Misys Treasury

1
Misys Treasury Capital Markets

• Achieving STP in Commercial Lending
• Ken Katz
• Misys Commercial Lending Division
• Product Manager Loan IQ

2
What is STP?

• Straight Through Processing (STP) is the
  substitution of automated tasks and processes for
  manual ones so that a business process or service
  (e.g. the origination, servicing and disposition
  of a commercial loan) can be entirely automated
  from beginning to end.
• All original information (e.g. customer and loan
  term information) is entered only once in the
  process and reused throughout the loan
  lifecycle
• Central database is sole repository for
  information
• Processes and workflow events are tied together
  seamlessly and performed without unnecessarily
  repetitive data entry or manual transition

Source TowerGroup
3
Critical Components of STP

• Real-time data processing
• Common database
• Business logic rules
• Automated workflow management
• Seamless integration of processes

4
Full STP Value Proposition to Commercial Lending
Internal Integration
Documentation
Perfecting
GeneralLedger
InternalSystems
CreditApproval
Risk Compliance
Sales Force Automation
Workflow Data Management
LoanProducts
Reporting Portfolio Mgmt.
Origination
Booking
Servicing
Core Loan Processing Cycle
Regulators
Remote / Wireless
SecondaryTrading
ServiceBureaus
LegalCounsel
SyndicateMembers
Customers
External Integration
Source TowerGroup
5
Current Lending Market Drives STP

• STP is a Necessity due to current commercial
  lending environment
• Banks no longer hold large deposits for long
  periods at high interest rates
• Highly liquid market due to secondary trading,
  non-bank investors and sophisticated derivative
  instruments
• Banks need to coordinate increasingly global
  information flow and work flows
• Need for a single platform to host and
  standardize data across different locations,
  time zones, currencies
• Banks need to comply with increasingly strict
  industry and government regulations
• Basel II, Sarbanes-Oxley Act
• Banks pressured to cut costs through improving
  operational efficiencies
• Net interest margins are at 20-year historical
  low

6
US Banks Net Interest Margin (1996-2006)
Net Interest Margin ()
Net Interest Margins are a 20 year low, forcing
banks to reduce costs through operational
efficiencies.
Source TowerGroup
7
Increasingly Liquid Loan Market
Europe in 2006
Multiple players in the market and more ways for
loan assets to be held means banks no longer hold
loans for long periods at high interest rates.
Source LSTA
8
How can STP benefit financial institutions?
Straight Through Processing
Single Source Database
Once only Data Entry
Seamless Integration of Processes Workflow
Single Source Database
Operational Efficiency Risk Management EnhancedCustomer Service Increased Revenue
Elimination of redundant systems Workflow management Responsiveness Cross sell opportunities
Reduction of manual labor Data integrity Accuracy Improved customer retention
Streamlined processes Exception management Reduced processing time Increased productivity
Lowered costs Accountability More comprehensive knowledge of customer Risk-adjusted pricing
Source TowerGroup
9
STP Technology Trends

• Business Process Management Systems (BPMS)
  Manage workflowautomate data gathering from host
  systems, apply standardized underwriting rules
  and policies, centralize reporting, and support
  on-going portfolio monitoring
• Electronic Content Management (ECM)Manage
  deliver content electronic and paper based
  documents, multimedia files, email, images, web
  pages and other communications
• Service Oriented Architecture (SOA) Web services
  used as a wrapper around legacy system
  integration points to provide standard interface
  protocol
• Business rules management system (BRMS) Manage
  business rules, enforce policies, make decisions,
  standardize processes

Source TowerGroup
10
Why have banks not fully achieved STP?

• Increasingly complex loan transactions with
  multiple parties
• System has to be able to link to clients, vendor
  systems, credit bureaus, databases
• Consolidation of front and back office processes
  and workflow is costly and requires
  organizational change
• Difficult for banks to define clear workflow and
  information flows needed for full STP
• Lack of industry standards in fast developing
  commercial lending industry

11
Achieving STP Efficiency

• Policy and process first approach before making
  major technology investment
• Technology should not lead the solution but
  rather enable the solution
• Banks internal front and back office divisions
  need to be aligned

Optimization Pathway
Technology
People
Process
Policy
Benefit
70
90
100
Source Benchmark Consulting International
12
Questions and Answers