FSRM briefs bankers on financial regulatory reform

Financial Services Risk Management (FSRM) partner Ian Lauron (CGL), together with managers Mike Dela Cruz, Christian Chua, and Belvin Armenion, briefed officers and members of the Bankers Institute of the Philippines on financial regulatory reform and its impact on business models. CGL talked about the reform’s current state, discussing Type I regulations (probability of financial institution failure), which cover capital adequacy, liquidity and leverage, and Type II regulations (severity of financial institution failure), which cover recovery and resolution planning (or “Living Wills”) and over-the-counter derivatives. He talked about the applications of reforming business models in an uncertain environment, “accept and adapt” strategies for an industry under siege and preparing for industry consolidation and structural reforms. He concluded with a lecture on financial inclusion and the framework for investing in corridor development.

Belvin discussed risk-adjusted profitability measurement (RAPM), focusing on how the banks need to move beyond pure regulatory compliance and optimize the use of new tools required by regulations to manage risk and grow businesses. He emphasized how both banks and non-bank financial institutions have the opportunity to fully adopt RAPM as an integrated risk-finance measure and an improvement to their performance management framework. Meanwhile, Mike spoke on industry consolidation and structural reforms, particularly the future state of risk, compliance, and audit functions. He also identified people, data and analytics, methodology and QA, and planning and reporting as the common areas where there are challenges. He then talked about Continuous Process Monitoring as a way to conduct real time ongoing process monitoring and improvement, utilizing three lines of defenses to manage risk and controls. Christian gave a talk on “Reform Business Models: Customer Segmentation and Big Data for Strategic Decisions.” He discussed the role of technology and data analytics in bank business models, focusing on the role of using customer segmentation in changing the way organizations approach customer relationship management. He also talked about change management and acquiring “low-hanging fruit” in the form of already-existing data assets within the bank’s control and used depositor segmentation as his case discussion.