Regulations…and Our Responses

Financial organizations need to keep in compliance with numerous and ever-evolving industry regulations. Here you can read how Third Pillar is addressing a few of the issues that impact your business.

Basel II Capital Requirements
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

Published in June 2004, the purpose of Basel II is to create an international standard for the development of regulations about how much capital banks need to put aside to guard financial and operational risks. The goal is to help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse.

Basel II establishes rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices.

These rules mean that the greater the risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability. Banks must conduct stress tests on their potential future minimum capital requirement.

Our LoanPath product helps to meet Basel II Capital Requirements by requiring the credit information needed for various Basel calculations, from the less data-intensive Basel approaches to the Advanced Internal Ratings Based approach.

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Operating Risk and Capital Allocation Requirements
Operational Risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems, or from external events.

Under the Internal Ratings Based (IRB) approach to measuring Operating Risk, all processes must be tracked, and any process breakdowns, including severity and frequency, must be logged in a loss database.

Our LoanPath product enables a regulated financial services entity to adequately measure and manage Operational Risk and reduce capital allocation, resulting in significant cost savings. LoanPath supports operational risk monitoring in your lending process and can feed a loss event database.

The validation, workflow, versioning and audit trail feature eliminates the errors inherent in a manual system and creates an end-to-end electronic process integrated with a loss event database and a process management module.

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Six Sigma Requirements
Six Sigma is a business management strategy that seeks to improve the quality of process outputs by identifying and removing the causes of defects and variation in manufacturing and business processes. It uses a set of quality management methods and creates a special infrastructure of people within the organization who are experts in these methods.

Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets.

The average commercial lending transaction involves more than 25 documents, many with multiple iterations that are touched by more than a dozen participants, often in different locations.  This results in significant opportunity for defects and bottlenecks?as well as lost time and lost revenue.

Third Pillar embeds Six Sigma methods in our product lines and our service offerings. The process management underpinnings in our LoanPath product ensure consistency across the enterprise, feeding executive dashboards and monitoring?for every transaction and entire portfolios.

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Sarbanes-Oxley (SOX) Requirements
SOX is a United States federal law enacted on July 30, 2002 in reaction to major corporate and accounting scandals. The act created the Public Company Accounting Oversight Board (PCAOB) charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure. It contains 11 titles that describe specific mandates and requirements for financial reporting.

All the transaction information in our LoanPath product is retained in an Oracle database that provides information for credit and auditor analyses of credit decisions and results. Further, the product features an audit function that looks at specific transactions and the workflows for those transactions to verify that credit policies are followed.

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Troubled Asset Relief Program (TARP)
TARP is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen its financial sector. TARP allows the United States Department of the Treasury to purchase or insure up to $700 billion of "troubled" assets. It is the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

Another important goal of TARP is to encourage banks to resume lending again at levels seen before the crisis, both to each other and to consumers and businesses. As banks gain increased lending confidence, the interbank lending interest rates (the rates at which the banks lend to each other on a short term basis) should decrease, further facilitating lending.

Our LoanPath product gives banks the confidence they need to resume lending levels.

>> Financial services organizations

Ensure compliance and gain a competitive advantage with LoanPath. Learn more

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