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Foreign banks may need to bolster resources for effective data aggregation, says expert

Foreign banks may need to invest heavily in their technology infrastructure if they want to have the resources needed for proper data aggregation, a market expert recently told American Banker.

Lenders have a lot of work to do
Anna Krayn, who works for a major financial services data provider as director of the risk and regulatory group, told the news source that these foreign lenders have a lot of work to do if they want to ensure that they can effectively gather and then aggregate this crucial information. She said that after the recent stress tests of the Federal Reserve, these organizations have greater insight into how much they will have to do.

Recently, the U.S. subsidiaries of foreign lenders had to undergo these tests, which assessed how well they would hold up under a wide variety of economic conditions. For example, the Fed examined how they would perform in both easy and severe circumstances. The central bank then evaluated various measures of their strength, including different capital ratios.

Banks propose capital plans
These foreign financial institutions also provided their proposed capital plans, which in some cases included requests to increase dividend payments and share buybacks. The Fed rejected many of these proposals, and now many banks have greater insight into the changes they will need to make.

Krayn emphasized the complicated nature of the situation when speaking with American Banker, stating that lenders will probably have to invest both many years – and also millions of dollars – into bolstering their current infrastructure. She noted that many firms have data that is spread across a wide range of business functions.

Key data spread out in many instances, says expert
“[A bank’s] risk group owns data with respect to loan characteristics,” the market expert told the media outlet. “And there is a financial group responsible for planning. And the treasury group will own the interest-generation data. [Comprehensive Capital Analysis Review] requires bringing those all together.”

Many different lenders have already invested heavily in preparation for the Fed’s stress tests. Some organizations leveraged both their internal staff, and also outside service providers, to ready themselves for these evaluations. The expenses associated with bolstering their technological resources so they can engage in more effective data aggregation will only add to their costs.

Lenders will need to cope with these expenses at a time when they are striving to function in a harsh climate characterized by rising costs, revenue challenges and complex regulations.

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