Asset Liability Management

VBC’s modeling value proposition is simple: Your Success is Our Goal. We provide strategic advice, recommendations and insight to help with the challenges of managing risks, maintaining regulatory compliance and maximizing performance.  VBC offers a full line of customizable services, ranging from individual components to a comprehensive fully integrated risk management modeling program.

  • Asset-Liability Modeling

    We provide strategic ALM modeling and risk reporting designed to meet the needs and overall objectives of each institution.  Based on the Institution’s balance sheet complexity, overall objectives and available budget, VBC employs several industry-leading ALM models to fit the unique characteristics of your chart of accounts, balance sheet and institution.

  • Liquidity Modeling and Stress Testing

    Utilizing cash flows from the A/L model, we create a fully customizable, multi-scenario liquidity stress test model. Unlimited scenarios can be provided and are typically based on a theme, such as a capital markets or institution specific stress event.  Additional VBC recommended and Institution requested scenarios are also included. The model incorporates key assumptions such as loan losses, deposit outflow and access to wholesale funding.

  • Funds Transfer Pricing and Profitability

    VBC’s integrated FTP and Profitability applications help Institutions optimize lending and funding rate decisions.  As the balance sheet and income statement can be loaded at the GL level, profitability can be customized by customer, product, branch, profit center, etc. The combination of an integrated FTP and ALM system at the GL level removes reconciliation issues, while permitting an efficient and organized process. The application also has the functionality to included customized activity-based costing and the distribution of below the line income and expense.

  • Budgeting and Planning

    VBC’s Budgeting and Planning application utilizes the Institution’s balance sheet and income/expense projections, specific growth strategies and tax rates, along with financial and operational drivers to both project results and evaluate ALM analytics and balance sheet impacts of different potential strategies. Our comprehensive solution provides both the top-down and bottom-up approach to financial and operational budgeting, long-term planning, rolling forecasts, and capital budgeting at the GL, departmental and aggregate levels.

Deposits & Loans Analytics

Behavior assumptions and forecasts for non-maturity deposits, time deposits and loan prepayments are critical inputs for accurate risk measurement and effective balance sheet management.  VBC offers a comprehensive suite of deposit and loan behavior analysis services that are both flexible and scalable in order to best meet your specific objectives, available data and budgets.

Whether your goals are to improve the quality and accuracy of ALM model inputs for regulatory compliance, to better understand potential concentration exposures within your deposit portfolio or to deploy fully segmented forecasts to support vintage, geographic or affiliate-based analyses, VBC will partner with you to deliver the most robust deposit behavior forecasts possible.

All VBC deposit and loan studies utilize industry-leading analytics and are fully transparent back to the underlying data.  Relationships between deposit and loan behaviors and interest rates or other economic conditions are clearly identified with “internal” assumptions and constraints kept to a minimum and always fully disclosed.  

  • Non-Maturity Deposits Study

    Non-maturity deposits (NMDs) are generally the most significant source of funding for financial institutions.  Understanding how deposit pricing responds to changes in interest rates and how depositor behaviors, either through attrition or balance changes, react to those changes is key to managing interest rate risk.  Similarly, sensitivity of deposit balances to other stressors such as changes in macroeconomic or local market conditions are vital to identifying and managing liquidity risks.

    Accurate repricing and deposit retention forecasts for regulatory IRR measurement are the foundation of all VBC non-maturity deposit analysis and include statistical analysis and forecasting of these behaviors across a range of rate shock scenarios.

    Our analyses can be performed on account-level or aggregated, summary-level data, and forecasts can be provided in a wide range of formats for integration into any ALM model.

    Beyond the regulatory focus of our Basic NMD Analysis service, our Advanced and Premier service levels expand the scope of assessment and forecasting flexibility to include many additional data-driven and defensible assessments including:

    • Funding concentration and volatile funding assessments including surge deposits
    • User-defined rate scenario forecasts such as ramps, twists, and fully user-defined
    • Detailed analytics to address transition related impacts of acquisitions or other unique events and appropriately incorporate them into forecasts
    • Inclusion of systemic and idiosyncratic economic variables for more robust liquidity stress test assumptions
    • Segment-specific forecasting 

  • Time Deposits Study

    Time deposits, such as CD’s or share certificates are another important component of balance sheet funding.  While contractual maturities are known for these deposits, early withdrawals need to be considered, particularly if penalties are minimal.  Understanding the magnitude of new volume pricing practices relative to market rate changes is critical to ensuring accurate new volume rate forecasts in ALM modeling.

    A VBC time deposit study is fully customizable and can be oriented to focus only on the pricing or early withdrawal dimension or expanded to include both.  When paired with a VBC Non-Maturity Deposit Study, cross-product relationships are explored to identify and quantify the magnitude of deposit transfers from time to non-maturity and vice versa.

  • Non-Maturity Deposit Analysis Benchmarking

    Our non-maturity deposit analysis benchmarking service provides a cost-effective complement to your current NMD forecasts.  Benchmark results can increase confidence in your existing ALM inputs by confirming the direction and magnitude of repricing and retention behaviors through an independent third-party assessment as well as offer additional perspective on behavior sensitivities across a range of interest rate environments not captured in your internal analyses.

  • Loan Prepayments Study

    Unscheduled repayments of outstanding loans create both opportunities and risks to the overall balance sheet management process.  Additional cash flows provide liquidity, but having to reinvest those finds into potentially lower earning assets create both NII and Eve/NEV IRR exposures.

    In order to effectively manage these exposures, it is critical to understand the magnitude and impacts of both whole and partial prepayments across the range of loan types, payment types, interest rate environments and other factors that influence prepayment behaviors.

    VBC loan prepayment studies are customizable based on project scope and the available data history.  At a minimum, the institution’s prepayment experience (whole and partial) is quantified and calibrated across required regulatory interest rate shock scenarios with assessments of the effects of:

    • Loan type
    • Fixed vs. non-fixed 
    • Coupon to market rate spread
    • Age

    From this foundation, the study can be expanded to assess and quantify other influences such as prepayment penalties or macroeconomic variables.

Model Validations

VBC validations and reports are designed with the end user’s goals and needs in mind, supported with transparent methodologies and work papers, and vetted annually by regulatory agencies.

Our validation services incorporate industry best practices, VBC experience and the objectives of each Institution.  Our validation approach and deliverables are designed to comply with all regulatory guidance such as FFIEC 2010-1A IRR and its associated FAQs, NCUA 12 CFR Part 741 and 12-CU-11, and OCC Bulletin 2011-12/FRB SR Letter 11-7.

The VBC team is comprised of industry experts from risk functions in the banking, credit union and fintech industries, regulatory and external auditing fields and financial model development. We offer invaluable and extensive experience from a practitioner, validator and compliance viewpoint.

If it’s a model, we validate it.  We have experience validating an array of financial and risk related models, such as deposit, loan, credit, auto decision, FTP, profitability and the more common models:

  • ALM/IRR

    Our comprehensive validation examines all aspects of the modeling process including account setups and attributes, data and mapping, assumptions, reporting, and model governance. We also evaluate model results and reports to ensure accuracy and compliance with internal policies. All regulatory components such as conceptual soundness, ongoing monitoring and outcome analysis are addressed. VBC's validation team has experience with all of the leading ALM models, including Fiserv (Sendero), ZMdesk, ZM OnlineALM, Ambit/Bancware, Empyrean, QRM, Profitstar and many others.

  • Liquidity Stress Models

    We provide a comprehensive review of the conceptual capabilities and limitations of the model, as well as a detailed validation of all model specifications, from data and assumption inputs, cash flow generation, and contingency funding sources, to risk parameters and reporting.  We evaluate model forecast accuracy and confirm that all liquidity components are addressed and applied correctly in stressed scenarios. In the context of industry best practices, regulatory compliance, and management expectations, we perform a process and governance review to assess Institution established policies, governance structures and internal controls.

  • CECL/ALLL

    We perform a comprehensive review of methodologies, assumptions, calculations, reporting and governance processes. Our validation experience ranges from simplistic Excel-based models to more complex software models that include loss migration analysis. We place significant emphasis on qualitative adjustment factors and accompanying support analysis and documentation. VBC's validation team has experience with the leading software models, including Abrigo’s Sageworks and MainStreet Technologies (MST) as well as internally built models.

  • CRE Stress Testing and Credit Models

    VBC has experience validating various types of credit models, including CRE stress testing, credit loss models (PD/LGD), loan performance stress models, cash flow models, loan valuation models, early warning models, credit scoring models and auto-decision models. Our validation of these models focuses on methodologies, assumptions, calculations, reporting and governance processes.

  • BSA/AML

    VBC validations are customized to meet each institution’s needs while adhering to and meeting all mandated regulatory guidelines. Our qualified CAMS specialist combines a risk-based approach with validation methodologies that ensures accuracy of data inputs as well as offering strategies to enhance model processing and output efficiency. We have experience in reviewing a wide variety of BSA/AML software solutions such as Abrigo’s BAM and BAM+, CSI’s NuMonitor, FIS’s Prime Compliance Suite, Fiserv’s Financial Crime Risk Management, GlobalVision’s Patriot Officer, Jack Henry’s Yellow Hammer, and Verafin.

  • Vendor Model Certification

    Due to the complex nature of simulation models, it is necessary for end users and subscribers to be provided with reasonable assurance that the underlying code is performing as expected.  As such, VBC, an independent and qualified third party, will perform an offsite certification for the Client.  Upon the completion of this engagement, VBC will deliver to the Client a comprehensive report detailing the testing methodologies and subsequent results for all components of the certification.  VBC will also provide a summary certificate outlining the results and an accuracy statement that the Client may distribute freely to their end users and other relevant parties.

BSA/AML

Bank Secrecy Act/Anti-Money Laundering (BSA/AML)

The current BSA/AML environment has zero tolerance for inadequate risk management programs and we continue to see increasing regulatory action for institutions with program weaknesses. To assist with managing these risks, many institutions have implemented BSA/AML models that require independent validations.

VBC provides comprehensive BSA/AML model validation services that are customized to meet each institution’s needs while adhering to and meeting all mandated regulatory guidelines. Our qualified CAMS specialist combines a risk-based approach with qualitative and quantitative validation methodologies to ensure the accuracy of data inputs and to offer strategies to enhance model processing and output efficiency.

VBC is the leading provider of BSA/AML model validations and has over 25 years of experience working with a wide array of models and Institutions offering higher at-risk services.  

  • Vendor Models, Systems and Solutions

    We have extensive experience in validating all vendor models, systems and solutions such as:

    • Abrigo’s (Banker’s Toolbox) BAM and BAM+
    • CSI’s NuMonitor
    • FIS’s Prime Compliance Suite (PCS)
    • Fiserv’s Financial Crime Risk Management (FCRM)
    • GlobalVision’s Patriot Officer
    • Jack Henry’s Yellow Hammer
    • Verafin
    • NICE’s Actimize

     

     

    Our clients include Institutions offering high risk services such as:

     

     

    • Electronic Banking
    • Correspondent Banking
    • Third Party Payment Processors (TPPP)
    • Money Services Business (MSB)
    • Marijuana Related Business (MRB)
    • Digital Currency

  • BSA/AML Advisory Services

    In addition to BSA/AML model validations, VBC also provides the following services:

    • BSA/AML Model Implementation Consulting
    • System Parameter Analysis & Optimization
    • OFAC Model Validations

     

     

     

CECL

VBC will help you accurately assess your current expected credit loss (“CECL”) options for your particular solution. This involves understanding how to best leverage your historical data to efficiently calculate your reserve and provide the requisite reports and disclosures. Institutions should balance the need for an accounting number while also considering the potential of the full integration of credit risk into earnings and capital decision making. 

  • CECL Modeling

    VBC will provide full service CECL modeling either in aggregate or at the loan level. Utilizing loan core system downloads, the model will calculate the reserve using client loss data calibrated, where necessary, to historic institution-specific or national averages.

  • Analysis and Disclosures

    Outputs from the CECL model will include accounting, ALCO, credit and all necessary regulatory disclosures as well as clear exposition of the process and underlying assumptions. Reports will not only include required disclosures but also any client customized requests by any field category available.

  • CRE and Credit Stress Testing

    Utilizing the loan level detail accompanied by all credit risk scoring data, the system will run any specified risk scenario. Thus, providing customized credit stressed reports and analysis. These stress tests can be fully integrated with the institution’s loan portfolio and balance sheet.

  • Implementation

    VBC can assist with the transition to CECL life-of-loan modeling requirements. Our services include assessing appropriateness of methodologies, evaluating core system data capabilities and assisting with either Excel-based model development or software-based implementation. 

Model Risk Management

Boards and management rely heavily on model output to make strategic and/or operational decisions and it is important to have a proper program in place to ensure accuracy and reliability. Installing a well-developed Model Risk Management program will enable your institution to organize and capture the risks associated with running models and also provide an “effective challenge” environment as prescribed by regulators.

  • MRM & Governance Development

    • Development of fully-integrated model risk management and governance framework
    • Building a solid risk management structure to oversee all models and their associated risk is essential to mitigate model risk.
    • Deploying effective governance, policies and controls to enhance the program.

  • Model Inventory & Risk Grading

    • Completing a current list of all models and their associated risk rating must be available and accessible to ensure appropriate risk management.
    • Establishing a comprehensive process to identify and log new models as they are designed and deployed across the enterprise.
    • Designing an effective and intuitive model risk rating system to ensure the most critical and/or complex models receive the appropriate level of attention.

  • Risk Assessment Process & Utilization

    • Developing a risk assessment process to fully capture the extent of all the associated risks a given model may encompass.
    • Integrating risk assessments into the risk rating and validation frequency schedule.

  • Resource Requirements & Deployment

    • Assessing the requisite unique skills and resources needed to run a Model Risk Management program that fulfills the specific needs of your institution.
    • Providing independent subject matter experts for co-sourced and outsourced model validations.
    • Offering independent human resources at any stage of an MRM program, whether in development or in a mature state of existence.