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BLACK ICE - WHO WE ARE

• Black Ice Partners is a global risk management consulting and technology firm with over 20 years experience in the financial services industry, and with clients ranging from large global financial institutions, to small domestic banks.

Experience

• We have a comprehensive understanding of best risk management practices, and continually update our services to cover constantly evolving regulations and demands.

Knowledge

• We are a practical and experienced team of industry veterans who have been part of at least ten Basel implementations around the world, and our partners are industry recognized experts.

Implementation

• Black Ice Risk Data Aggregation Solution (RDAS) Solution

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OUR TRACK RECORD

Client Work Description

Malaysian Bank A ICAAP Gap Analysis

Malaysian Bank B Enterprise Risk Management Risk Data Mart

Canadian Banks (2) Road Map for Basel AIRB Compliance and Gap Analysis Report

South Korean Bank Implementation of Basel II AIRB Compliance

Singaporean / Taiwanese Bank Implementation of Basel II AIRB Compliance

Canadian Bank C Road Map for Basel AIRB Compliance and Gap Analysis Report

Canadian Bank D ERM Risk Data Mart

Singaporean Bank Road Map for Basel AIRB Compliance and Gap Analysis Report and ICAAP

Nth American Bank Road Map for Basel AIRB Compliance and Gap Analysis Repo

Data Warehouse Provider Enterprise Risk Management Risk Data Mart

Global Bank Independent Audit of ICAAP Implementation on behalf of Board and Senior Management, Basel III and Dodd Frank Gap Analysis and readiness

Malaysian & Indonesian& Thai Regulators

Training to the directors and management of various banks on Basel III and ICAAP, Risk Governance, Ent Risk Mgmt, Techniques in Risk Management

Malaysian Investment Bank Training for Bank risk team on ICAAP, Risk Appetite, RAROC, Basel III

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OUR TRACK RECORD

Client Work Description

Taiwanese Bank ICAAP Gap Analysis

Australian Bank Enterprise Risk Management Risk Data Mart

Thailand Bank Road Map for Basel AIRB Compliance and Gap Analysis Report

Canadian Bank Implementation of Basel II AIRB Compliance

Hong Kong Bank Implementation of Basel II AIRB Compliance

Black Ice RDAS

Wholesale Credit

Retail Credit

Market Risk

Operational Risk

BLACK ICE RISK DATA AGGREGATION SOLUTION (RDAS)

A Physical/Logical Data Model framework developed on IBM PureData that enables the organization of data efficiently and effectively in a way that makes sense.

The Black Ice Risk Data Aggregation Solution (RDAS) addresses all levels of Basel and Dodd Frank compliance with all relevant analytic engines and comprehensive reporting.

The Black Ice RDAS compromises of four Logical Data Models that organizes data and feeds analytic engines:

u  BRC Wholesale Credit Data Model u  BRC Retail Credit Data Model u  BRC Market Data Model u  BRC Operational Risk Model

Allows a financial institution to meet the following regulatory requirements:

u  Risk Data Aggregation & Reporting (2016) u  Global Legal Entity Identifier u  Basel II/III u  Capital and Risk Weighted Asset calculations

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CAPABILITIES FINANCIAL INSTITUTIONS MUST MEET

Basel Committee on Banking Supervision (BCBS) – Basel II and III u  Guidance on international standards on capital adequacy, and principles for effective banking supervision

BCBS – Risk Data Aggregation & Risk Reporting u  A set of principles to strengthen banks’ risk data aggregation capabilities and risk reporting practices.

National supervisors expect G-SIBs to implement these principles by 2016.

Financial Stability Board – Global Legal Entity Identifiers u  The Global Legal Entity Identifier is designed to accurately identify financial transactions.

Country Specific Regulator Guidance u  Implementation Notes on Data Maintenance, that prescribe Senior Management Oversight, Data

Collection and Data Processing guidelines.

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EVOLVING & EMERGING REGULATOR EXPECTATIONS

Governance & Infrastructure

Risk Data Aggregation Capabilities

Risk Reporting

?

How does an institution effectively

operationalize regulatory

requirements?

The majority of institutions will

require an investment in

technology solutions to meet

requirements

Data Aggregation

u

Governance Data Arch and IT Infrastructure

Accuracy and Integrity

Timeliness

Completeness

Adaptability

Accuracy

Frequency Clarity

Comprehensive

BIT

S

Ris

k D

ata

Ag

gre

gat

ion

Sol

uti

on

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Executive Sponsorship

Data Governance

Data Quality and Integrity

Data Architecture

Data Analytics & Business Intelligence

Level 1 Level 2 Level 3 Level 4

Infancy Developing Mature Leading

Localized Initiatives driven by individual IT teams

Limited involvement of senior business and management in information integration

Collaboration of business and IT mangers with senior management sponsorship

Top management actively engaged in enhancing the

enterprise

Lack of data ownership; No defined responsibilities for

caretaking of data

Assigned data caretaking for selected data sets

Business driven data governance; Augmented by IT

support and infrastructure

Functional areas own data assets and benefit from

senior business executive support

Data is not trusted, not consolidated & errors are

corrected manually

Data consolidation is underway, basic data quality

requirements have been defined

Data accuracy and completeness is trusted

within silos; Quality tools and & processes in place

Data accuracy and completeness is trusted

enterprise-wide; Quality is actively monitored &

improved

No enterprise reference data model in use

Defined data model but not widely used

Single and widely used data model but lacking formalized

governance of the model

Standardized data model located in a central repository, centrally

managed and governance model well known across the enterprise

No organized BI plan or strategy; Lack of alignment

to business objectives Multi-year BI strategy and

budget

BI Strategy linked to functional strategy; benefits

tracked & realized

BI strategy integrated with the Enterprise information

needs and strategy

INDUSTRY MATURITY ANALYSIS – INVESTMENT REQUIRED

Industry Average BITS Implementation

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MAIN DRIVERS OF THE PROBLEM FOR AN INSTITUTION

Undefined Data Ownership at the Enterprise

Level

Data Quality

Inconsistent or Inaccurate Reporting

Inadequate Structure or

Framework for Data

Complex and Comprehensive

Regulatory Requirements

End-to-end data element

identification

Single View of Client and Relationship to

Exposures

Data Aggregation

u

QUESTIONS INSTITUTIONS CANNOT USUALLY ANSWER

u  Do you understand the impact of IT projects across the entire organization, or only with systems with direct relationships (i.e., one-step removed)?

u  Do you know who owns your data, is there a central group that will drive changes, or does each business unit determine their own priorities?

u  Do you know how accurate your data is, are you confident that all reports reflect the same information? u  Do you know your data strategy, is there an enterprise or a business-level strategy? u  How comprehensive is your data framework and data policies to support your approach and to ensure

regulatory requirements and senior management expectations? u  Has your institution identified Mandatory Risk Data from origination to reporting/calculation? u  Has your institution identified controls to ensure accuracy for Mandatory Risk Data? u  What validation/monitoring do you perform on data quality?

Actual Observations at financial institutions

•  ALCo reports being generated using incorrect data. The data dictionary was incomplete, and the business thought the data was “real-time/current” and was the same value as the book of record.

•  Retail risk reports being generated by two different groups for different purposes, but the values for the same period did not match. Neither group could determine which was the correct value.

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WHAT IS BEING SAID ABOUT DATA AGGREGATION

u  G-SIBs need to act now to meet the deadline, but those that embrace this opportunity to deliver strategic change will gain competitive advantage.

-  Deloitte EMEA Centre for Regulatory Strategy

u  Overall, we see further evidence in these changes of the shift from risk as a compliance function to risk as a support function for improved performance across the business. And, as we look ahead, the baseline is that G-SIBs have got to get moving and start investing in the systems that will keep them on track towards the 2016 deadline.

-  IBM Integrated Risk Platform

u  Inadequate data aggregation, insufficient risk reporting and ineffective IT systems were seen as a significant contributor to the financial crisis

-  Thompson Reuters

u  The financial crisis revealed that many banks, including global systemically important banks (G-SIBs), were unable to aggregate risk exposures and identify concentrations fully, quickly and accurately. This meant that banks' ability to take risk decisions in a timely fashion was seriously impaired with wide-ranging consequences for the banks themselves and for the stability of the financial system as a whole.

-  The Asian Banker

u  Risk data and reports should provide management with the ability to monitor and track risks relative to the bank’s risk tolerance/appetite.

-  BCBS

u  Common data governance and management issues are found across the industry with data aggregation as a critical foundation for resolution

-  Deloitte & Touche LLP

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BLACK ICE RDAS – THE SOLUTION PARTNERS

BLACK ICE TECHNOLOGIES IBM PureData System

BLACK ICE RDAS

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BLACK ICE RDAS – PROVIDES COMPLIANCE

Global Legal Identity

Identifier

BCBS Risk Data

Aggregation and Risk Reporting

BCBS Capital Calculations

Board and Senior

Management Reporting

BLACK ICE RDAS – OUR DIFFERENTIATION

The solution provides critical advantages to the client in the areas of: u  Platform agnostic, enterprise-wide risk infrastructure covering Market, Operational, Credit Risk (across retail &

Wholesale asset classes) u  Cost effective solution available as measured in Total Cost to Acquire and Cost to Maintain u  Rapid time to deploy (typically between 3 to 8 months to implement and achieve full compliance) u  Compliant with regulator requirements for end-to-end data lineage

u  Supports disparate data and reporting requirements across -  Management reporting; -  Board of Directors reporting; -  Regulatory reports; and -  Regulatory audit processes.

u  Provides a foundation for future risk requirements (e.g., by BCBS or by the regulator) through the enterprise risk data foundation schema, resulting in a reduced effort to assess and meet new requirements

u  Delivers the capability for a single identifier across the institution u  Other solutions such as RDAS exist, but are expensive and often are in-house bespoke solutions built by financial

institutions themselves that focus on Integrated Enterprise Wide Risk and Capital Data. u  RDAS is what a Global Financial Institution usually builds for itself given the resources and knowledge they have

in-house but at a significantly higher cost.

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BENEFITS OF HOLISTIC DATA AGGREGATION & REPORTING

Improved Decision Making

Improved speed at which information is available

Improved ability to manage risks

Enhanced management of

information across the institution

Improved quality of strategic

planning

Reduced probability of losses resulting

from weak risk management

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HOW DOES RDAS FIT INTO THE IMPLEMENTATION SOLUTION

Self Assessment (Consulting Firm and/or

Financial Institution)

Define Strategy (Consulting Firm and/or

Financial Institution)

Implement Common

Data Model (Black Ice Technologies)

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IMPLEMENTATION OPTIONS FOR RDAS

Data Models by Asset Class (4): Provides the capability for an institution to be BCBS data and GLEI compliant Includes comprehensive library of regulatory and Board & Management reports out of the BOX

Analytics (yes/no): Provides the capability to leverage stored procedures inside the RDAS, or leverage existing analytic engines currently in use at the institution

ONE

TWO

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RISK DATA AGGREGATION SOLUTION – COMPONENTS

Data Models

Analytic Engines

Reports

RWA

Economic Capital

Stress Testing

RAROC

Liquidity Risk

RWA

Economic Capital

Stress Testing

RWA

Economic Capital

Stress Testing

RWA

Economic Capital

Stress Testing

Risk Rating Models

Risk Rating Models

eVaR

Management + Regulatory

Reports

Management + Regulatory

Reports

Management + Regulatory

Reports

Management + Regulatory

Reports

Wholesale Retail Market Operational

IBM

P

ure

Dat

a S

tore

d P

roce

du

res

Imp

lem

enta

tion

Op

tion

s:

Bla

ck I

ce /

3rd

Par

ty /

Non

e

Incl

ud

es C

ore

R

epor

t Te

mp

late

s

RAROC

2 1

Corporate and Commercial Banking Systems

•  Risk Rating Systems

•  Credit Approval Systems

•  Credit Servicing Systems

•  Collections and Workout Systems

•  Trading Systems •  Trading Exposure

Systems

RISK DATA AGGREGATION SOLUTION – DATA ARCHITECTURE

Retail Banking Systems •  Small Business

Credit •  Credit Card

Products •  Mortgages

•  Retail Portfolio Management

•  Analytics and Decision Support

Trading Room Credit Risks •  Facility

Apportionment •  Ratings Systems •  Exposure

Measurement

•  Collateral Management and Valuation

•  Securities Finance

Special Products •  Securitization •  Non-Traded

Equities

Finance Systems •  Detailed GL

Postings •  Financial

Hierarchies

Source Systems

Concentration Risk Analysis

Risk Adjusted Pricing & RAPM

Regulatory Capital Calculation

RAROC & Economic Capital

Stress Testing and Back Testing In

Dat

abas

e A

nal

ytic

En

gin

es

OR

Ex

tern

al A

pp

licat

ion

Dat

a M

art

Source Systems feed into Physical/Logical Data Model

Regulatory Board Management

Reporting

Financial Data

•  Physical /Logical Data Model

•  Basel Asset Classes

•  Global Legal Identity Identifier

SQL / DataStage

Metadata Repository

Internal Audit

BLACK ICE RDAS

Credit Risk Retail/Wholesale Operational Risk (AMA)

Market Risk (B2.5)

Basel II Basel II.5 Basel III

GL Data

Financial Reconciliation

Solution By

MAPPING AVAILABLE FOR SEVERAL RISK APPLICATIONS

The BlackIce RDAS is already mapped to the following downstream Risk Applications: u  SAS u  Moody’s Analayitcs u  ALGO Risk Watch u  Sungard Adaptiv, u  Sungard Panaroma, u  Sungard Front Arena u  Sungard B2CM u  Sungard BancWare u  Moodys KMV u  Several G/L

The BlackIce RDAS is already mapped to these upstream aggregated data warehouse models: u  FSLDM u  BDW u  Razor u  Murex u  Calypso u  Xtrader u  Misys u  Sophus

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CURRENT OPPORTUNITIES – PHASE ONE

Client Country Status Contract Period

Siam Commercial Bank Thailand Final contract negotiations ~$400k + Q2

Bank of China China Workshop / Proof of Concept ~$1.0M – $2.0M + Q3

China Guangfa Bank China Workshop / Proof of Concept ~$1.0M – $1.5M + Q3

Bank of Bejing China Engagement Started ~$1.0M + Q4

Chengdu Bank China Engagement Started TBC Q4

SBV Vietnam RFP Process with IBM ~$2.0M + Q2/Q4

TMX Group Canada Engagement Started ~$1.0M (plus reseller license) + Q3

Sales Focus §  Initial sales effort started in Thailand, Philippines, Indonesia and Vietnam due to the infancy of the

financial system §  Countries are mandated to implement BCBS guidelines as directed by the timelines provided by their

home regulator (see market size in appendix)

Existing Partnerships §  IBM §  Deloitte, PwC, Pactera, Camelot, Digital China

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PROJECTED FINANCIALS

Financials - Asia Financials - USA

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BLACK ICE RDAS – PRICING STRATEGY

Option 1 Option 2

Risk Data Aggregation

Report Templates

Analytics No Analytics

Purchase: $2.5M Purchase: $2.0M

Lease: $110k/month – 3 year contract Lease: $100k/month – 3 year contract

Purchase Option: Support is optional and fixed at 10% - No obligation

Lease Option: Support is included in lease payment

Hardware costs are extra and dependent on size requirements

INVESTMENT PROPOSAL & USE OF FUNDS

Investment Proposal

u  $300K -$500K Required u  Set up a syndicate structure – Limited Partnership u  Funds Invested as Shareholders loan u  Loan paid before majority Shareholders loan u  Interest paid on the Investment beginning 12Months from date of Investment u  Syndicate receives 15% - 25% of Equity depending on amount Invested u  Board Seats

Use of Funds

u  Hire staff for upcoming projects u  Bridge financing for operations u  Finish documentation for RDAS solution u  Marketing efforts u  Finish development and packaging of the GCD Solution

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