Budgeting and Planning for Banks and Credit Unions

What is unique about budgeting and planning for banks and credit unions?

The basic components of budgeting, planning, forecasting and reporting are the same for organizations large and small, across all industries. Everybody plans and tracks actual performance throughout the year against the plan. Most also employ some form of forecasting, driver-based modeling, and scenario modeling. However, due to the nature of their business financial institutions tend to have unique requirements when it comes to profitability analysis, balance sheet reporting, factoring in risk, and meeting regulatory requirements. Driven by balance sheet productivity rather than income statements, banks must also focus on compliance, new customer acquisition costs, and scrutiny of assets for underperformance. They have a growing need for integrated sensitivity/what-if analysis, stress testing of loan portfolios, integrated business planning, and portfolio planning that integrates with the treasury area, for capital adequacy analysis. For these reasons it is especially important when automating these processes to seek out software solutions from vendors that understand and can address these specific needs.

What are the specific capabilities to look for in a budgeting and planning solution for banks and credit unions?

Financial institutions, and banks in particular, have some specific needs that their performance management solution needs to address. A partial list would include the following:
– Ability to produce reports required by the Asset-Liability Committee (ALCO)
– Support for allocations and complex calculations of actuals based on net interest margins and other waterfall allocations
– Provide a mechanism to audit/proof the data coming from the transactional system for the quarterly call reports
– Dashboards with rolling averages of key bank metrics to help identify money laundering, large drops in deposits, etc.
– Ability to forecast deposits and loans on a new and net growth basis
– Integration with ALM system to obtain cash flow/margin details at the product/branch level
– Driver-based interest and non-interest income, with the ability to model multiple interest rates, margins, fees, and transaction volumes
– Analysis and forecasts for investments by holding companies into banking and other subsidiaries
– Forecasting regulatory capital requirements based on growth plans
– For profitability analysis banks need to be able to model, measure, and monitor profitability using historical and anticipated interest and FTP rates assigned at the portfolio, individual customer relationship, and/or instrument level
– Support for DFAST, FINREP, COREP, and CCAR reporting

Which vendors offer budgeting and planning software for banks and credit unions?

Most vendors offer cross-industry solutions that can be set-up to address the unique requirements of financial institutions. This enables the buyer to choose from the broadest range of solutions and price points possible. Smaller organizations with basic needs can probably find a cost-effective solution to meet their needs in this group. For everyone else there are two smaller groups of vendors that may be a better fit.

One group targets financial institutions as one of several areas they market to and invest in. This usually means that they have financial services experts on staff in both pre and post-sales positions that speak the language and understand the needs of this community. In addition, these vendors typically have a demo customized to highlight the use of their product in banks. As a result of these efforts they will usually have a sizeable number of financial services customers who can speak to their success with the product. This is clearly an improvement over the pure cross-industry solution providers.

The last group of vendors, which by its nature is very small, focuses almost exclusively on the financial services industry, usually as one of a handful of industry verticals. They have deep expertise in the industry, not just one or two knowledgeable resources, and are often thought leaders on the topic of budgeting and planning for financial institutions. Often they will have unique out-of-the-box content for financial institutions that reduces both consulting costs and time to value. These vendors will have a large community of customers from the industry who drive them to further enhance the product (or provide complementary products) to address the unique needs of banks and credit unions. While this category of vendors would appear to be the best choice there aren’t many to choose from, and all of the industry-specific content and knowledge necessitates a higher price. What most financial services companies do is evaluate vendors from both the group that targets them as well as the group that focuses on them.

How do you ensure that you select the right vendor?

For over 20 years BPM Partners has been helping banks, credit unions, and insurance companies develop their detailed requirements and confidently identify the ideal solution for their unique needs at the lowest possible cost. Learn how we can help you do the same.

Selected BPM Partners FI Customers

For your reference we have provided screen shots for a selection of vendors that have demonstrated success with financial institutions. Click on the images below to enlarge them.

 Visit PerformancePlace for more detailed information on each vendor or speak with one of our experts.