NextGen Balance Sheet Management and ALM: Vendor ABCD

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17 August 2020

Celent present insights into how financial institutions and vendors are chasing the frontiers of technology-enabled total balance sheet optimization approaches


Globally, the financial environment remains in an ultra-low interest rate environment and there is a high probability that interest rates will remain low for a prolonged period of time. The imperative now is for banks to act and establish a clear action plan to mitigate the potential material negative impact of low rates on profitability. For financial institutions, determining the approach and path to greater sophistication around banking book interest rate risk management involves key decisions around metrics, behavioral adjustments, balance sheet projections, and IR risk modeling.

From a technology and solutions standpoint, these changes also translate into a greater sophistication around more dynamic, forward-looking, and interactive interest rate simulation capabilities that can support forecasting and profit optimization under different scenarios. Morever, with regulatory regimes such as Basel IV coming into play, financial institutions face further imperatives to combine regulatory capital analytics with multi-faceted views of risk and accounting on a total balance sheet basis.

In the coming years, the evolution towards Basel IV (from Basel II, II.5 and III) will also require institutions to understand where capital consumption is most intensive, relative to the profitability profiles of product and business lines. ALM functions and activities are increasingly characterized by growing expectations for improved collaboration and alignment between ALM and other risk groups, intertwined with treasury, finance and business unit frontline functions.

This report profiles 13 ALM and Balance Sheet Management systems. We provide solution profiles and detailed assessments of the functionality, the customer base, the technology, and other information financial institutions evaluate in a buying situation. Beyond the core elements around ALM, funds transfer pricing (FTP), and liquidity risk, we evaluate solution capabilities that extend beyond ALM, such as credit risk, loss accounting, traded market risk, capital management, profitability analysis, and balance sheet optimization—with an overarching assessment of solutions that can cover the entire balance sheet across banking and, in varying degrees, the treasury and trading book as well.

The vendors that participated in our study include Empyrean, Finastra, FIS, Intellect Design, Kamakura, Moody's Analytics, MORS Software, Oracle, Prometeia, QRM, SS&C, Wolters Kluwer and ZMFS. We employ Celent’s ABCD Vendor View, which is our standard representation of a vendor marketplace, designed to show at a glance the relative positions of each vendor in four categories: Advanced technology and analytics, Breadth of functionality, Customer base, and Depth of services.