More and more I’ve been talking to fellow bankers, consultants, auditors, and examiners about the OTS phasing out. It occurred to me that I haven’t mentioned anything about it on this blog. I’m not sure what the full impact of the phase-out will be. Things are likely to be different, especially for smaller Thrifts and in our little niche of A/L and Risk modeling. If you’re a Thrift your new regulator will be expecting more from you than you’ve probably dealt with in the past.
You are used to receiving an Interest Rate Risk measurement analysis directly from the OTS. This analysis will stop once you start filing a Call Report (as of March of 2012). As you look for a vendor to provide the service I hope you’ll consider using A/L BENCHMARKS.
Here’s my quick “top ten list” of reasons to choose A/L BENCHMARKS. They are not in any order of importance. This is just off the top of my head. If you have any comments or questions I encourage you to leave them below, or better still, you can email me.
1) We’ll continue to measure NPV
Your OTS report measured your long-term interest rate risk by stress-testing your Net Portfolio Value. We’ll continue doing that for you, although banks use the term “EVE” which stands for “Economic Value of Equity”. We’ll also continue to provide you with Pre and Post-Shock ratios so you’ll have an apples-to-apples comparison.
2) We also measure Earnings at Risk
There is more to measuring your interest rate risk than just looking at Net Portfolio Value. The OCC wants you to look at short-term risk using 1-year and 2-year earnings stress-tests. We prepare these measurements as a standard part of our service.
3) Just as easy for you to update
Our basic summary level service only requires inputs that you’re already capable of producing. We’ll need your Call Report data (produced by software like EasyCall or others), and a detail loan data file (such as the ALERT or RegLoans file).
4) We’re an independent third-party
The OCC is big on this one. They want to make sure that you get an unbiased assessment of your risk profile. We don’t sell bonds, offer safe-keeping, bond accounting or cash-management services. We don’t offer funding products and we don’t suggest management strategies. In short, we have no vested interest in providing you with anything other than an objective analysis of your institution’s risk.
5) Narrative
Our reports are full of more than just numbers and tables of data. We provide you with a narrated walk-through of your performance. I’ve had many CFO’s tell me that the narrative text is the best way to communicate this type of information to their Boards.
6) Pictures
For those of you that also want a graph or two – we won’t disappoint. But here we also keep it simple. We do not invent strange new charts that nobody can understand. We stick to the basics – bars, lines, and pies. No 3-D, neon, casino style graphics.
7) Peer data
Is your risk number high or low? How does it compare to other institutions? What does your trend show? Is your institution moving along with the industry or are you moving counter-trend? We include peer data so you can put all your risk measurements in perspective.
8) More than just Interest Rate Risk
The OCC isn’t just interested in you stress-testing your interest rate risk. They made it clear (along with the FDIC and the Fed) that you need to stress-test Liquidity and Credit Risk. We’re aware of these new requirements and can help you meet regulator expectations.
9) Industry experience
Our Company has been in business for over 40 years. In that time we’ve adapted to major changes in banking and accounting. We’ve seen big transitions in the regulatory environment. And we’ve been able to take advantage of improvements in technology. Our model has been through five substantial revisions and upgrades since the ‘70s!
10) Support
We’re a small business like most of our customers. And although it may sound trite to say, we do value customer service. Any time you call or email our company you will talk to a person – likely the same person – each time. You’ll either talk to me, Susan, Karen, Dave, or Kurt. We’ll get to know you and you’ll get to know us.
Comments