Managing Operational Continuity and Resolution (OCIR)

Operational Continuity and Resolution (OCIR) is a banking regulation which aims at ensuring critical banking services are provided to customers should a bank be in resolution.

The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

In my last blog post for UK Finance, I made a passing reference to OCIR. The events of the last few weeks with Silicon Valley Bank have really brought into light why OCIR is an important regulation, and why banks need to have agile planning platforms to help them avoid requiring to be put into resolution.

As a function of OCIR, banks must understand the costs of providing these critical services. Most banks have identified the end-to-end processes for these critical banking services and allocated costs to inform their OCIR reporting. Consequently, banks are able to then better understand the profitability of providing all of their services. Historically this has been done by using traditional legacy systems or in a lot of cases, relying on spreadsheet-based tools.

Navigating uncertainty

This may have worked well in the past, in a relatively stable macro-economic environment. However, in a world where matters are changing rapidly, banks are struggling to react in an agile and flexible manner due to the limitations of the tools they have at their disposal.

I’m happy to talk about the specifics of Silicon Valley Bank, but the reality is that the rises in interest rates will have a material impact on the value of the bonds held by a bank. The ability to be able to scenario-plan, and compare how rises in base rates of 25 basis points versus 50 basis points over the short term and longer term, will help banks navigate and manage their balance sheets and allow for more informed decisions to be made.

Another separate but distinct issue that has been highlighted is the lack of transparency and control in how costs are allocated from a profit and cost management perspective, with the budget owner often having little clarity of the costs they have been allocated versus those that they were expecting when agreeing budgets. I have spoken to clients where the receiver of these costs has been asked to agree to cost reduction targets for costs which include a large proportion of allocated costs for which they have little sight or control of.

Avoiding cost and complexity

Given these challenges, banks and building societies are now turning to best-in-class platforms. Solutions that empower end users to create scenarios to really understand the impact of strategic changes on the business, from both a management and regulatory perspective.

This includes addressing the impact of macro-economic events, business structural changes, for operational or purely reporting reasons. An important emerging need is to report on new structures against multiple historical structures.

Banks and building societies are realising the benefits of using a single point solution for multiple use cases. This will avoid the cost and complexity of managing multiple vendors and achieve greater value from the investments that have been made.  

Intelligent Planning Platforms offer the ability to provide solutions across a bank or building society aiding in not just cost allocation and planning, budgeting and forecasting but also scenario modelling, stress testing, management actions and a whole host more. Join me at Board Beyond in London on 16 May 2023 if you would like to find out more.