ECB Reporting and Transaction Management Success Story
The following white paper provides an executive overview of the serious challenge faced by TMF in 2010 to meet new regulatory requirements and how the EaseCap team was able to provide tailored solutions for a client that reduced weeks of work to days, provided more accurate analysis and recovered its cost in less than a year.
Not long ago, the European Central Bank (ECB) implemented a new regulation adding more depth to their requirements for Special Purpose Vehicles (SPVs). Financial institutions (or their service provides) now had to report all holdings of the SPVs to their local country's Central Bank. The layouts and formats were significantly different from the previous standards for Central Bank reporting, requiring considerably more detailed and cross-referencing than in the past.
The jurisdictions in question were, and remain, The Netherlands (Central Bank of the Netherlands), Luxembourg (Banque Centrale de Luxembourg) and Ireland (Irish Central Bank). Ireland was a completely new jurisdiction for this reporting requirement. As a result, these regulations introduced new criteria which were unique to Irish transactions.
The Structured Finance Services division of TMF is one of the premier providers of SPVs and related services to the Global financial industry. Their European presence is particularly strong. Nonetheless, to comply with the new regulations, TMF's existing system would require many complex modifications. Some of these changes affected transactions involving FX rates, but the bulk of the challenge was simply to cope with the significant expansion of reporting. Instead of reporting just a few pieces of information for each transaction, the SPVs had to disclose a great deal of detail about their financial activities in each period. As an added challenge, the output had to be produced in XML and upload seamlessly to a website operated by the regulating Central Bank.
Timely implementation of a solution was critical to TMF because failure to comply with the regulations could result in stiff fines being levied (up to €200k per incident). Needless to say, TMF required an effective solution -and fast.
"The Natural Choice"
TMF has relied on EaseCap to support its Transaction Manager system for them since its implementation in 2005. TMF judged EaseCap as "the natural choice" to help them meet this new challenge for a variety of reasons, but their performance record with TMF and proven ability to work collaboratively and think out-of-the-box were primary.
Facing a tight deadline to meet compliance requirements, the EaseCap Response Team did not have time for the typical project planning and execution cycle. As a result, the team jumped in immediately to work shoulder-to-shoulder with the TMF business unit staff to design the necessary functionality, new report formats and regulator-compliant XML output for the Central Banks. In addition, EaseCap was also able to create and map new data templates to the database within the project deadline.
With the new templates in place, TMF could now quickly and cleanly assimilate all of the required data for the three reports relevant to the Central Banks in Ireland, Netherlands and Luxembourg.
Model of Efficiency
TMF now has the added capability to repurpose the data they import into the system to generate multiple views. As an example, the same data sets used as input for bookkeeping software (and as the basis for generating auditor reports as required) can now be used to create reports for the relevant ECB jurisdiction - all while decreasing the probability of translation errors from one report to another.
Without automation, TMF estimated that one to five man-days would be required per report to do the reports manually for each jurisdiction. Since implementation of the Transaction Manager, a TMF efficiency review found that the time to do one report has decreased by 80 percent and can now produce each report in only two to three hours - including cross-checking, edits and addressing input issues. The reports themselves are produced in less than 20 seconds.
In the big picture view, EaseCap's tailored solution enables TMF to deliver a more accurate analysis with a much faster turnaround for both clients and regulators.
Repaid in Less Than One Year
The entire update project completely repaid TMF's investment in less than one year (only six months by one internal estimate). The labor savings alone more than recovered the cost of design and development. TMF is also generating new revenue as a direct result of the new capabilities they can provide to clients.
In short, EaseCap produced a winning solution for TMF by meeting business requirements and deadlines for a profitable conclusion to a very successful project.