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Towards Sustainable Financial Resource Management

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13 June 2014

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN

Abstract

Banks are navigating a fundamental transformation of the rules of the road for their industry, driven in part by new, more stringent controls on the level, composition, and use of financial resources – risk-based capital, leverage-based capital, liquidity and funding. A steady stream of regulations has been rolled out, with each new proposal driving an intense industrywide response to bring the business into compliance or match the performance of peers.

Understandably, banks have been responding to each new challenge in turn, optimizing against the “binding constraint” of the day. However, efforts to optimize the use of one financial resource in isolation often come at the expense of the efficient use of some other financial resource and overall economic performance. This is not a sustainable model for financial resource management.

New capital, liquidity and funding requirements are now a permanent fixture of the industry landscape, and are increasingly driving the strategic direction of the bank. Oliver Wyman argues in this paper, which forms part of the Oliver Wyman series on Financial Resource Management, for the development of a holistic, groupwide approach to FRM. The paper describes new approaches to FRM optimization, including charging metrics, initiative programs and the drive to make FRM truly strategic through organizational changes and war-gaming exercises.

For more information, please see the Oliver Wyman website.