Navigating Basel III Endgame — A Transformational Journey for a Global Bank in the US

This is an ongoing project, and this case study will be regularly updated.

• Updated November 2023

Basel III Endgame (B3E) has emerged as a pivotal moment in the global financial landscape, presenting a transformative challenge for banks worldwide. In this case study, we explore the initiatives undertaken by Arrayo in collaboration with a leading Japanese international financial institution operating in the United States. With the proposed compliance deadline of July 2025, our client is actively navigating the complexities of Basel III, with our team playing a crucial role in shaping the ongoing transformation.

B3E, unveiled through the Notice for Proposed Rulemaking (NPR) for the Fundamental Review of the Trading Book (FRTB) and Basel III Finalization, marks a radical shift in US risk-based capital standards. It was published on July 27, 2023, by key regulatory bodies, including the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC).

Challenge

With a compliance deadline looming just two years away, the US entity of our client is actively addressing the multifaceted challenges posed by B3E. This includes ongoing efforts to understand nuanced regulatory changes, assessing their impact on Risk and Operations Management, addressing the new regulatory data format/standards and technology requirements, realigning business strategies, and implementing a comprehensive capital metrics framework.

Delivery

Arrayo, in close partnership with our client’s Risk team, is actively engaged in an ongoing comprehensive approach to B3E compliance and transformation. The key pillars of our strategy include:

• Continuous Regulatory Analysis: We actively monitor and interpret ongoing regulatory changes, ensuring that the bank is well-informed and agile in adapting to evolving requirements.
• Technology Modernization: Recognizing B3E as an opportunity to modernize capital infrastructure, our ongoing efforts involve continuous updates to the bank’s technological landscape by streamlining and further automating processes, enhancing their agility and scalability, addressing inefficiencies and manual processes to reduce operating costs and man-hours.
• Strategic Execution: The central focus of our efforts lies in orchestrating the seamless transition to a dynamic and compliant operational framework. This includes continuous development and refinement of business and functional requirements, iterative creation of analytical dashboards and reporting tools, and dynamic adjustments to workflows to ensure alignment with regulatory changes.
• Process Improvement: We lead and actively participate in ongoing business and IT improvement of products, services, and processes through incremental and breakthrough improvements.

Value

While the project is ongoing, the achieved milestones and deliverables include:

• Dynamic Project Plan: An evolving Project Road Map and Project Plan outline key milestones, tasks, and timelines, ensuring that the project remains on track for timely compliance.
• Comprehensive Business and Functional Requirements: Continuous development and refinement of detailed project artifacts aligned with the evolving regulatory landscape, including the Project Vision Summary, Target Operating Model, Business and Functional requirements, Diagrams of Process Flows, Gap Analysis, and other materials and artifacts related to risk and regulatory reporting and user interface platforms.
• Iterative Workflow Designs: Ongoing creation and refinement of workflows ensure that business processes are automated to the maximum extent, aligned with regulatory demands, and fully support operational efficiency.
• Target Operating Model (TOM): Development of a dynamic Target Operating Model provides a vision and roadmap for the bank’s future state, optimized for compliance, automation, scalability, and efficiency.

Basel III Endgame presents an ongoing challenge that requires adaptability and continuous effort. Through collaborative ongoing efforts, Arrayo and the bank are actively turning this challenge into an opportunity for transformation, setting the stage for sustained success in an evolving financial landscape.