Q2 Exam
Gramm-Leach-Bliley Act of 1999
"Financial services modernization act"; response to the announced merger of Citicorp and travelers group worth $10B, and demonstrated the inadequacy of the legislative and regulatory patches in place, provided a unified legal framework that standardized financial convergence; its centerpiece is the creation of an entity called a financial holding company (FHC)
Monetary base
"High powered" Money= currency + reserves
Multiplier
(1 + C/D) / (RR + C/D + ER/D) Multiplier decreases as RR, C/D, and ER/D increase
Interest rate risk
A by product of our normal daily banking activities
The optimal foundation
A combination of BB&T & SunTrusts mission; Two like minded institutions with strong cultural alignment and a focus forward
Fixed mindset
Abilities are static, unchangeable traits; effort is unnecessary because you either have it or you don't; challenged are tests that might reveal lack of ability, leads to avoidance; avoid negative feedback and seek affirmation, feel threatened by others' success
Observable behaviors
Acknowledge the impact your observable behaviors have on others Identify other behaviors that may lead to better results
Dodd-Frank Act
Advanced warning system Ends too big to fail Consumer protection with authority and independence Federal bank supervision Transparency and accountability for exotic instruments Executive compensation and corporate governance Protects investors Enforces regulations on the books
Macro prudential regulation
Aims to mitigate risk to the financial system as a whole (systematic risk) and thus avoiding and reducing the macroeconomic costs of financial instability; identifying and correcting behaviors and structures in financial markets that create excessive risk before they mushroom into something that threatens the entire financial system
Myers-Briggs Type Indicator (MBTI)
An assessment based on the research and theory of Dr. Carl g. Jung; predicts the patterns of human behavior that individuals are most likely to display
Negotiation
An interaction to influence the behavior of another where you cannot or choose not to exercise authority to force that behavior
Treasury challenges
Auto loans and commercial real estate have highest risks at BB&T Greater regulatory demands for more sophisticated, comprehensive market risk management tools End of LIBOR?
End of LIBOR?
BB&T has $55B attached to LIBOR (SubTrust has more) When it goes away at the end of 2021, it gets fixed at the last floating rate What will we charge our clients? Should it be based on the last rate published? LIBOR is unsecured, might be changed to secured Banks prefer the new rate to be tied to banks funding costs New floating rate will be based on market transactions
Chief information officer
Barbara duck
Donnas idea for end of LIBOR
Based on bank yield index; but doesn't check all boxes
Leadership model
Beliefs Behaviors Results
Manager of operations shared services
Bennett Bradley
The federal reserve organization
Board of governors, chair + 6 members 12 district FRB's, 9 directors FOMC board of governors, president of NYFRB, 4 other FRB presidents
General counsel, secretary & chief corporate governance officer
Bob Johnson
President, retail banking
Brant standridge
Treasury activities
CCAR stress testing models CECL allowance models PPNR Models Interest rate risk and client behavior models (no control over what the fed moves the rate, basis risk/ movement of risk are not always in sync)
Values
Character: honesty, integrity Judgement: reality, reason, independent thinking Success: productivity, teamwork, judgement Happiness: self-esteem, pride
President and chief operating officer
Chris Henson
Chief risk officer
Clarke Starnes
High performing teams
Communicate Connect Commit Care
Types of feedback
Complimentary feedback reinforces behaviors and helps others more fully own and leverage their strengths Constructive feedback redirects behaviors and provides an opening to move into a problem solving conversation
Macro prudential regulation emphasis
Concerns too big to fail problem Has potential to lower systematic risk and thereby create a more secure financial system that will contribute to macroeconomic goals
Monetary policy
Could play a role in restraining undesirable swings in leverage, and, by extension, reduce systematic risk (e.g. interest rate cuts in a time of market disruption)
CECL
Current expected credit loss; new accounting standard that will change how financial institutions account for expected credit loss; lifetime losses of loan; BB&T is going to adopt January 1
Chief financial officer
Daryl bible
President, community bank
David Weaver
Micro prudential regulation sources of funds
Deposits, other borrowings, capital
CFO financial management objectives for 2019
Develop associate/ talent development Meet operating plan for 2019 Exit 1MM sq. Ft. Of real estate (merger will exit 5-10 MM) Avoid adverse risk outcomes Execute in CECL requirements/ plans Maintain a strong liquid and capital position and manage within stated risk appetite Execute on systems/ projects Support successful execution of IHOP initiatives- insurance BCG Implement physical security enhancements Support vendor management transformation Close the SunTrust merger with successful execution of all legal day 1 requirements
Model development
Develop, manage and maintain the models used to measure credit and interest rate risk
CFO key strategic objectives of 2019
Differentiate our client value proposition so we are distinguished through disruption, reconceptualization, and transformation Provide the PCE maintain a strong associate value proposition Accelerate revenue growth Maintain effective risk management Maintain expense discipline
Success scripts
Directives you can give yourself to compensate for the negative beliefs you have about yourself; the way you create your life so that neither you nor others experience you in a negative way, and instead experience you in a positive way
Treasurer
Donna Goodrich
Chief digital and client experience officer
Dontá Wilson
Myers-Briggs Type Indicator (MBTI) profile
ENTJ
Business tax returns
Each section of the business tax return provides a different piece of information and when all of those pieces are combined we are able to get a better understanding of the financial condition of the company
Glass-steagall act of 1933
Enacted to protect consumers and the coming from the conflict of interest that, conventional wisdom held, contributed to the Great Depression, by separating deposit-taking activity from the underwriting of securities, the act created a highly regimented financial services landscape, provided a clear separation between commercial and investment banking and between banking and commerce generally
Myers-Briggs scales
Engage the problem (energy): extroversion vs. introversion Pay attention to the problem (information): sending vs. intuition Decide on a solution (decision making): thinking vs. feeling Take action (approach external world): judging vs. perceiving
What did the glass-steagall act do
Enhanced the safety and soundness is the banking system, regulated the interest rate paid to depositors, established the federal supervision of group banking, increased power to supervising officers
Four main pillars of IRM
Focus- ask the right questions, engage in active listening, know needs and what's best Integration- work as a unit, introduce the right partners at the right times, seamless solution based and not produce based motivation, communicate and coordinate well Execution- important to be collaborative with client, ensure constant communication Trust- foundation of relationship, important to have relationship with both the clients and the other IRM partners to know what is best to fit both parties
Feedback
Frequent Early Evidence based Dialogue Beneficial Action orientated Clear Kind
Alan blinders three questions for the FOMC
Given the current state of the economy should monetary policy be stimulating the economy or restraining it? Is current monetary policy stimulative or restraining? If the Fed alters it's policy, what should we expect to happen to inflation and unemployment?
ALT committee alternative to LIBOR
Has to be based on market observed transactions Secured; rate will fall dramatically if it goes wrong Needs significant enough volume so it cannot be manipulated Banks want it to be off the average of the banks funding costs
Bible sayings
I believe people create their own luck; hard work and assisting others If it was easy anyone could do it; anyone can identify problems, winners find solutions If you can be bought, you can be sold; we will always have opportunities to make more money, focus on responsibilities, values, integrity, growth and people with whom you work Never get too comfortable in your position because it can be taken from you tomorrow; always try to improve and get better Most decisions should be made with about 70% of the information that you wish you had; if you wait for 90% you are too slow; either way you need to be quick at recognizing and correcting bad decisions
Soul of company
IRM
Banking pressures in the modern era
Increased non-bank competition, decrease in profitability, broadening activities and services, off balance sheet activities
BB&T competitive advantage
Integrated relationship management knowledge
Chief credit officer
Jim Godwin
Chairman and chief executive officer
Kelly king
Coaching model
Know Show Grow
Success scripts
Know and acknowledge them May over do in terms of frequency, duration, intensity, context (FDIC) May not be most effective choice for a given situation
Triggers
Know and acknowledge them Reduce the chance of being triggered intentionally by adjusting the environment
Bank holding company
Less complex corporate structures and are well capitalized, so getting the designation proved is relatively easy, and these institutions will be prepared for good future opportunities (repeals G-S by creating FHC; broader BHC)
Quantitative and credit risk analysis role
Leverage advanced quantitative techniques with historical data to produce quantitative decision making tools, provide insightful analysis to increase effectiveness, efficiency, and responsiveness of lending decisions across all phases of the credit life cycle, assist with strategy design and measurement associated with lending decisions
Safety net
M1 Money multiplier x monetary base
Treasurer responsibilities
Manage BB&T balance sheet as well as its derivative/ off balance sheet position within established policy guidelines for interest rate risk, liquidity, capital adequacy, deposit pricing and reporting; to stabilize and optimize net interest income and EPS on a consistent risk adjusted basis
Examples of IRM partners
Merchant services Insurance services Treasury services International services BB&T at work Bank card Retirement and institutional services
Self awareness model
Mind: success scripts, experiences, values, beliefs, morals Emotions: visible negative emotions, joy, fear, hurt Body: observable behavior patterns
What does QCRA offer
Model development Model outcome analysis Mediate quality assurance concerns Advanced quantities analytics for first/ second lines of defense Consultation
Federal reserve targets
Money supply, short and long term interest rates
Micro prudential regulation
Motivation rooted in consumer protection, ensuring solvency of financial institutions, strengthens consumer confidence in the individual firms and the financial system as a whole, oversight of individual financial institutions aimed at preserving their safety and soundness, including on site examinations, surveillance, guidance, regulations and enforcement; first line of defense against systematic risk
Visible negative emotions
Negative emotions you display
Financial holding company
Once an organization obtains the FHC designation, it can house a complete family of financial activities through distinct affiliates
Federal reserve tools
Open market operations, discount policy, reserve requirements
Five components to credit life cycle
Origination Risk premium estimation Account management Collections prioritization Recovery
Mission
Our mission is to make the world a better place to live by: helping our clients achieve economic success and financial security; creating a place where our associates can learn, grow, and be fulfilled in their work; making the communities in which we work better places to be; and thereby, optimizing the long term return to our shareholders, while providing a safe and sound investment
Heart of company
PCE
Leadership style should be
Participative Team orientated Fact based Rational Objective
Model development life cycle
Planning Data acquisition Exploration Modification Model build and assessment Documentation and review Evaluation and surveillance
Visible negative emotions
Practice recognizing and acknowledging your emotions Take ownership
Giving feedback process
Prepare and deliver Verify understanding and impact Create solutions together Identify support needs Clarify expectations for follow up
Federal reserve goals
Price stability, high employment, sustainable economic growth, stability of financial markets
Role of the CFO
Provide financials for both internal and external constituencies Manage the banks balance sheet in a manner to optimize earnings given our risk constraints Provide leadership to the financial group to grow and be best in class for industry Support business line leaders so that they can maximize revenue given risk constraints Primary communicator to both analysts and investors Support CEO to achieve desired results for the company
Principles of leadership
Put the people you serve first, and success will likely follow Listening is a cornerstone of success Good ideas are everywhere Lead by example Giving back is not optimal- it's essential Creating value depends on values
Regulatory relief and consumer protection act of 2018
Randall quarrels throughly that regulation is how broad in scope and complex, we need to improve it For BB&T and similar large banks, title IV tailoring regulations for certain bank holding companies might cause us to have to start doing stress tests again
Macro prudential regulation requirements
Real time collection and analysis of data from a wide variety of financial institutions and markets, the deployment of tools to mitigate the inherent pro-cyclical tendencies of financial markets, new resolution powers to deal with the failure of any institution that poses a threat to financial stability
Five basis of power
Referent Authority Reward Punishment Expert
PCE commitments
Reliable Responsive Empathetic Competent
Federal reserve instruments
Reserve aggregates, fed funds or short term rates
Micro prudential regulation uses of funds
Reserves Securities Loans
QCRA primary divisions
Retail Small business/ small commercial Commercial Technical infrastructure and support
President & CEO, BB&T securities, LLC, financial services & commercial finance manager
Rufus Yates
Problem solving Z
S: what are the facts N: what are the possibilities T: what are the pros and cons F: what would be the impact on people Can be used to improve problem solving and decision making
Emphasis of micro prudential regulation
Safety and soundness of individual banks Reduce risks of illiquidity and insolvency
Triggers correlated to success scripts
Show negative emotions and observable behavior patterns, which has both short and long term results
Influence
The ability to indirectly control or affect the actions of other people or things
Power
The ability to influence the behavior of another so that the other acts in accordance to your wishes
Mental models
The beliefs, ideas, images and descriptions that guide our thoughts and actions; formed from our experiences either consciously or unconsciously; represent our perception of reality, leads us to expect certain outcomes, give meaning to events, and shape our behaviors, explain our thought processes about how things work in the real world, blinds us to facts and ideas that challenge or defy our deeply held beliefs
Mindset
The foundational belief about the ability to change your most basic qualities, like intellect and talent
Taylor rule
The relationship between unemployment and inflation to help determine interest rates (e.g. recommends the FED raises interest rates when inflation is high or when employment exceeds full employment levels)
Vision
To create the best financial institution possible; the best of the best
Observable behavior
Visible behavioral reactions that accompany the negative emotions
IRM in 7
Vision Partnership Coaching Knowledge Systems Measurement Recognition
3 non-negotiable
Vision, mission, values
Value promise definition
Who we are What we do How we do it; The commitment that you are making to your client that we are here for them throughout their entire life to help them with all of their financial needs
Growth mindset
You can change and improve your abilities with hard work, effort is a critical element of achievement, challenges are opportunities for growth, you persist through obstacles, you seek and learn from criticism, you learn and celebrate from others' success
