Case Study: Successfully creating a combined Treasury and Asset Liability Management system for two merging banks
This case study details how MORS effectively was implemented as a combined Treasury and Asset Liability Management system for two merging Nordic banks, resulting in a unified and streamlined system, offering holistic risk management for the merged entity.
In 2021, a leading Nordic consumer finance bank acquired one of its Scandinavian peers. The acquiring bank has been a MORS customer for some years while the acquired entity was using a third-party treasury management (TMS) system. Initially, the acquired entity was run as a separate subsidiary. Accordingly, the initial plan was to set up a separate MORS instance for the acquired entity, to ensure regulatory compliance for the subsidiary located in a different jurisdiction than the parent. While having a separate instance of MORS for the subsidiary, the group balance sheet would also be available in the parent bank’s MORS instance.
While the MORS instance for the subsidiary was set up, the two banks decided to merge. Given the decision to merge, it effectively meant only one instance of MORS would be required. While the decision to merge in the end would result in a streamlined systems landscape, the change in plan mid-project added to the challenge level, as the merger time schedule was tight, and the target was to have the full merged balance sheet in MORS right after the merger was completed.
MORS worked closely with the banks to develop a comprehensive integration project plan that addressed the key challenges of initially the acquired bank and then the merged entity. In order to cater for daily operational Treasury Management requirements, regulatory and internal Asset Liability Management (ALM) requirements, the merger required complex integration of the two banks’ source data systems in MORS. This applied both for banking book data but also for combining liquid assets and derivative portfolios from front to back office. Additionally, calculating internal and regulatory interest rate and liquidity risk ratios for the combined entity was a key deliverable.
The integration included the following key elements:
Source data integration: Integrating a large number of data sources including imports of customer loans and deposits, import of security portfolios managed by 3rd party asset manager, correspondent bank integration via Open Banking and Swift for Nostro accounts, as well as market data integration. The goal was to have the full merged balance sheet in MORS,
Front to back-office Treasury Management workflow integration: As two Treasury teams were merging into one, there was a need to streamline daily treasury operations, including system routines, revaluation methodology, back-office integrations and overall workflows.
Aggregation of Internal reporting and Calculating Regulatory Ratios: The acquiring bank compiles an extensive internal daily risk report for which MORS is the main source. Extending the report for the merged entity was a key requirement. MORS is also used for calculating regulatory ratios including LCR, NSFR and IRRBB. A key requirement was to calculate the ratios for the merged entity.
“The project was completed in less than five months, despite the change of plans mid project,” says Jari Ojanen, COO of MORS Software. “It was great to extend the use case of MORS in strong co-operation with the client. The client articulated very clearly the success criteria which helped the MORS team focus on the key deliverables. During the project, the subject matter expertise from the bank, including from the acquired entity, provided a very strong foundation for successfully delivering the project, on time and on budget.”
Successful Merger, successful Treasury ALM systems integration
The merger between the two Nordic banks and the MORS integration project was completed in Q4 2022. The combined company is the largest independent specialist consumer finance lender in the Nordics.
MORS was able to effectively combine the ALM and Treasury system operations of the two banks. MORS’s expertise in data management and its easy-to-use solution helped the banks successfully integrate their operations and create a stronger, more competitive entity. The merger was completed on time and within budget, with minimal disruption to the banks’ operations. The benefits of the merger have also been significant, including increased scale, a wider range of products and services, and improved financial stability.