MYRIAD Group Technologies: Manage your agents and sub-custodians overseas – Simon Shepherd
Simon Shepherd, CEO of MYRIAD Group Technologies, highlights the risks to consider when seeking a corresponding banking partner or sub-custodian, and how banks can use technology to make better informed decisions.
The financial sector has for several months been focusing on restoring balance sheets and trimming foreign operations. This has forced banks to retrench, leaving many institutions with reduced capacity to serve clients in overseas markets. The logical solution is to leverage their correspondent or sub-custodian bank network to help service client needs abroad.
Future Banking: How can MYRIAD Group Technologies' solution help banks deal with the particular challenges of the past 18 months?
Simon Shepherd: MYRIAD pulls together a whole host of agent and correspondent banking data in one place for the first time. The MYRIAD platform then provides detailed reporting and management information systems (MIS) capability across all of this data in a truly integrated fashion. This level of transparency and granularity is currently not available to the banks.
Banks struggle to access data quickly and easily, and that data is often inaccurate. Most banks are reliant on a variety of disparate systems, which means that reporting and MIS are cumbersome and incomplete. MYRIAD creates a database that maps each of our client's multiple entities to each of their providers. Any type of supplier or provider relationship to the client institution can then be managed appropriately.
This database captures all documents in each relationship 'context', right down to individual account level, and each relationship can have many hundreds of accounts attached to it. MYRIAD acts as a repository for all the static data, including mandatory document lists, which satisfies a whole host of needs both internally and externally in the government, risk and compliance (GRC) space. Once threaded through the solution, each client can capture a variety of dynamic data against those 'live' documents on a daily basis. This aggregation of data over time gives tremendous transparency on each relationship.
With the re-emergence of cross-border risk, knowing who to trust is imperative. How can banks use technology to get ahead in these trying times?
Issues of trust come down to human judgement, but this can be underpinned by systems that aid transparency. Effective GRC systems such as MYRIAD support informed decision-making.
Generating a basic but comprehensive list of accounts - for example, simple static data - would be a start. Without this, banks cannot hope to manage exposure effectively. Lists of accounts enable a bank to manage very specific reporting requirements, from which they can manage most situations. There are also a few things to think about with regard to all providers, including custodians. Are they transparently linking underlying costs to what they actually bill for their services?
All custodians will publicly say they do this effectively, but making the connection between the real underlying costs of servicing a specific client and what that client pays is at best opaque. We are talking to several banks who want to make this connection much more visible. Banks are very focused on reciprocity, but assessing profitability with incomplete knowledge of costs is extremely difficult.
How do you perceive the future of correspondent banking in a volatile market?
The importance of sound correspondent banking operations has never been higher. Prior to the financial crisis, volumes and complexity were rising and the emphasis was on the top line. Post-crisis, institutions have responded in different ways. Some banks have focused on rationalisation of networks and reduction in supplier numbers. Some have been obliged to enter more exotic markets to service both internal and external client demands.
This all requires additional management effort; volumes are starting to rise again, market numbers are expanding and products are getting more and more sophisticated. The search for growth has made entry into more exotic markets a necessity, and with it comes greater risk. Significant elements of these risks are better handled by systems and technology, not manual processing.
Do you advocate replacing current market practice - manual processing, labour intensive administration and archaic systems - with improved technology?
Yes, it is very simple: for the annual cost of one FTE, a bank can get three to five times that capacity using a single platform such as MYRIAD. Banks can then move from an administrative focus to one of added value. We find that banks can readily transition from multiple, isolated tools on to an integrated solution in a relatively short period of time. From a regulatory standpoint, simply being able to pull a report instantaneously showing lists of accounts and implicit exposure would be a major step forward.