Corporate Culture and the FR2052a

2052a & Company Philosophy

As I make my daily commute from kitchen to home office, I’ve been thinking about how company philosophy really matters in our daily lives.  For many people, the very nature of their role means that they must be in a specific place of work.  For others, the physical location is less important and all that’s really needed is a good internet connection (and the right lighting for Zoom calls).  At VERMEG, the company’s philosophy has been to ensure that those who can work remotely, do.  The goal was to make sure that the act of going to work didn’t put anyone at risk unnecessarily.  For that, I’m grateful.  We’ve shown we can deliver projects and software solutions successfully, even 100% remotely.

In the privileged position of a “knowledge worker” who can work remotely, I’ve also found myself thinking about how company philosophy impacts customers. We’ve seen the videos of irate customers objecting to being told they must wear masks, but in the B2B world, how does a company’s philosophy impact the customer?  As a software provider, my thoughts are focused on how vendors such as us provide value and show long-term commitment to partnership and serving customers.

In the regulatory reporting space – which has been my focus for over 7 years, one area of current change is around the FR2052a report.   Prior to the recent changes, the US Complex Institution Liquidity Monitoring Report posed challenges for the institutions under its mandate.  During the pandemic, many institutions were required to increase their frequency of liquidity reporting while responding to COVID-19 PPP changes.  Although the recent adoption of the Net Stable Funding Ratio (“NSFR”) for certain large institutions subject to the liquidity coverage ratio was much anticipated, the recent changes regarding NSFR only encompassed a portion of the published proposed changes with other changes having a much larger increase in scope than originally anticipated.

Aside from the revisions made to the reporting form and instructions to reflect the NSFR final rule, the Federal Reserve (“Board”) added other data elements it deemed necessary to monitor liquidity positions and compliance with Liquidity Risk Measurement Standards. Such changes include a new section added for Supplemental Balance Sheet, requiring elements to be reported to construct an accounting balance sheet such as other assets, other liabilities and counterparty netting.

Furthermore, the definition of the term “Transactional Accounts” has been expanded to include a subset of transaction accounts recently added to align with the amended Regulation D to include accounts that were formerly subject to transfer limit requirement.

In the Board’s final Federal Register, what was proposed remains intact, with the Board giving two effective dates, May 1, 2022 for Category I institutions and October 1, 2022 for Category II-IV institutions.

VERMEG’s philosophy is that the above changes are part of the standard course of business for us as regulatory reporting solution providers.  With that in mind, VERMEG’s approach is that software development costs are most appropriately borne internally – customers pay a license and maintenance, and we consider the use of those funds to cover the development as part of cost of doing business.

Other vendors in this space take a different approach, where the philosophy is more transactional.  Once the software is bought / licensed, that’s just the first step in an ongoing payment stream, where license and maintenance cover only existing capabilities and if new changes are needed, then those changes are charged.

There’s pros and cons to both approaches, but in the regulatory world where changes can be significant and frequent, the VERMEG approach provides a degree of protection for our customers from sudden and possibly unexpected increases in license cost.  I see a line connecting how a company manages and treats its workers and how they treat their customers.  Company philosophy matters, both for workers and customers.

Happy New Year!

Katherine TORNARITES – Regulatory Product Analyst