Client data on credit lines, trading positions, holdings etc. all exist. But they do so in a siloed environment in any databases across a company. Avox not only makes sure that these silos and databases are synchronized, it also allows clients to understand company hierarchies and use netting opportunities more efficiently and reliably, and to avoid unintentional risk accumulation.
Four of the top seven reasons for failed settlements are linked to flawed counterparty data, according to a study by the Bank of International Settlements. Sending out account statements to the wrong addresses does not only incur high correction costs, but also causes irreparable damage to a company's reputation. The Avox data service removes duplicates, corrects formatting and typing errors and makes sure addresses are accurate and up-to-date. This can lead to extensive savings in the context of regulatory requirements, such as Basel II or, in the future, KYC and MiFID.
Understanding the client's solvency and reliability is the key to understanding settlement exposure and market risks. Avox's parental hierarchy data and timely notification of defaults facilitate a dramatic reduction of settlement risks.
The service fits perfectly into the changing regulatory landscape. Initiatives and regulations, such as MiFID, Basel II, KYC, AML, the Patriot Act and UCITS III, require accurate and timely counterparty data. Avox suports financial institutions' efforts to achieve the required level of accuracy. Since Avox not only delivers address information but also industry classification and corporation type, it is a very valuable resource for anti-money-laundering (AML) departments in banks allocating money-laundering risk profiles. Ownership hierarchies help risk managers and credit departments to generate a holistic view on risk exposures, and trading desks to use netting opportunities to achieve higher trading limits or reduced collateral requirements. Another important data issue is the deliberate misrepresentation of company information. This could indicate fraudulent or terrorist activity which must be rapidly identified and addressed. Independent and timely data validation helps to minimize the possibility of deliberate data misrepresentation.
The challenges for operations departments are on the one hand siloed databases which are not linked between departments or locations, and on the other hand insufficient staffing and funding. Often the data is poorly formatted or incomplete. Additionally, operations departments have to deal with the challenge that clients have not informed them of name, address or ownership changes. Where changes are communicated, they might not be passed on or will get mixed up within the communication chain. Obsolete data leads to poor service quality which results in low customer satisfaction and greater, more expensive remedial efforts.
Avox offers for all financial institutions engaged in open market operations in the Eurosystem a service solution to avoid close links. More