1. Harnessing the Network of Banking Intelligence Misys Treasury & Capital Markets Streamlining Treasury & Capital Markets operations for competitive advantage Vincent Kilcoyne MSc. PhD Misys Treasury Operations Expert Head of Business Solutions EMEA

2. Harnessing the Network of Banking Intelligence Agenda Challenges facing Treasuries Sample Treasury Architecture Misys Approach OpicsPlus Overview Questions ?

3. Harnessing the Network of Banking Intelligence Business Drivers –Workflow and Operational Efficiency –Commoditisation of Treasury Products –Regulation Technology Drivers –Componentisation –Web Enablement –Outsourcing and ASP Services Key Market Drivers

4. Harnessing the Network of Banking Intelligence Workflow and Operational Efficiency –Automation top priority –Reverse trend in Headcount growth –Banks focus on headcount in proportion to returns –Highly skilled individuals not wasting time on menial tasks –Reduce Error Rates –Reduce Transaction costs Business Drivers

5. Harnessing the Network of Banking Intelligence Back-office operations – from labour-intensive to “systems intensive”

6. Harnessing the Network of Banking Intelligence Cost per Trade Year on Year Trends For FX, the Cost per Trade has steadily decreased over the last 5 years despite some fluctuation in average volumes. In 2004, CLS completed its first full year of processing and this has further contributed to the ability of banks to 'scale up' their processing without a measurable increase in headcount. For Currency Options, the Cost per Trade remained relatively static in 2004 despite another significant increase in average trade volume, part of this was due to the increase in the volume of corporate & exotic trades. The Cost per Trade for Money Markets continues to reduce, indicating that technology improvements have been made in a previously "unfashionable" area.

7. Harnessing the Network of Banking Intelligence Cost per Trade Year on Year Trends For Interest rate Derivatives, static volumes and the rise in the Cost per Head have contributed to a rise in the Cost per Trade For Credit and Equity Derivatives, a rise in volume together with increased usage of industry utilities and better technology has driven a rise in Operational Throughput and thus a reduction in the Cost per Trade.

8. Harnessing the Network of Banking Intelligence this Can you afford to ignore this ? = 25% Operational Risk –

9. Harnessing the Network of Banking Intelligence Commoditisation of Treasury Products –Increased complexity and broader coverage of asset classes Treasuries demand improved ease of access Banks and clients keen to deal in more complex instruments –Increased interest in Riskier markets and Financial Instruments Declining margins in traditional FX and MM Increased trading in Higher Return markets Banks must have appropriate infrastructure and risk management processes –Improved client service and delivery models Banks are forced to differentiane on service, and breadth of offering Business Drivers

10. Harnessing the Network of Banking Intelligence Regulation –IAS39/FAS133 Not all organisations are fully compliant Lack of integration causes: »Increased operational risk »Inconsistencies between models will cause errors in accounting systems –Sarbanes-Oxley Strict requirements on PLC’s regarding disclosure and transparency Many treasuries will be forced to adapt/change existing treasury solutions to support Sarbox requirements. –BASLE II—Deadline 2007 Implications –Banks must put more comprehensive systems in place for calculation of risk exposure –Treasury is a contributor to the overall risk position of the bank –Inadequate processes in Treasury (operational Risk) could increas exposure Business Drivers

11. Harnessing the Network of Banking Intelligence Componentization –Banks traditionally see packaged solutions as not meeting their specific needs in terms of Scalability Functionality –New development platforms such as J2EE and.NET drive the trend towards open architecture Allows easier customisation Cleaner Customisation Easier Integration Packaged solutions using these approaches are seen as more viable –Banks see flexibility as a priority for long-term treasury systems strategy Technology Drivers

12. Harnessing the Network of Banking Intelligence Web Enablement –Internet and Thin-client result in cheaper way of distributing access to core systems for Internal Staff –Result in increasing centralisation –Greater control and monitoring Corporate clients for ”Self-Service” –Reduction in error rates and transaction costs Outsourcing and ASP Services –Primarily targeted at Regional Banks and Buy-Side (Hedge Funds, corporates etc.) –Not really practical for large banks as they see core treasury as part of their expertise. Mainly provided by large institutions e.g. ABNAmro, JPMC using either Vendor applications or in-house Technology Drivers

13. Harnessing the Network of Banking Intelligence Challenges facing Treasuries Sample Treasury Architecture Misys Approach OpicsPlus Overview Questions ?

14. Harnessing the Network of Banking Intelligence IT – critical enabler to achieve STP ? The current systems architecture landscape: ForexMoney MarketsFixed IncomeEquities Product coverage by business areaProduct coverage by business area –Forex Spot & Fwd. –Swap & Time Deposit –Repo –OTC Derivatives –Bond –Repo –OTC and exchange- traded derivatives –Equity (Brokerage) –Equity derivatives –Foreign bonds issuance

15. Harnessing the Network of Banking Intelligence What is the result of this disparity Integration Complexity –High degree of effort, initial and maintenance Approximately 60% of the implemetation effort is spent on Integration Deployment Uniformity of treatment –Are we suffering from ”Internal Argitrage” or ”Model Risk” Workflow –Where is my transaction ? –Do I have a clear control or understanding of the Workflow –How many systems do my staff need to learn –Can my Back office system(s) support the same products as my Front Office system(s) What happens if the answer is no ? Are we relying on Excel and Access

16. Harnessing the Network of Banking Intelligence Challenges facing Treasuries Sample Treasury Architecture Misys Approach OpicsPlus Overview Questions ? Misys Banking Systems

17. Harnessing the Network of Banking Intelligence Misys’s Financial Markets Solutions – A holistic view of your financial markets operations based on our E-STP concept Misys Banking Systems

18. Harnessing the Network of Banking Intelligence BUT ! A Solution is more than product !!!

19. Harnessing the Network of Banking Intelligence What Solution means to us ! –Functionality that has evolved through extensive use in multiple segments and locations. –Confidence that our products will stay in tune with new trends –Technical –Functional –Best Practice Implementations. Bringing true life implementation experience to you »Decreased Implementation times »Industry proven approaches

20. Harnessing the Network of Banking Intelligence An Important Question STP: Process or Philosophy ?

21. Harnessing the Network of Banking Intelligence What are your real STP rates Description Single Occurance Replication/ Enrichment STP Rate Transaction Yes No 90% Client Details Yes 85% Yield Curves No Yes 80% Rates/Prices No Yes 75% Settlement Instructions Yes 70% Others Yes ?%

22. Harnessing the Network of Banking Intelligence Is STP simply a term used to reflect the flow and management of transactions ? In reality, it is much more !!

23. Harnessing the Network of Banking Intelligence Challenges facing Treasuries Sample Treasury Architecture Misys Approach OpicsPlus Overview Questions ? Misys Banking Systems

24. Harnessing the Network of Banking Intelligence OPICSPlus Accounting Management Sub Ledger Accounting Risk Mgmt Liquidity Mgmt Performance Mgmt Limits & Compliance Mgmt Middle Office Decision Support Portfolio Management Order Mgmt Trading Front Office Cash Mgmt Custody Mgmt Clearing and Settlement Back Office Market Info Clear & Settle Link General Ledgers External Links Work Station Internet Client 1st Qtr 2nd Qtr 0 20 40 60 80 1st Qtr 2nd Qtr eOpics User Interfaces Product Overview

25. Harnessing the Network of Banking Intelligence Summary A treasury solution designed by practitioners Extensive Customer Base. Approximately 250 sites Providing full automation for transaction lifecycle, trading activities and workflow control Enabling institutions to streamline their treasury business through efficient workflows