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In a short time, the New York
branch of Landesbank Hessen-Thuringen has significantly improved its
financial reporting to the Federal Reserve Bank (FRB). Just two years ago,
the bank had faced criticism of its regulatory reporting, so Senior Vice
President and Controller Bernd Haeger is understandably pleased at the quick
turnaround.
In fact, he is so
pleased that he demonstrated his automated regulatory reporting system to
colleagues at another financial institution – Commonwealth Bank of Australia
– which has since implemented the same system.
How did Mr. Haeger
effect such a quick and decisive turnaround?
Landesbank, whose
origins date back to the early 19th century, is headquartered in Frankfurt
am Main and Erfurt, Germany. It maintains international branch offices in
London, Luxembourg, Zurich, Amsterdam and Dublin, and has a presence in
several other cities worldwide. The New York branch has been in existence
since 1981.
For many years, the
New York office accomplished regulatory reporting for the FRB and the New
York State Banking Department manually. “The entire reporting process was
accomplished manually, with manual ledger entries used to arrive at the
correct reporting positions,” Mr. Haeger explains. “We had some assistance
from a PC spreadsheet, but all of the data from the general ledger (GL) had
to be entered manually into the spreadsheet.”
“It took two
clerical staff a total of approximately three weeks on and off to create the
quarterly reports and then review them, and still there were errors. We
always finished the job at the last minute and had to send the reports via
messenger to the FRB.”
Eventually, the bank
realized that it had to make a change. Because the reporting process was
entirely manual, there was a higher risk of errors. At the same time, the
FRB was changing its reporting requirements. “They were asking us for
better documentation of worksheets and also wanted us to provide
reconciliation from the GL starting point to the final report in a concise
format that a ‘neutral’ person could easily follow to understand how we came
up with the reporting position. We knew we would either have to create
tremendous amounts of information in-house – a time consuming and expensive
proposition – or find something better,” Mr. Haeger says.
Fortunately, Mr. Haeger had colleague at another bank who was in the process of implementing
“something better,” an automated regulatory reporting solution. The system
is designed to automate compliance with reporting requirements to regulatory
authorities, management and head offices, and help ensure the accuracy and
integrity of financial reports while increasing the efficiency of reporting. The product, called REG-Reporter©,
was developed and is marketed by IDOM, Inc., Newark, N.J., a leading
provider of banking automation products and management consulting services
to the financial sector. In business since 1988, the firm is comprised of
career bankers and systems specialists whose knowledge lies in the banking
and banking technology industries, with expertise in financial operations,
management, accounting and reporting.
“IDOM had the only
workable solution to address the issue of improving regulatory reporting,”
Mr. Haeger says. He began implementing REG-Reporter in 1997, running the
new, automated system parallel with the manual reporting process for the
first few cycles to ensure accuracy and allow the bank to analyze
differences between the two. "We had to make
decisions about how the reports should look and how to get the required
information from our Midas Banking System database running on AS400 to the REG-Reporter database. We also had to make some changes within our
mainframe system in the way we use data fields. New product codes, customer
types and other transactional codes had to be implemented and maintained in
the database and linked to REG-Reporter.”
“But once the
initial mapping was completed and all decisions had been made in line with
relevant regulations, the process was over and done with; you never have to
do it again.”
Working with IDOM’s
consultants through the implementation of REG-Reporter was a bonus for
Landesbank. “They brought in expertise in regulatory reporting because they
have people who worked with the FRB and/or other banks and knew our
business. That was a major benefit to us. We didn’t have to explain things,
and the end product is a better and higher quality report that we can
generate much more quickly than ever before.”
Mr. Haeger says his
goals for the project were to improve regulatory reporting, automate the
reporting as much as possible and achieve extremely high data quality and
consistency in reporting. He says that the bank has met and even exceeded
each of these goals.
“Financial
regulatory reporting is simpler,” he says, “because in essence, you press a
button and download, import, run a report, review the report, make limited
adjustments and you’re done.”
“We went from
three-plus weeks to prepare the quarterly report to one week. Now we can
spend more time analyzing the information. The focus has shifted from a
clerical job to a more analytical process, allowing us to look very closely
at the numbers.”
Mr. Haeger adds that
the bank has achieved its primary goal of automating, simplifying and
facilitating the entire process. “We wanted whatever is in the GL to be
incorporated into the call report (FFIEC002). With REG-Reporter, if the
system finds an error from the database, it automatically brings up a screen
showing us where the missing codes and errors in the database are located
and prompts us to fix it within our systems.”
“The system has a
built-in reporting logic, with each reporting position having an audit
trail,” Mr. Haeger says. “The audit trails go back to the GL, which is
something the regulators prefer to see. In this case, with no effort, we
can produce these audit trails. The FRB’s examiners stated that they were
extremely pleased with our high quality and consistent reporting.”
“It’s good to know
the regulators are pleased with your system. They expect the data to be
correct, and now, in all cases, it is.” |
Case
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