Cognizant 20-20 Insights
Building a Holistic Capital
Management Framework
Embedding the strategic use of capital into banks internal cultures
will help them gain competitive advantage.
Executive Summary
The 2008 financial crisis induced banks to
rethink their capital planning approach and
identify new ways to extract shareholder value
in an increasingly risk-averse environment.
A lower risk appetite and increased regulatory
capital requirements have imposed new con-
straints forcing banks to optimize capital alloca-
tions, which in turn have required some difficult
business decisions.
We believe capital management is not a one-
dimensional problem. Developing a holistic capital
management framework is a new imperative for
banks.
In this white paper, we examine key develop-
ments and highlight the challenges facing banks
that are looking to develop a holistic capital
management framework. We analyze the impact
of regulations on capital planning decisions. We
also lay out the capital management value chain,
and highlight the need for a strategic transfor-
mation of existing processes and systems.
cognizant 20-20 insights | march 2017
Where Does Capital Generate Value?
A Strategy & Performance
Management Perspective
Performance management allows businesses to
decide which product or business lines to direct its
resources to, so as to maximize profitability. ROE1
is a common way to measure the performance of
a bank. However, ROE does not incorporate the
risk element that the equity is exposed to, and
hence it can be misleading. Risk-adjusted perfor-
mance management is a method to allocate risks
across the business on a consistent basis in terms
of their contribution to capital requirements.
Given the constraints of capital availability and the
cost considerations, banks must assess whether
promoting certain business lines that generate
high returns is indeed generating value for the
business if the investment has to be financed at
a greater cost and by meeting more stringent
regulatory requirements.
To maximize shareholder wealth, banks undertake
capital allocation a process of planning, allocating
and managing capital for a variety of products to
Holistic Capital Management Framework
2. Economic Capital
Position Risks
(FX, IR, Equity and
Commodity Risks)
The potential unexpected
loss in economic value of
the banks portfolio of its include operational and
1. Strategy & Performance Management positions over a one-year
horizon.
Performance Measures Risk Appetite
Other Risks
(e.g. operational risk)
Risks not captured by
the position risks; these
pension risks. 3. Regulatory Capital
Market, Credit and
Pillar II Requirements
Operational Risk

Set performance
Definition of the risk Banks should respond to Qualitative and
measures (e.g., ROE) to 2. Economic
profile needed to regulatory requirements quantitative assessment
drive decision-making.
support the banks risk Capital that have an impact on of whether banks have
Embed risk-adjusted capacity and its overall their RWAs (e.g. ,CVA sufficient capital to
performance into strategy. charge, IRRBB, FTRB). continue operations.
decision-making.

1. Strategy &
Performance 3. Regulatory
Capital Capital
Management
Management

5. Recovery and Resolution Plans 

4. Risk-Based Product Pricing

Measures for Monitoring 5. Recovery Reflecting the Riskiness of the

Liquidity Distress 4. Risk-Based Product in the Trade
and
Product
Maintain sufficient liquid assets to Resolution
Pricing Embedding risk in products pricing in
retain depositor confidence and Plans order to ensure that it covers the
maintain a buffer over regulatory and
costs associated with hedging CVA
internal assessment of liquidity
capital charge.
requirements.

Figure 1

ensure that the return on investment outstrips the
costs. To achieve success, banks must be able to
appropriately balance growth, risk and return to
remain in line with the interests of investors.
Clearly, capital management should be increas-
ingly embedded in evaluating decision-making,
costs, performance and incentives per group,
business and product. Performing such an
analysis would require identifying and continu-
ously monitoring a set of metrics that use the
same set of enterprise data and are consistent
and comparable across business groups, lines and
products. However, metrics are often unique to
each business line or product, which makes com-
parisons difficult. The solution is a standardized
performance management framework.
How Much Capital? An Economic
Perspective
When considering a performance management
framework that captures the risk underlying
assets, one way of measuring that risk is by
understanding economic capital requirements.
The capital possessed by a firm protects it against
insolvency in case the difference in value between
its assets and its liabilities decreases. Economic
capital (ECap) represents an estimate of the
worst possible decline in the institutions capital
at a specified confidence level, within a chosen
time horizon. Hence, it can be used to gauge the
amount of risk a bank is exposed to and can be
seen as capital that a bank needs to hold on its
balance sheet to support those risks and stay
solvent. Since ECap incorporates not just a banks
capital position but also the underlying risk, it is a
very useful tool for capital management.
When considering a performance
management framework that
captures the risk underlying
assets, one way of measuring that
risk is by understanding economic
capital requirements.
Banks have had to increasingly focus on two
areas:
Which risk-driven business area/project should
we channel our capital to?
Across business areas, is the capital sufficient
to absorb the risk of insolvency?
ECap can support this dual agenda as it can be
used to develop risk-driven profitability measures
to compare businesses but also produce a single

cognizant 20-20 insights 2

 Benefits and Challenges of Using Economic Capital Metrics
with Regulatory Capital Metrics 2. Economic Capital

Benefits Challenges
Complements Allows risk data Allows for May require a ECap models Management
regulatory to be aggregated comparison rethink of IT traditionally complexities
capital at group level between strategy difficult to from parallel use
measures businesses/ back-test of ECap and
products RegCap metrics

ECap is being ECap metrics are ECap metrics can be Ecap metrics are to Intensive Regulatory capital is
increasingly used to flexible and can be calculated at a be calculated both back-testing of reported to the
measure capital calculated across business level. This at a business level models is needed to regulator at group
buffer. Banks must geographies and allows for and across ensure the level while ECap
maintain it in businesses and risk-adjusted geographies to robustness of the metrics can be used
addition to hence, can present performance obtain an aggregate model, but this could at business/product
regulatory capital the aggregate view measure and view of risk results. be challenging due level.
to avoid falling of risk that comparison between Supporting this to unavailability of
short of regulatory regulators seek. different businesses massive risk data and longer time
requirements. which helps architecture change horizons.
management decide may require a
capital allocation for rethink of banks IT
businesses. strategy.

Figure 2

aggregate figure for all risk types, products and economic value added (EVA).2 EVA is positive if
business units. the absolute return on an asset is greater than
the risk-weighted cost of capital needed to fund it.
The risk adjusted return on (economic) capital Hence EVA identifies which projects, products or
(RAROC) is the normative, risk-based leverage business lines create value for shareholders.
measure that allows comparison between
different business areas and also enables banks An increased focus on risk management and
to determine whether high return assets and the regulatory spotlight on banks internal risk
management practices have prompted a revival
Incorporating an ECap analysis into in ECap model adoption. It also has an important
role under Basels Pillar II as it represents a banks
the capital management framework view of the amount of capital required to support
will, however, allow banks to gain its business activities.
a more holistic view of their needs ECap metrics bring their own challenges, and
and generate significant value banks are weighing the benefits against the
in the long run. challenges (see Figure 2).

investments are contributing toward higher
economic capital. It addresses the shortcomings
of regulatory capital, which is usually calculated
at the company level and doesnt allow compara-
tive analytics to be performed across business
areas. Executives can use RAROC to make better
decisions on complex problems. It can be used ex
post to decide which investments are generating
target profits or exante to set transaction prices
or determine which business lines deserve more
resource injections that could include capital. A
similar performance measure related to ECap is
Incorporating an ECap analysis into the capital
management framework will, however, allow
banks to gain a more holistic view of their needs
and generate significant value in the long run.
A Regulatory Perspective
In contrast to economic capital, the framework
for regulatory capital is laid out by regulators and
is meant to ensure the soundness of the banking
system, protect depositors and prevent financial
crises. Increased capital and funding costs along
with the heavy investment in infrastructure to

cognizant 20-20 insights 3

Regulatory timelines 2. Economic Capital

Overview of Regulatory Timelines

Theme Sub-Theme 2016 2017 2018 2019
Core Tier 1 4.5% 4.5% 4.5% 4.5%

Tier 1 6.0% 6.0% 6.0% 6.0%

Capital Tier 2 2.0% 2.0% 2.0% 2.0%

Countercyclical Buffer 0.625% 1.25% 1.875% 2.5%

Conservation Buffer 0.625% 1.25% 1.875% 2.5%

LCR 70% 80% 90% 100%

NSFR Observation period 100% 100% 100%

Liquidity
Tools include Concentration of funding, Contractual maturity
Liquidity Risk tools mismatch, LCR by significant currency, available unencumbered assets

Leverage Leverage ratio Tracking ratios components 3% 3% 3%

BIS Consultative Documents were issued in 2012/2014 for FRTB.

Trading Book FRTB Updated Market Risk standards issued in January 2016.
The deadline for this framework to be implemented is in 2019

BIS Consultative Documents were issued in 2015 for IRRB Updated

Banking Book IRRB Basel IRRBB standards were issued in April 2016.
Banks are expected to implement the standards by 2018

PRA expects full compliance of all ILAAP documentation from

ICAAP, ILAAP, October 2016 onwards.
Pillar 2 Stress Testing
Z&^d For US IHCs that meet the asset threshold(total consolidated assets
Requirement of $50 billion or greater) are required to submit first capital plan to
Federal Reserve in January 2017

   


Figure 3

deal with regulatory changes have put a strain on
profitability and brought capital management to
the forefront.
Despite the extended implementation timeframe,
many financial institutions are tackling the
balance sheet consequences of the new regime
only now. An overview of all regulations that
may affect responses in capital management
is provided in Figure 3. The regulatory initia-
tives have tried to tackle various elements of
the banking system and their multipolar nature
requires that banks conduct impact analysis on
different fronts.
Basel III and Beyond
Components of Capital
BASEL III has introduced stricter capital
standards by increasing the quality of capital that
banks are to set aside for risk management as
well as a stricter definition of what constitutes
regulatory capital. The total capital ratio3 under
Basel III remains 8% of RWA but its composition
has changed.
Regulatory capital comprises Common Equity
Tier-1 capital (including Core Tier 1) and Tier 2
but common equity requirements have increased.
Basel III also introduced a capital conservation
buffer of 2.5% of RWA as well as a countercyclical
capital buffer in the range of 0 to 2.5% to address
excessive build-up of systemic risk.
Under Basel III, the predominant source of Tier 1
capital is common shares and retained earnings.
In order to qualify as common equity, capital
has to be recognized under both accounting and
insolvency law as own funds and must not have
obligatory distributions. Share premium accounts
can be considered common equity only if the

cognizant 20-20 insights 4

 shares that gave rise to the premia were eligible
as common equity. As for instruments other than
common equity to be included in Tier 1, specific
criteria have been introduced to ensure these
are loss absorbent on a going-concern basis. In
particular, this means that dated and innovative
Tier-1 instruments will be phased out. Regulatory
adjustments set out in Basel do not apply in fair
value changes of additional Tier 1 and Tier 2
capital instruments that are recognized on the
balance sheet. Guidance from each competent
authority is available on what is considered an
incentive to redeem for additional Tier 1 capital
(e.g., a call option combined with an increase in
the credit spread of the instrument if the call
is not exercised or a call option to convert the
instrument into shares if the call is not exercised).
Deductions from capital (e.g., for goodwill and
intangibles, minority interests, deferred tax
assets, defined benefit pension fund assets,
shortfall of provisions to expected losses for IRB
institutions) and prudential filters have been
harmonized on a global basis and are applied
almost entirely to common equity. Regulations
require that banks deduct investments in capital
instruments of other institutions from the class of
component of capital for which the capital would
qualify if issued by the bank itself.
Tougher capital requirements will
primarily impact areas such as
sales and trading, securitizations,
securities lending and OTC
derivatives.
Basel III has simplified and reduced Tier 2 capital
by eliminating Upper Tier 2 from the capital
structure. Tier 2 capital ensures loss absorption
in case of liquidation (going-concern) since banks
must hold further debt securities that can convert
to equity in times of stress.
Tougher capital requirements will primarily
impact areas such as sales and trading, securiti-
zations, securities lending and OTC derivatives.
Institutions may choose to exit capital-intensive
areas of business (OTCs, commodities) where
levels of return on higher capital levels dilute
shareholder value.
Higher capital costs have forced banks to
reconsider their business models unless they are
able to manage both elements of the capital ratio.
cognizant 20-20 insights
Thus, comprehensive capital management that
incorporates capital planning, calculation and
strategic optimization has become inevitable for
all banks. Banks will need to measure and monitor
the quality of capital defined under the regulatory
initiatives, and this may require an analysis of
data and system requirements to support the
review.
Counterparty Credit Risk (CCR)
During the 2008 crisis, two-thirds of the losses
generated from counterparty risk was due to
credit spread and market variables movements.
So the CCR charge under Basel II, which was not
originally designed to consider market movements
of the exposure, has now been redesigned by
the Basel Committee to adopt a further capital
charge, the CVA charge, to cover for credit spread
volatilities and market volatility of the CCR. The
CVA charge materially increases the capital
requirements for OTC derivatives activities and
has attracted considerable attention from banks
and regulators alike.
Standard and advanced CVA are the two common
methods used by banks to calculate the CVA
capital charge. The standardized approach
allows less flexibility in incorporating market
implied data. It should theoretically result
in a higher capital charge compared to the
advanced approach due to regulatory implied
alignment between risk weights and external
ratings and other more conservative VaR calibra-
tions. However, the standardized approach also
removes complexities associated with market
risk VaR methodologies/IMM approval and
testing. The standardized CVA risk capital charge
methodology requires the development of a
number of heuristic approaches to estimate the
exposure at default, the discounted notional of
single name and index CDS hedges, the effective
maturity of the transaction with the counterparty
and the maturity of the hedges for index CDS.
Calculation of the advanced CVA RWA is a market
risk computation and may be used by institutions
that have regulatory approval to use the internal
model method (IMM) for CCR and specific VaR
model approval for market risk capital. If the
VaR models use a sensitivity-based approach,
the credit spread values in the 1st and 2nd order
sensitivities are the current levels as of valuation
dates for both the stressed and unstressed VaR
capital component of the advanced CVA. Hence,
no additional period of stress may be required for
credit spread parameters in determining future
5
counterparty EE profiles. Calculation of effective
EPE profiles and EAD are common on both
methods and may not have been subject to any
adjustments arising from credit protection that
the bank intends to include as an eligible hedge
in the CVA risk capital charge. However, the use
of other types of credit risk mitigation such as
collateral or netting set that reduce the effective
EPE and EAD amounts in the CCR framework
can be maintained when feeding the risk capital
charge. Also, the VaR model for eligible CDS and
CDS swaptions should capture their nonlinear
risk. Banks will need to assess which model is best
suited and evaluate if legacy systems are capable
of supporting those models.
Market Risk
Interest Rate Risk in the Banking Book (IRRBB)
The post-crisis period witnessed record low
interest rates to boost the economy. Policy
makers are now concerned about the impact
when interest rates rise. Hence banks are being
urged to consider keeping more capital aside
to deal with increases in interest rates. Based
on a set of qualitative principles largely backed
by stress testing and internal audits, banks are
required to manage rate fluctuations. The Basel
Committee was considering bringing interest
rate risk in banking book (IRRBB) under Pillar
1 but it published new standards for IRRBB in
April 2016 and concluded that IRRBB will remain
(will be captured) in Pillar 2. Banks are expected
to implement an enhanced Pillar 2 approach to
identify, measure, monitor and report IRRBB. This
involves adequate procedures, policies, systems
and controls. Banks are also required to assess
and measure IRRBB and the impact of interest
rate shocks on economic value (NPVs of future
cash flows and interest income) of assets, off-
balance sheet items and liabilities and on earn-
ing-based measures (change to future gains or
losses) of the banks.
Fundamental Review of the Trading Book
(FRTB)
An analysis of FRTB reveals that it:
Proposes standardized criteria for defining the
boundary between the trading and banking
books.
Places restrictions on changing this classifica-
tion to provide better alignment in the quanti-
fication of capital across the industry as well
as reducing arbitrage between banking and
trading books.
cognizant 20-20 insights
Argues for a move from VAR to ES for market
risk calculation to capitalize for loss events in
the tail of the P&L distribution.
Provides validation criteria that banks must use
to approve the soundness of internal models,
and where found inappropriate, banks will be
forced to use standardized models.
The Basel Committee also proposes a revised,
more risk-sensitive standardized market
approach that includes calculation of the risk
sensitivities based method (delta and gamma),
the default risk charge and the residual risk
add-on.
Banks are being urged to implement
a robust risk management
framework to identify, measure,
monitor and report IRRBB.
Compliance with FRTB would require extensive
interaction between multiple desks trading,
market risk, analytics, regulatory reporting,
technology, finance, project management and
business analysts. This is both time-consuming
and expensive. Banks will have to invest heavily
in data management, business process reengi-
neering and technology. However, some argue
that FRTB provides an opportunity for banks to
enhance their system capabilities and replace
their legacy IT infrastructure.
Liquidity Risk
The liquidity measures mandated by Basel III aim
to reduce reliance on unstable sources of funding,
highlight the importance of managing funding
costs and encourage banks to review the com-
position of assets and liabilities on their balance
sheets. Liquidity coverage ratio (LCR)4 and net
stable funding ratio (NSFR)5 will likely drive
banks away from sourcing shorter-term funding
and toward longer-term funding arrangements.
This will also increase the competition for retail
deposits, affect funding costs and margins, and
result in lower RWAs.
LCR reduces complexity but interpretive guidance
is necessary for all banks to follow a consistent
implementation approach. Key examples of high
quality liquid assets (HQLA) implications that
banks will face are as follows:
Unused portions of eligible HQLA assets,
already pledged, that are part of the collateral
pool can be used toward the banks stock of
HQLA with associated haircuts considered.
6
 Where the bank cannot determine which
collateral remains unused it may be assumed
that these assets are encumbered in order of
increasing liquidity value.
Lower-rated (BBB+ to BBB-) sovereign and
central bank securities that cannot be included
in the definition of Level 1 assets may be
included in the Level 2B assets with a 50%
haircut but will not constitute more than 15%
of level 2B assets.
The liquidity measures mandated
by Basel III aim to reduce reliance
on unstable sources of funding,
highlight the importance of managing
funding costs and encourage banks to
review the composition of assets and
liabilities on their balance sheets.
Non-0% risk-weighted sovereign/central bank
debt securities included in the Level 1 assets
and the amounts of foreign currency exposures
should be limited to the jurisdiction of the
issuing sovereign/central bank.
Common equities, which are exchange-traded
and are part of a major market index within
the home jurisdiction of the bank, should be
denominated in the same currency.
NSFR enables better assessment of funding
risk across on- and off-balance sheet items, and
promotes funding stability by reducing reliance on
short-term wholesale funding. This ratio reduces
the possibility that a disruption at a banks
standard source of funding will impact its liquidity
position to cause the banks failure and trigger
systemic risk (Basel Committee). The amounts
of available and required funding are calibrated
to reflect the presumed degree of stability of
liabilities and liquidity of assets. The calibra-
tion promotes the use of more stable, long-term
sources of funding. This calibration reflects which
stable funding type and counterparty is used (e.g.,
longer term is assumed to be more stable) to fund
the resilient credit creation of the asset side of
the balance sheet.
The Basel Committee has proposed a set of sup-
plementary monitoring tools to assist supervisors
with the analysis of bank-specific and system-wide
liquidity risk trends. Additionally, the committee
has introduced tools to monitor data on the
cognizant 20-20 insights
quantity, type, currency and location of available
unencumbered assets. These include market-
related monitoring tools that allow monitoring of
market-wide information (e.g., market data from
debt markets or specific products such as secu-
ritized products), financial sector information
(to check how the financial sector is reacting to
broader market movements) and bank-specific
information (to gauge market confidence in and
risks associated with specific banks).
Leverage Ratio
Basel III introduced a non-risk-based leverage
ratio to complement the risk-based capital
requirements so as to reduce the excessive
buildup of on- and off-balance sheet leverage.
This will diminish destabilizing deleveraging
exercises during periods of stress. The leverage
ratio measures the relationship between the
capital base and the assets of an institution. The
ratio is designed to put a floor under the buildup
of leverage in the banking system as well as to
introduce additional safeguards against model
risk and measurement errors by supplementing
the risk-based capital requirements with a simple,
transparent measure of risk. In addition, off-
balance sheet positions shall be included in the
denominator. In contrast to capital requirement
calculation and accounting, collateral and netting
for derivative and repo transactions will not be
considered. To ensure international comparability
of the ratio, it will be adjusted for differences in
accounting standards.
The exposure measure is the sum of five
components:
On-balance-sheet exposures, including collateral
for derivatives and securities financing transac-
tions but not the corresponding assets as they
form the next two points.
Derivative exposures accounts for replace-
ment cost, potential future exposure and
adjustment for certain collateral.
Securities financing transaction exposures
accounts for counterparty credit exposure
related to repos, reverse repos, securities
borrowing/lending and margin lending trans-
actions.
Other off-balance-sheet items.
Leverage ratio acts as a backstop measure
to the risk-based capital requirements and
therefore provides added protection against
model risk and measurement error.
7
The implementation of the leverage ratio will
entail changes to regulatory reporting processes
and potentially require system changes.
Revisiting Pillar 2
The purpose of the second pillar under Basel is
to supplement existing regulatory capital require-
ments for banks capital planning process and
risk management. Pillar 2 guidance intends to
help banks better identify, assess, manage and
mitigate risks in their internal capital adequacy
assessment process (ICAAP). Pillar 2 should
exceed Pillar 1 capital requirements so that
all risks are adequately covered. The ICAAP
process should be commensurate with the size
and complexity of the banks business as well as
its risk appetite. A supplemental guidance was
issued by the Basel Committee to support their
ICAAP exercise. It addresses the following areas:
Risk concentrations.
Off-balance-sheet exposures with focus on
securitization.
Valuations.
Sound stress-testing practices.
ICAAP should incorporate stress testing to
complement other processes such as setting risk
appetite and assessing economic capital so that
the bank has the shock absorption capability to
adequately protect against severe stress events.
The banks capital planning should incorporate
rigorous and forward-looking stress testing in
order to withstand uncertain market conditions
and volatility over time. Banks should also assess
their capital adequacy under stress conditions
against a variety of capital ratios (e.g., RWA,
Tier2).
Banks will be forced to move further away from
holding risky and costly assets (e.g., OTC deriva-
tives) on their balance sheet, and will reshape
their strategies toward client businesses. This
will impact banks profitability and require them
to transform their operating models. Capital
management will also require improvements and
upgrades to systems used for stress testing and
back testing.
Similar to ICAAP, Pillar 2 addresses the banks
internal liquidity adequacy assessment process
(ILAAP). The bank is required to undertake an
annual assessment of its liquidity and funding
risk across different time horizons in accordance
with existing ILAA and CRDIV rules. Banks ILAAP
cognizant 20-20 insights
must be consistent with their risk appetite and
with their overall approach for measuring and
managing liquidity and funding risk. ILAAP
involves a comprehensive stress testing on
variables that affect liquidity risk, assessment of
intraday liquidity risk, the banks ability to meet
its intraday liability requirements, assessing its
liquidity risk governance framework and a robust
transfer pricing system in place to ensure that
costs, benefits and risks are fully incorporated
into the banks product pricing and incentives.
Banks will be forced to move further
away from holding risky and costly
assets (e.g., OTC derivatives) on their
balance sheet, and will reshape their
strategies toward client businesses.
U.S. intermediate holding companies (IHCs) with
$50 billion or more in total consolidated assets
are subject to assessments by bank regulators to
check if the banks have effective capital planning
processes and sufficient capital to absorb losses
during stressful conditions. The assessment
includes the comprehensive capital analysis and
review (CCAR) and Dodd-Frank Act stress testing
(DFAST).
CCAR evaluates an IHCs capital adequacy, capital
distributions and capital adequacy processes. For
the annual CCAR submission, IHCs are required to
assess capital adequacy under three supervisory
scenarios provided by the FRB (baseline, adverse
and severely adverse), as well as at least two
internally developed scenarios (baseline, severely
adverse). As part of CCAR, the Federal Reserve
evaluates whether IHCs have sufficient capital to
continue operations through times of economic
and financial market stress and whether they
have robust, forward-looking capital planning
processes that account for their unique risks.
As such, banks have to perform key tasks to
be compliant with CCAR: conduct stress tests
based on relevant scenarios; ensure a control
and governance structure is in place to reduce
risks; and enable accurate and timely reporting of
annual, quarterly and monthly reports.
DFAST is a complementary exercise to CCAR
that assesses whether financial institutions have
sufficient capital to absorb losses and support
operations during adverse economic conditions.
A snapshot of the CCAR taxonomy indicates that
these developments will significantly increase
8
Snapshot of CCAR Taxonomy
Schedules that need to be submitted as part of the annual FRT-14A report and financials reporting impact
Report
Schedule Constituent Worksheets R E L X A+L C
Id
FR Y-14A Summary Cover Sheet
Income Statement
Balance Sheet
Legend
1. Capital CCAR and 2. Capital DFAST
Standardized RWA R Revenue
Retail Balance and Loss Projections E Expense
Retail Repurchase
Loss (impairments,
ASC 310 30 L allowance, charge-offs,
reserves incl.)
Projected OTTI for AFS Securities and HTM by Security
Risk Exposure
Projected OTTI for AFS and HTM Securities by Portfolio (All eligible assets for
X
OTTI Methodology and Assumptions for AFS and HTM Securities by Portfolio RWA calculations)
Projected OCI and Fair Value for AFS Securities A+L Assets and Liabilities
AFS and HTM Fair Market Value Sources by Portfiolio C Capital

Trading
Counterparty Risk
Operational Risk Scenario Inputs & Projections
PPNR Projections
PPNR Net Interest Income
PPNR Metrics
Scenario Supervisory Baseline Scenario
Supervisory Adverse Scenario
Supervisory Severely Adverse Scenario
BHC Baseline Scenario

Additional Scenario
Regulatory Capital Transitions Cover Sheet
Capital Composition
Exceptions Bucket Calculator
Advanced RiskWeighted Assets
Standardized RiskWeighted Assets
Leverage Exposure
Planned Actions
Regulatory Capital Instruments Schedule C
Operational Risk BHC Operational Risk Historical Capital
Legal Reserves Reporting

Measures used against reporting schedules/worksheets

Measure Name Schedule ID Report Schedule Worksheet
Equity Delta Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity by Geography
Equity Gamma Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity by Geography
Profit/(Loss) from % Change in
Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity by Geography
Country Equity Prices
Equity Vega Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity by Geography
Profit/(Loss) from changes in Spot/Vol Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity Spot-Vol Grid
Equity Vega post vol shock Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity Spot-Vol Grid
Equity Delta post spot shock Q FR Y-14Q Trading, PE and Other Fair Value Assets Equity Spot-Vol Grid
Equity Gamma post spot shock Q FR Y-14Q Measure
Trading, PE and Other Fair Value NameEquity Spot-Vol Grid
Assets Schedule ID Report Schedule Worksheet
Equity Vega post spot shock Q FR Y-14Q Common
Trading, PE and Other Fair Value Equity
Assets Tier 1Spot-Vol
Equity Capital Grid D.1 FR Y-14A Regulatory Capital Transitions Capital Composition
Adjustments and deductions associated with commo D.1 FR Y-14A Regulatory Capital Transitions Capital Composition
Profit/(Loss) from a -1% change in dividends Q FR Y-14Q Trading, PE and Other Fair Value Assets Other Equity
Conditional AOCI related adjustments D.1 FR Y-14A Regulatory Capital Transitions Capital Composition
FX Delta Q FR Y-14Q Trading, PE and Other Fair Value Assets
Additional tier FX Spot Sensitivities
1 capital D.1 FR Y-14A Regulatory Capital Transitions Capital Composition
FX Gamma Q FR Y-14Q Trading, PE and Other Fair Value Assets FX Spot Sensitivities
Other capital instruments (e.g, issuance, repurchase D.1 FR Y-14A Regulatory Capital Transitions Capital Composition
Profit/(Loss) From % Change in Spot Price in Q FR Y-14Q Significant
Trading, PE and Other Fair Value Assetsinvestments in the capital of unconsolida D.2
FX Spot Sensitivities FR Y-14A Regulatory Capital Transitions Exceptions Bucket Calculator
FX Lognormal Vega Q FR Y-14Q Mortgage
Trading, PE and Other Fair Value servicing
Assets assets
FX Vega D.2 FR Y-14A Regulatory Capital Transitions Exceptions Bucket Calculator
Aggregate of items subject To the 15% limit (signifi D.2 FR Y-14A Regulatory Capital Transitions Exceptions Bucket Calculator
Directional Risks: DV01 Q FR Y-14Q Trading, PE and Other Fair Value Assets Rates DV01
Advanced Approaches Credit Risk: Credit RWA D.3 FR Y-14A Regulatory Capital Transitions Advanced RiskWeighted Assets
P/(L) from a Parallel Move in Rates (bps) Q FR Y-14Q Trading, PE and Other Fair Value Assets
Advanced Rates DV01
Approaches Operational Risk: Operational D.3 FR Y-14A Regulatory Capital Transitions Advanced RiskWeighted Assets
Basis Risks: DV01 Q FR Y-14Q Advanced
Trading, PE and Other Fair Value Approaches
Assets Rates DV01Operational Risk: Market RW D.3 FR Y-14A Regulatory Capital Transitions Advanced RiskWeighted Assets
Interest Rate Normal Vegas Q FR Y-14Q Standardised
Trading, PE and Other Fair Value Assets Risk Weighted
Rates Vega Assets: Credit RWA D.4 FR Y-14A Regulatory Capital Transitions Standardized RiskWeighted Assets
Standardised Risk Weighted Assets: Market RWA D.4 FR Y-14A Regulatory Capital Transitions Standardized RiskWeighted Assets
Inflation Delta Q FR Y-14Q Trading, PE and Other Fair Value Assets Other Rates
Leverage Exposure for Tier 1 Leverage Ratio D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Cross-Currency vs. USD Basis Q FR Y-14Q Trading, PE and Other Fair Value Assets
Leverage Other for
Exposure Rates
Supplementary Leverage Ra D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Delta Q FR Y-14Q Trading, PE and Other Fair Value Assetsto Advanced
(Applicable Energy Approaches BHCs Only)
Gamma Q FR Y-14Q Derivative
Trading, PE and Other Fair Value Assetsexposures
Energy D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Vega Q FR Y-14Q Repo style transactions
Trading, PE and Other Fair Value Assets Energy D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Other off-balance sheet exposures D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Delta Q FR Y-14Q Trading, PE and Other Fair Value Assets Metals
Capital and total leverage exposures D.5 FR Y-14A Regulatory Capital Transitions Leverage Exposure
Gamma Q FR Y-14Q Trading, PE and Other Fair Value
ActionAssets Metals
Description D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Vega Q FR Y-14Q ActionAssets
Trading, PE and Other Fair Value Type Metals D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Delta Q FR Y-14Q Exposure
Trading, PE and Other Fair Value TypeAgs and Softs
Assets D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
RWA Type D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Gamma Q FR Y-14Q Trading, PE and Other Fair Value Assets Ags and Softs
Common Equity Tier 1 D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Vega Q FR Y-14Q Trading, PE and Other Fair Value
Tier 1 Assets Ags and Softs D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Delta Q FR Y-14Q Trading, PE and Other Fair Value Assets Diversified Commodity Indices
RWA Standardised D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Gamma Q FR Y-14Q RWA Advanced
Trading, PE and Other Fair Value Assets Diversified Commodity Indices D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Vega Q FR Y-14Q Total Asset
Trading, PE and Other Fair Value AssetsforDiversified
Leverage Ratio
Commodity Indices D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Total Leverage D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Exposure for
Supplementary
Leverage Ratio
Balance Sheet impact D.6 FR Y-14A Regulatory Capital Transitions Planned Actions
Operational risk capital by BHC unit-of measure E.1 FR Y-14A Operational Risk BHC Operational Risk Historical Capital
Total Legal Reserve Balance E.2 FR Y-14A Operational Risk Legal Reserves Reporting
Total Repurchase Litigation Reserve Balance E.2 FR Y-14A Operational Risk Legal Reserves Reporting
Losses associated with loans held for investment at A.1.a FR Y-14A Summary Income Statement
Real Estate Loans (in Domestic Offices) A.1.a FR Y-14A Summary Income Statement
First Lien Mortgages A.1.a FR Y-14A Summary Income Statement
Second / Junior Lien Mortgages A.1.a FR Y-14A Summary Income Statement
Loans Secured by Farmland A.1.a FR Y-14A Summary Income Statement
Real Estate Loans (Not in Domestic Offices) A.1.a FR Y-14A Summary Income Statement

Schedule description and data granularity

Report Id Report Description Report Purpose Frequency Schedule Schedule Description
FR Y-14Q Captures BHC's granular data on various asset classes To capture actual data at the end of each quarter - Quarterly Regulatory Capital Instruments Captures details about redemptions and issuances
and pre-provision net revenue (PPNR) for the reporting improve the Federal Reserve's ability to perform its during the quarter and capital instrument positions.
period. continuous risk-monitoring function by providing
more-timely data.

Constituent Worksheets Forecasting Horizon Granularity of Data Captured

Regulatory Capital Instruments Actuals: Quarterly - from third quarter of the year of submission through third quarter of the following year (e.g. from Q3 2012 Captured at Security CUSIP/identifier and Instrument Type level
through Q3 2013)
Repurchases/ Redemptions Actuals: Quarterly - from third quarter of the year of submission through third quarter of the following year (e.g. from Q3 2012 Captured at Security CUSIP/identifier and Instrument Type level
through Q3 2013)

Issuances Actuals: Quarterly - from third quarter of the year of submission through third quarter of the following year (e.g. from Q3 2012 Captured at Security CUSIP/identifier and Instrument Type level
through Q3 2013)

Figure 4

cognizant 20-20 insights 9

data and reporting requirements. However, there
are multiple commonalities between CCAR and
DFAST in terms of data, processes and supervi-
sion. Hence, there is significant scope for banks to
align processes to gain synergies while ensuring
compliance with both, provided they reassess
their current operating model.
Both regulations should serve to inform the
Federal Reserve and the general public of how
these financial institutions capital ratios might
change during a hypothetical set of adverse
economic conditions and the same three FRB-
provided supervisory scenarios as under CCAR
are required of the IHCs for the year-end DFAST.
For institutions with significant trading
businesses, extensive data template submissions
are required to support supervisory stress tests
and analysis of the firms trading operations.
A thorough understanding of the CCAR
reporting requirements of all regulatory
reporting templates will help banks identify the
level of data granularity in each schedule and
regulatory requirement demand. The regulatory
risk taxonomy analysis in Figure 4 (see previous
page) will also help banks ensure that the
required data is available in an appropriate
structure.
Risk-Based Pricing: A Pressing
Imperative
Risk-based pricing is the alignment of pricing of a
trade by reflecting the riskiness of the product in
the trade. A borrowers credit risk determines the
price as well as the interest payment, and thus the
higher the perceived risk, the higher the fee that
should be charged on the OTC trade. Risk-based
pricing closely aligns the cost structure with the
real costs by incorporating considerations such
as cost of capital, cost of funding, expected and
unexpected losses, and other allocated expenses
to provide a price that maximizes value.
Along with CVA, rising funding costs that affect a
firms P&L should be included in the valuation of
a product i.e., fair value adjustment (FVA). FVA
incorporates the PV of funding cost into the value
of the product rather than accruing it over the
life of the product. Banks also use fund transfer
pricing (FTP) to charge a lending business or
desk the cost of raising funds. FTP allows a bank
to allocate funding costs to each business unit or
product based on how much capital is required
for that particular product.
cognizant 20-20 insights
Recovery and Resolution Plans (RRPs):
Lessons from the Past
The 2008 global financial crisis resulted in new
regulations aimed at increasing the resilience of
banks; a key focus has been the preparation of
a recovery and resolution plan (RRP). The RRP
determines the operational procedures related
to liquidity crisis solution and thus highlights the
need for more effective tools to resolve financial
distress. The responsibility of the ongoing
monitoring of the emergency liquidity plans lies
under the responsibility of treasury, risk and the
asset liability committee (ALCO). The RRP should
prevent a liquidity crisis from happening, with
its actions mainly dependent on the exposures
and the systemic importance of the financial
institution.
The 2008 global financial crisis
resulted in new regulations aimed
at increasing the resilience of
banks; a key focus has been the
preparation of a recovery and
resolution plan (RRP).
Banks use stress scenarios for recovery planning
purposes. Scenarios range in severity but banks
use both internal and external (usually driven
by macroeconomic indicators) ones for stress
testing in order to estimate the likely future
impacts on income statement, balance sheet,
RWA, regulatory Tier I common equity, economic
capital and liquidity.
RRPs set out what will be expected of banks
with regard to planning for a stressed situation
that will require a bank to take action to recover
or undertake resolution in an orderly manner
without the need for public funded support.
RRP aims to minimize the adverse impact on the
financial system of firms failing to meet their
liabilities when they fall due. All the firms are
required to provide the authorities with sufficient
information to assess the preferred recovery and
resolution strategy.
Challenges and Complexities
Banks are tasked with the dual agenda of meeting
economic and regulatory requirements. They
face challenges on four fronts: governance,
processes, systems and data. The challenges
manifest from these individually, and also due to
inefficient interaction between them. To manage
10
capital effectively, banks need to have stricter
governance and oversight to instill shareholder
confidence in business strategy and perfor-
mance. The processes have to be streamlined
to reduce complexity and response times, and
achieve synergies while integrating functions
within teams. Systems and data management
need to be overhauled in order to manage capital
accurately and in a timely manner. This will allow
banks to spend more time analyzing the data to
gain insights rather than simply aggregating and
reporting data.
Bringing Order to Chaos: Implementing
Effective Capital Management
Processes
In order to effectively manage the indicated
challenges, it is important to analyze and
fully appreciate the complexity of the capital
management value chain in Figure 6 (see next
page).
Capital planning and supervision is an enterprise-
wide exercise that encompasses various functions
within a bank, including strategy and business

Key Challenges Related to Capital Planning, Allocation & Management

The Regulatory Agenda The Economic Agenda
How do I allocate my capital How do I allocate my capital
across assets to ensure across assets to generate the
minimal risk and compliance highest risk-weighted return on
with regulatory requirements? assets?

Accurately measure quality of Define risk profile needed to

capital to ensure regulatory support overall capital planning.
compliance both across lines of
business and on an entity level. Capital
Management
Accurately capture and monitor Decision-Making Obtain accurate risk-based
leverage. Process product pricing.

Have accurate view of asset Set risk-adjusted performance

classification to accurately measures to drive decision-
forecast regulatory capital making.
requirements.

Monitor counterparty credit Compare performance between

exposure. different lines of business.

Challenges
Governance Process Data Systems

Capital planning not
adequately responsive
due to lack of alignment
between senior
management.
Difficult to compare
business lines due to
lack of standardized
metrics or KPIs.
Delayed response to
resolve identified issues
due to absence of
ownership and
accountability.
Decision-making slow
due to fragmented and
poorly defined approval
process.
Difficult to fully utilize Defragmented data Difficult to scale
capital planning resource architecture makes it systems to address
due to lack of synergy difficult to capture increased modelling
between business and IT, performance and risk requirements.
and between risk and measures both across
finance. lines of business and on Systems incapable of
an entity level. supporting increased
Processes slow, stress testing require-
inefficient and prone to Degree of data ments.
human error due to granularity between
reliance on manual businesses inconsistent Lack of real time or
processes. which makes KPIs on-demand data due to
difficult to design and system design and
Processes cannot be comparison between performance
adapted during transfor- businesses difficult. limitations.
mational phases.
Data produced is
Processes pose opera- inaccurate, incomplete
tional risk due to lack of and out of date and
robust control frame- hence, decisions based
work. on data are unreliable
and flawed.

Figure 5

cognizant 20-20 insights 11

planning, risk management, finance, front office,
compliance, executive management and the
board of directors. Capital management requires
data and system interactions within the various
functions. For instance, in planning for an orga-
nizations overall capital needs, its risk appetite
will in part advise an organization and the risk
appetite, in turn, will be facilitated by extensive
stakeholder discussions and risk calculations.
Similarly, when an organization is monitoring
capital risk associated with a line of business, it
will seek advice from its control framework in
determining how frequently capital needs to be
monitored. The firm will also require significant
firepower from risk management teams that
often make use of sophisticated risk management
platforms. A disparate set of processes and
systems must come together to support and
guide capital management at each step. To enable
a successful framework, firms need to rethink
their enterprise data management strategy and
develop a standardized data dictionary. Banks
will also need to strategize and define the target
operating model for effective capital management
and transform their processes, systems and data
infrastructure.
This transformation has largely been ad hoc,
reactive and tactical to accommodate the
immediate regulatory requirement. Banks need to

Capital Management Value Chain

Goal definition and
strategic planning
Recognition of Stakeholder and
Organisational Goals

Implementation Roadmap

Business & Operating Model

Development

Organisational Recovery Resolution Strategies Regular sources of finance &

target deadlines & Operational Plan market accessibility

Stress testing performance Sources of finance

metrics & BU/ Product focus for resolution

Pricing & performance Planning &

Financing
Forecasting Risk management
measurement

Product/BU Strategy Review BU/Products Risk Appetite Setting

Economic
capital
performance Capital
Defining Performance Metric
& Monitoring Performance metrics Risk Reporting and Analysis
Capital
Capital
Regulatory Allocation &
Performance
Risk Based Pricing Capital Usage Limit Risk Control Limits
against Planning
Setting

Risk Identification, Modelling

Reallocating Resources
Capital Risk & Measurement
Measurement & Usage
Limit Monitoring
Resource
reallocation plans
Risk control
limit
XVA metrics definition

Capital risk
metrics

Limit monitoring
frequency
Governance, policies and
procedures

Monitoring Of Compliance

Set up Control Framework

Design Controls

Policy Development

Figure 6

cognizant 20-20 insights 12

engage in strategic rather than ad hoc enterprise-
level change programs. Our experience suggests
that business and IT transformations are often
disconnected and poorly aligned with enterprise-
level strategy. Hence, a change that can improve
multiple functions often addresses only a few due
to lack of relevant stakeholder involvement in
the early stages. By the time other functions are
involved, implementation deadlines force singular
changes, and firms fail to leverage potential
synergies. Enterprise-wide change management
programs would enable proper integration,
address challenges at the outset and avoid work-
arounds that often create governance issues.
For instance, embedding a strategic transforma-
tion process will help banks successfully optimize
their regulatory capital and hence optimize RWA.
Reviewing current systems and data can help
make granular data available to achieve this.
Based on our analysis of the underlying challenges
within the capital management process, we
propose an efficient IT platform model that facili-
tates and automates the complex challenges
covered in this paper. At the outset, the model
collates data from multiple disparate systems in
the enterprise service bus before transforming
it appropriately in the warehousing layer.
The transformed data is ready to support various
processes underlying capital management.
Several of these processes are performed in the
core computation layer. In particular, the model
allows the organization to gauge capital demand,
and allows planning and forecasting to be
performed on a dynamic basis by incorporating
the changes within the industry and regulatory
landscape.
It is important to recognize that there are various
levers within an organization that influence its
RWA. The allocation module incorporates these
various levers to provide re-optimized capital
allocations across LOBs and products and ensure
a firms RWA is minimized. The capital risk mate-
riality module generates relevant capital risk cal-
culations and advises on the materiality of limit
breaches to ensure organizations can be well-
prepared. The information must be presented
through function-specific dashboards that
allow stakeholders to monitor risks and control
outcomes.

Roadmap: Strategic Transformation and

Implementation of Target Operating Model

Gap identification & Implementation of

As-is analysis
recommendations to address gaps optimization
Activities Analyze and Compare work to date with best practice to Define data requirements to
document as-is state: identify: enable the automation of
Review of IT Gaps. processes and reporting.
architecture. Misalignment with as-is state.
Design future state by mapping
Analysis of Assess existing management IT to identify data process based on to-date
interdependency control weaknesses and process inefficiencies. recommendations.
of data and
systems. Propose how different units( process, controls, Start implementing optimization
Test robustness of data and systems) should interact. in systems, data and processes.
control framework
Quantify impact of gaps at a high level based Ensure business users are
(including IT
on best practices and market experience. adequately informed of change.
controls).
Prioritize gaps based on value & delivery Confirmation with relevant
Review and confirm
impact. stakeholders that requirements
as-is state with
have been met post
relevant stakeholders. Develop potential options and implementation.
recommendations to close high priority gaps.

Output Documentation of Identification of gaps and weaknesses in Target state achieved.

as-is state. existing structure.
Endorsement of target state
Approval from List of prioritized gaps and potential impact of from relevant stakeholders.
relevant stakeholders. each gap.

Recommendations and actions to close gaps.

Cost estimates.

Figure 7

cognizant 20-20 insights 13

Capital Management IT Model

Trade Positions, PV PnL, Tier 1 and Tier 2 Capital,

Trading System Finance System
Existing RAROC, Leverage Ratios
Client Enterprise
PGs, LGDs, EPE, ENE Expected
Systems Static Trade Data, Historical and Service Bus Shortfall, Stress Tests, Back Testing,
Data Repository Risk System
Market Data (e.g., Ratings) (Routing, AMA, VaR sensitivities and VaRs,
Trading Agreements
Messaging,) Risk Limits
Other Relevant
Legal & Compliance Netting Agreements Other Metrics Systems
Collateral Agreements

Risk & Finance Data

Orchestration,
Warehousing Data Sourcing & Transformation Engine Validation &
Layer Reconciliation
Component
Market Entity Risk ROE Credit Achieved Credit
Prices & Appetite RAROC exposure RAROC Limit
Industry & Regulatory Business/ Business/LOB/ Business/LOB/
Margin Entity Limit Breaches Business/LOB/
Entity Capital & LOB/Product EVA Product Risk & Product Capital Achieved Product Capital
Performance Financing RAROC Economic Performance VaR Regulatory Risk Metrics RWA VaR Usage Metrics
Metrics Costs Leverage Capital Metrics Metrics Limits Limits Achieved Breaches
...
Ratio LCR Leverage
Limits Ratio

Scenario Demand Scenario Adjustments

creation Generator Planning & Rules Capital Risk
Computation rules Forecasting Aggregation Engine Allocation Materiality Materiality
Materiality
Layer Dynamic Capital Module Definition Assessment Engine
Module Aggregation Module
Demand
Demand Rules
Forecasting Engine
Forecasting Allocation Engine Capital Risk Capital Risk Engine
Model & Optimisation Definition
Rules Exception Manager Rules

Reporting Capital Optimal RWA & Capital Risk Assessment &

Layer Performance
Projections Capital Allocations Materiality Heatmaps Analysis
Dashboard

Reported and Analysed by Line of Business, Product, Geography, etc.

Figure 8

Conclusion allocated. This will help establish greater predict-

ability on capital demand.
In this increasingly dynamic post-crisis era, banks
decision-makers will need to work through layers In addition to encouraging greater collaboration
of complexity when implementing a comprehen- between various stakeholders, the change in
sive capital management strategy. Banks need to approach will enable banks to fully utilize existing
perform an in-depth assessment of the existing resources and generate greater return on pre-
governance structure, processes, systems and existing investments and assets. Ultimately, a
data. Adopting a holistic approach will not only holistic capital management framework will
allow banks to improve operationally through enable banks to comply with regulations while
streamlined processes, but also help identify also ensuring that they generate sustainable
the areas where capital is being inappropriately value for their shareholders.

cognizant 20-20 insights 14

Footnotes
ROE = Net Income / Capital
1

2
A certain iteration of EVA can be given by EVA = (Revenues Costs-Expected Loss Tax) - (Economic
Capital * Cost of Capital Employed)
3
Capital Ratio = Regulatory Capital (Tier 1 + Tier2) / RWA Assets (Credit, Market, Operational)
4
Liquidity Coverage Ratio = Stock of high quality liquid assets / Net cash outflows over a 30 day period
100%
5
Net Stable Funding Ratio = Available amount of stable funding / Required amount of stable funding)
100%

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About the Authors

David Paris is Governance, Risk & Compliance (GRC) head within the Banking and Financial Services
sector for Cognizant Technology Solutions in the UK. He has over 30 years of experience in financial
services management and advisory globally, focused on credit, market, liquidity and operational risk
management. This includes roles at Wells Fargo Bank, First Interstate Bank, Ernst & Young, Reuters
Instinet, IBM and Cognizant. David has an M.B.A. in finance from the American Graduate School of Inter-
national Management and a degree in Chinese and Russian history from Washington University. He can
be reached at David.Paris@cognizant.com.

Guruprasad Chavan is an Associate Director (Consulting Senior Manager) within Cognizant Business
Consultings BFS Governance Risk and Compliance Practice. He has over 16 years of experience in
business/IT consulting and auditing across various areas such as strategy consulting, enterprise-wide
risk management, accounting policy, SOX compliance, AML, information security and business continuity
management. Guruprasad has in-depth knowledge and experience across various domains within banking
and capital markets. He can be reached at Guruprasad.Chavan@cognizant.com.

Nick Palamaras is a Senior Manager (Consulting Manager) within Cognizant Business Consulting. He has
over 12 years of experience in risk consulting and investment banking. Nick has significant experience
across the risk, finance and treasury functions, and with regulatory teams of global investment banks.
He has in-depth knowledge of prudential regulation, liquidity risk and Basel (CRDIV and CRR), and has
led assignments in the assessment as well as the design and implementation of treasury and liquidity
risk management frameworks. Nick is a Chartered Accountant (ACCA) and holds a postgraduate degree
in economics and banking. He can be reached at Nikolaos.Palamaras@cognizant.com.

Zareef Anam is an Associate (Business Analyst) within Cognizant Business Consulting. He has worked on
multiple consulting engagements including business transformation, regulatory compliance and opera-
tional risk. He can be reached at Zareef.Anam@cognizant.com.

About Cognizant
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based, consultative approach helps clients envision, build and run more innovative and efficient
businesses. Headquartered in the U.S., Cognizant is ranked 230 on the Fortune 500 and is consistently
listed among the most admired companies in the world. Learn how Cognizant helps clients lead with
digital at www.cognizant.com or follow us @Cognizant .

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