©LogicaCMG plc Making Compliance Pay Ian Larkin Head of Risk and Compliance LogicaCMG UK FICCI-IBA Conference 5th October 2005

©LogicaCMG plc Regulatory Compliance The harsh reality is: Cost of regulation is huge –Implementation, then operation & maintenance –£200m for a Tier 1 bank, £1bn in 2005 for B2 across Europe Aim for minimum acceptable compliance –Minimizing spend, cutting scope Regulatory programmes are “siloed”, despite overlaps –Minimizing the project dependencies –Little coordination, few synergies, multiple hits Compliance causes business and strategic disruption –Delays strategic business programmes –Impacts business as usual Is a rubber stamp the only benefit?

©LogicaCMG plc An Alternative Strategy Regulatory compliance is not just an overhead - it should add value! so… Don’t do it because the regulator says so; do it for business benefit, and comply “en passant”.

©LogicaCMG plc Two ends of a spectrum –Disparate projects to cost, implement & manage –No strategic overview –“Do what we must” –Back-pressure –Repetition of work –Resource intensive –Co-ordinated strategic approach –“Compulsory spend – use it wisely” –Business gain costs less! –Progressive, incremental development –Optimal economic capital allocation Minimum compliance Benefit-based

©LogicaCMG plc Some quotes Woolly or wise? –“We don’t want MI to provide information internally – only to send reports to satisfy the regulator!” –“We are not spending anything on Basel II! We are enhancing our Credit Risk system, which will be Basel compliant.” (Tier 1 Head of Risk) –“We see B2 as giving us the opportunity to develop risk- based pricing for our retail customers.” –"Spending on Sarbanes-Oxley is an upfront investment in making the processes of the company better," says BP’s Macdonald. "We don’t view it as an intolerable burden.”

©LogicaCMG plc How to get some benefit… Re-use information & systems Sox process maps  B2 OpRisk AML analysis  CRM Stress testing  risk navigation Use aggregated information Counterparty exposure  limit utilisation, sales authorisation Shared statistics  model calibration, benchmarking Use consistent metrics Enterprise Compliance Data Management Comparative risk measures  risk-adjusted returns Finance & Risk Integration

©LogicaCMG plc Managing Compliance Data Paper Production Systems Datamart, calc & reporting Step by step Map existing models to Metamodel Migrate extracts to ETL ….. Enterprise Data Warehouse Paper or XBRL Production Systems Staging Servers Data Mart Basel II IAS PSB,SarbOx Fraud, AML Credit Risk & Op Risk MetaData Data definition, Lineage ConfigMgt Versioning, dev & prod, time stamp Reporting Engine Stovepipes

©LogicaCMG plc Enterprise Compliance Data Management C’pty Data Enterprise Data Warehouse (logical or physical) Regulatory (Paper or XBRL) Production Systems Staging Servers Data Marts Basel II IAS PSB, SarbOx Fraud, AML Credit, Market, Ops, ALM… MetaData Data definition, Lineage Config Mgt Versioning, dev & prod, time stamp Reporting Engines Key Benefits Enterprise risk management Compliance with SarbOx Single extract, single clean up Easier reconcilation Reduced storage Consistent business reporting Mkt Data Risk MIS Risk Engines Transports

©LogicaCMG plc Beyond Basel II – Adding Value Benefits and implementation complexity Regulation Economics Adding Value Basel II Internal Ratings-Based Approach Risk Adjusted Pricing Based on IRB Active Credit Portfolio Mgt with Front & Back-End Steering Typical Implementation Sequence

©LogicaCMG plc Steering the Organisation Customers Secondary Markets Back OfficeProduct Processing Origination Activities Active Portfolio Management Secondary Mkt. Products Account Management Credit Risk Management Syndication Credit Derivatives Structured Deals Insurance Credit Portal Central Portfolio Management Unit Secondary Market Mgt Front-End Steering Back-End Steering

©LogicaCMG plc Making Compliance Pay In summary… Manage your enterprise compliance data Re-use compliance systems for business benefit Implement economic measures of performance Work towards maximizing the value of the enterprise Ian N. Larkin Head of Risk & Compliance LogicaCMG UK direct +44 (0) mobile +44 (0)

©LogicaCMG plc Who are we? Logica cm… who? LogicaCMG has implemented RTGS for RBI, nation-wide LogicaCMG is a major international force in IT services to clients across diverse markets We provide management and IT consultancy, systems integration and outsourcing services Formed in December 2002, through the merger of Logica and CMG, the company employs around 20,000 staff in offices across 34 countries

©LogicaCMG plc Contact… Nath Parameshwaran Business Manager Financial Services - South Asia LogicaCMG Express Tower 3rd Floor Nariman Point Mumbai India Tel +91 (22) Mob

©LogicaCMG plc LogicaCMG has taken reasonable care to ensure that the information contained herein is correct at the time of publication. Before using or relying on any content in this presentation, independent verification should be obtained. LogicaCMG accepts no liability nor responsibility for any use of or reliance upon the content of this document.