Global bank booking models
Maximizing and maintaining the business benefits
Booking models continue to come under increasing scrutiny from supervisors on both sides of the Atlantic. This joint report from our EMEA Centre for Regulatory Strategy and our US Center for Regulatory Strategy explains the recent changes to the supervisory landscape and identifies key areas on which banks should focus to navigate the challenges ahead.
Despite the evident business benefits and the significant investment that some banks have made to bring their booking models closer into line with heightened supervisory expectations, many are not there yet. In order to close the gap, many banks need to adopt a booking model mindset across their business that coincides with their strategic approach to operations across various legal entities.
In this report, we analyse the key areas on which, in our view, banks should focus their efforts to reach leading practice and realise the numerous business benefits of having a robust booking model. Building on our 2015 report on this topic, we provide deeper insight into the questions that banks should be able to answer if they are to demonstrate to supervisors that their booking model is properly documented, governed and controlled.
In general, banks will be expected to demonstrate an end-to-end view of the relationship between new product approvals, origination, booking, risk management, governance (both divisional and legal entity), and the supporting operational infrastructure across legal entities and branches and between jurisdictions.
Four challenging areas for bank booking models
|Documentation and articulation
Documentation of the booking model should take both an aggregated business-wide view and a legal-entity view, and should be linked into incremental new business decisions.
Senior management should be familiar with, able to articulate, and responsible for approving the booking model. Legal entities should be able to police their own boundaries and, if necessary, reject (types of) trades where the board and management do not want to accept particular risks on to their balance sheet.
|Monitoring, controls and reporting
Strong controls should be in place, particularly covering trading authorities and scope, inter-affiliate transfer pricing, legal entity financials and risk, and reporting across independent control functions. Banks should consider the use of preventative controls frameworks in the first line of defence.
|Efficiency and business drivers
It is essential that banks do not lose sight of efficiency and business drivers when re-thinking their booking models, which include, amongst others, risk management, capital and funding efficiency, and operational efficiency.
About the Centre for Regulatory Strategy
The Deloitte Centre for Regulatory Strategy is a powerful resource
With regional hubs in the Americas, Asia Pacific and EMEA, the Centre combines the strength of Deloitte’s regional and international network of experienced risk, regulatory, and industry professionals - including a deep roster of former regulators, industry specialists, and business advisers - with a rich understanding of the impact of regulations on business models and strategy.