Capital & Liquidity Planning
Banks, by their very nature, are highly leveraged businesses. But how much leverage is appropriate is not an easy question to answer but is essential to managing a bank effectively. The effect of not planning for and managing the available financial resources can be catastrophic, causing solvency threatening liquidity crises.
A bank’s bond holders would like the bank to hold as much capital as possible so as to ensure that it does not default on its obligations. Equity holders, on the other hand, would like to see the bank hold as little as possible so as to maximize their returns. Striking the balance between these two competing perspectives is what capital management is all about.
SunGard can help. SunGard’s Ambit Risk Consulting will work with the banks management team to understand the current available capital and the variety of forecasts used for planning.
Features
- Uses economic capital analytics to help quantify the appropriate level of capital
- Work with the finance and planning group to develop a plan for managing the capital and risk-adjusted return
- Looks at strategies for raising capital or for return to shareholders to ensure that the RAROC of the bank is above the hurdle rate demanded by the market, the level of profitability required to enhance shareholder value while maintaining the solvency of the bank
- Helps identify the process for managing capital levels on an ongoing-basis
Benefits
- Gain a comprehensive and analytic basis for optimizing leverage to ensure that both the bond holders and the shareholders meet their goals and the bank’s ROE is enhanced
