology-led |
businesses.
What has happened to FCMs
July 21, 2010.
Abstract:
derivatives markets.
model.
and attempting to support two businesses. In part due
potential business opportunity, banks focused on tactical

64. 62 | Investment bank transformation: from ideas to action
The road forward
• Cost of capital
•
•
segments

65. 63Be technology-led |
longer measure performance based solely on revenues or
1.
2.
result, cleared derivative transactions are now counted
leverage and reduce deleveraging stress components.
leading to increased cost of capital and less opportunity
Managing the new cost of capital
eligible positions by automating allowable offsets before
increasing its market risk. Since gross notional amounts
commodity spread involving different but related products
CCP.”
offering makes sense.
market practices.” By renouncing customer assets, banks
rate environment.

66. 64 | Investment bank transformation: from ideas to action
need to consolidate client service, operations, collateral
platforms unstable, and banks must now review, consolidate
infrastructure was built.
Capturing technology and operations

67. 65Be technology-led |
Focus on the costs of clients
Succeeding in a harder business
Authors Title Phone number Email
Thomas Zaldivar Manager
Barry Kraver Manager barry.kraver@ey.com
Rachel Elgawly Manager
Author directory

68. 66 | Investment bank transformation: from ideas to action
by
Ravi Karra and Andrew Hosking
Shining a light into
dark pools

69. 67Be technology-led |
Abstract:
operators are being investigated for potentially violating rules around dark pools and alternative trading systems
Proliferation of dark pools
Wall Street Daily, .
Internalization and Equity Markets Quality, November 2012 Issue Brief.
Growth in dark trading raises
concerns over transparency,
fairness, investors’ access and the
basis for competition with traditional
exchanges.

70. 68 | Investment bank transformation: from ideas to action
Market demand for controls
The Journal of Finance.
Groping in the Dark: Navigating Crossing Networks and Other Dark Pools of Liquidity.
Optimal Liquidation in Dark Pools,
Dark pool customers are now asking
to review the methodologies, rules
and controls within the venues.
in order to inform public policy issues related to
Dark pool concerns

71. 69Be technology-led |
Assessing dark pool quality
EY Banking and Capital Markets Publication, Dark Pools and Toxicity Assessment.
Dark pool quality metrics
• Execution performance in terms
of time and price
• Protection of clients’ anonymity
• Speed, latency and throughput
of connectivity
• Availability of order types

72. 70 | Investment bank transformation: from ideas to action
Effectiveness of controls
Ibid.
Ibid.

73. 71Be technology-led |
future enforcement action.
Authors Title Phone number Email
Ravi Karra Senior Manager ravi.karra@ey.com
Andrew Hosking
Author directory

74. EY
About EY
doing, we play a critical role in building a better working world for our people, for our clients and for our
EY is a leader in serving the global financial services marketplace
transaction and advisory services to our asset management, banking, capital markets and insurance
About Ernst & Young’s Capital Markets Advisory practice
ey.com
Roy Choudhury
Principal, Capital Markets
Ernst & Young LLP
Christopher Rigg
Principal, Capital Markets
Ernst & Young LLP
Jonathan Firester
Executive Director, Capital Markets
Ernst & Young LLP
Qingji Yang, PhD
Principal, Capital Markets
Ernst & Young LLP
CM contacts