1. Misys Treasury & Capital Markets
Achieving STP in Commercial Lending
Ken Katz
Misys Commercial Lending Division
Product Manager Loan IQ

2. What is STP?
Straight Through Processing (STP) is the substitution of automated tasks and processes for manual ones so that a business process or service (e.g. the origination, servicing and disposition of a commercial loan) can be entirely automated from beginning to end.
All original information (e.g. customer and loan term information) is entered only once in the process and ‘reused’ throughout the loan lifecycle
Central database is sole repository for information
Processes and workflow events are tied together seamlessly and performed without unnecessarily repetitive data entry or manual transition
Source: TowerGroup
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3. Critical Components of STP
Real-time data processing
Common database
Business logic rules
Automated workflow management
Seamless integration of processes
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4. Full STP Value Proposition to Commercial Lending
Internal Integration
Documentation
Perfecting
General Ledger
Credit Approval
Internal Systems
Sales Force Automation
Risk & Compliance
Workflow & Data Management
Loan Products
Origination
Booking
Servicing
Reporting & Portfolio Mgmt.
Core Loan Processing Cycle
Remote / Wireless
Regulators
Service Bureaus
Secondary Trading
Legal Counsel
Syndicate Members
Customers
External Integration
Source: TowerGroup
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5. Current Lending Market Drives STP
STP is a Necessity due to current commercial lending environment
Banks no longer hold large deposits for long periods at high interest rates
Highly liquid market due to secondary trading, non-bank investors and sophisticated derivative instruments
Banks need to coordinate increasingly global information flow and work flows
Need for a single platform to host and standardize data across different locations, time zones, currencies
Banks need to comply with increasingly strict industry and government regulations
Basel II, Sarbanes-Oxley Act
Banks pressured to cut costs through improving operational efficiencies
Net interest margins are at 20-year historical low
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6. US Bank’s Net Interest Margin (1996-2006)
Net Interest Margins are a 20 year low, forcing banks to reduce costs through operational efficiencies.
Source: TowerGroup
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7. Increasingly Liquid Loan Market
Europe in 2006
Multiple players in the market and more ways for loan assets to be held means banks no longer hold loans for long periods at high interest rates.
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Source: LSTA

8. How can STP benefit financial institutions?
Straight Through Processing
Single Source Database
Seamless Integration
of Processes & Workflow
Once only Data Entry
Single Source Database
Operational Efficiency
Risk Management
Enhanced Customer Service
Increased Revenue
Elimination of redundant systems
Workflow management
Responsiveness
Cross sell opportunities
Reduction of manual labor
Data integrity
Accuracy
Improved customer retention
Streamlined processes
Exception management
Reduced processing time
Increased productivity
Lowered costs
Accountability
More comprehensive knowledge of customer
Risk-adjusted pricing
Source: TowerGroup
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9. STP Technology Trends
Business Process Management Systems (BPMS): Manage workflow—automate data gathering from host systems, apply standardized underwriting rules and policies, centralize reporting, and support on-going portfolio monitoring
Electronic Content Management (ECM): Manage & deliver content– electronic and paper based documents, multimedia files, , images, web pages and other communications
Service Oriented Architecture (SOA): Web services used as a ‘wrapper’ around legacy system integration points to provide standard interface protocol
Business rules management system (BRMS): Manage business rules, enforce policies, make decisions, standardize processes
Source: TowerGroup
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10. Why have banks not fully achieved STP?
Increasingly complex loan transactions with multiple parties
System has to be able to link to clients, vendor systems, credit bureaus, databases
Consolidation of front and back office processes and workflow is costly and requires organizational change
Difficult for banks to define clear workflow and information flows needed for full STP
Lack of industry standards in fast developing commercial lending industry
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11. Achieving STP Efficiency
“Policy and process first” approach before making major technology investment
Technology should not lead the solution but rather enable the solution
Bank’s internal front and back office divisions need to be aligned
Optimization Pathway
Technology
People
Process
Policy
Benefit
70%
90%
100%
Source: Benchmark Consulting International
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12. Questions and Answers
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