How the Dodd-Frank Act affects Investment Banking

The regulatory reform known as the Dodd-Frank Act has been hailed as the most revolutionary, comprehensive financial policy implemented in the United States since the years of the Great Depression. Created to protect consumers and investors, the Dodd-Frank Act is made up of a set of regulations and restrictions overseen by a number of specific government departments. As a result of this continuous scrutiny, banks and financial institutions are now subject to more-stringent accountability and full-disclosure transparency in all transactions.

The Dodd-Frank Act was also created to keep checks and balances on mega-giant financial firms that were considered too big to crash or default. This was especially deemed crucial after the collapse of the powerhouse financial institution Lehman Brothers in 2008. The intended result is to bring an end to the recent rash of bailouts that have plagued the U.S. financial system.

Additionally, the Dodd-Frank Act was created to protect consumers from unethical, abusive practices in the financial services industry. In recent years, reports of many of these abuses have centered around unethical lending practices and astronomically-high interest rates from mortgage lenders and banks.

Originally created by Representative Barney Frank, Senator Chris Dodd and Senator Dick Durbin, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as it is officially called, originated as a response to the problems and financial abuses that had been exposed during the nation’s economic recession, which began to worsen in 2008. The bill was signed into law and enacted by President Obama on July 21, 2010.

Although it may seem complicated, the Dodd-Frank Act can be more easily comprehended if broken down to its most essential points, especially the points that most affect investment banking. Here are some of the component acts within the Dodd-Frank Act that directly involve regulation for investment banks and lending institutions:

* Financial Stability Oversight Council (FSOC): The FSOC is a committee of nine member departments, including the Securities and Exchange Commission, the Federal Reserve and the Consumer Financial Protection Bureau. With the Treasury Secretary as chairman, the FSOC determines whether or not a bank is getting too big. If it is, the Federal Reserve can request that a bank increase its reserve requirement, which is made up of funds in reserve that aren’t being used for business or lending costs. The FSOC also has contingencies for banks in case they become insolvent in any way.

? The Volcker Rule: The Volcker Rule bans banks from investing, owning or trading any funds for their own profit. This includes sponsoring hedge funds, maintaining private equity funds, and any other sort of similar trading or investing. As an exception, banks will still be allowed to do trading under certain conditions, such as currency trading to circulate and offset their own foreign currency holdings. The primary purpose of the Volcker Rule is to prohibit banks from trading for their own financial gain, rather than trading for the benefit of their clients. The Volcker Rule also serves to prohibit banks from putting their own capital in high-risk investments, particularly since the government is guaranteeing all of their deposits. For the next two years, the government has given banks a grace period to restructure their own funding system so as to comply with this rule.

? Commodity Futures Trading Commission (CFTC): The CFTC regulates derivative trades and requires them to be made in public. Derivative trades, such as credit default swaps, are regularly transacted among financial institutions, but the new regulation insures that all such trades must now be done under full disclosure.

? Consumer Financial Protection Bureau (CFPB): The CFPB was created to protect customers and consumers from unscrupulous, unethical business practices by banks and other financial institutions. One way the CFPB works is by providing a toll-free hotline for consumers with questions about mortgage loans and other credit and lending issues. The 24- hour hotline also allows consumers to report any problems they have with specific financial services and institutions.

? Whistle-Blowing Provision: As part of its plan to eradicate corrupt insider trading practices, the Dodd-Frank Act has a proviso allowing anyone with information about these types of violations to come forward. Consumers can report these irregularities directly to the government, and may be eligible to receive a financial reward for doing so.

Critics of the Dodd-Frank Act feel that these regulations are too harsh, and speculate that the enactment of these restrictions will only serve to send more business to European investment banks. Nevertheless, there is general agreement that the Dodd-Frank Act became necessary because of the unscrupulous behaviour of the financial institutions themselves. Although these irregular and ultimately unethical practices resulted in the downfall of some institutions, others survived or were bailed out at the government’s expense.

Because of these factors, there was more than the usual bi-partisan support for the Dodd-Frank Act. As a means of checks and balances, the hope is that the new regulations will make the world of investment banking a safer place for the consumer.

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Business Turnaround Tip for a Successful MBO Turned Awry

When you acquire a company through an MBO, your hopes are always high. You know the business more than anyone else and you’ve got too much at stake to do a sloppy job. So how could things go wrong? Well sometimes they do. And if you don’t make a quick business turnaround, you could end up losing more than just your company.

If that management buyout was financed by a bank, then chances are you were required to invest a sizeable amount from your own pockets. I won’t be surprised if you even remortgaged your house for it.

Regardless of your source of funding, whether it was a bank, a venture capitalist or through a deferred consideration, the mere thought of losing your job and getting buried in enormous debt at the same time might be too much to bear. If you get too overwhelmed by your emotions and can’t think clearly, you’ll have to step out of the driver?s seat and have someone take over.

That someone can’t be a member of the management team that took part in the management buyout. Like you, he/she might be in panic mode as well. You need someone from the outside who has no emotional attachments to the company and hence can view the crisis from a clear perspective.

Here’s what’s needed:

Review and Plan

Take a closer look at all factors affecting your business: governance and organisational structures, employees, suppliers, systems and procedures, roles and responsibilities, etc. Identify potential risks and assess the likelihood of them affecting your business.

This will give a clearer picture of cause-and-effect relationships as well as the specific tasks on hand.

Thus, when it is time to draft a plan, you can do so from a well-informed standpoint. This will enable you to target specific areas of improvement and avoid pointless activities.

Assure all stakeholders

Once a watertight plan has been formulated, you will have to approach your stakeholders. They?ll need to know what your directions are. Once they’re all sold on the plan, you could implement our strategies unimpeded.

This is a very crucial part because a sceptical stakeholder can serve as a major stumbling block in our efforts to improve the situation. You need to convince your banks, sponsors, and investors in order to avoid additional financial obstacles. You need to convince your suppliers too. If they cut off or limit supply, you won’t be able to continue doing business.

Most of all, you need to persuade your staff and employees that the proposed major changes have to be carried out in order for the company to survive. You can’t run your operations without them on board.

Redesign and set up new systems and procedures

Any company requiring a turnaround will certainly have systems and procedures that are no longer working well in the current conditions and hence would require either major changes in key areas or a total revamp. You need to study personnel roles and responsibilities as well as systems and processes, including financial and IT systems, and supervise the implementation of necessary changes.

You will need to evaluate your existing IT architecture and determine how you can best maximise what you already have and propose what you think will work more efficiently for our proposed systems and procedures. Every piece of hardware or software recommended will take into consideration your present resources. There are many solutions out there, you just need to find the best fit.

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How FieldElite helps Electricians

The need to hire an electrician arises more often than we expect. It’s quite common to come across problems with structure-wiring, whether at home or in your business premises. It’s, therefore, not surprising to come across a home or a business owner in search of electrical services.

Whether a startup or a fully-fledged business that offers electrical services, there are challenges that come with running the venture. Where you have field service electricians, the challenges are even compounded, more so on matters of assigning tasks, receiving complaints from customers, and receiving field service reports.

As we all know, an electrical business isn’t just limited to the management of field service electricians. You’ll have to manage all the processes, a responsibility that can be quite daunting.

It doesn’t have to be difficult, though. You can take advantage of a field service management software program to make the entire management process effortless.

FieldElite is one such software. With FieldElite, you can assign tasks, communicate, and receive reports from your electricians on the go. Incorporating field service management in your electrical business enables you to run your business operations smoothly. 

Below are some of the benefits of using FieldElite field service management software. 

Increased Efficiency

Improved efficiency is the number one benefit electricians can get from field service management software. With FieldElite, electricians can accept jobs while in the field and add attachments together with client signatures using their smartphones or tablets. From the field management software, they can get information on the optimal route to the site, the tools required for the job, the service history of the customer, and contractual commitments.

Managing and scheduling tasks on FieldElite are just a few clicks away for office-based operators. That means reduced travel times and delays that often cripple workforce management.

Improved Professionalism

FieldElite field management software gives you a professional edge over your competitors. With this field management software, you can store all your business-related information in a central place. Therefore, each of your electricians can access the data from anywhere using their smartphone or tablet installed with the FieldElite mobile application. As such, there?s no breach in communication, and that means the electricians will get the scheduled tasks on time. Building such relationships with your team in the field encourages teamwork and motivates each team member to play their part. Again, since you can monitor what’s going on in the field, you can address the issues raised by your electricians or customers as soon as possible. 

Effective Communication

Timely communication is very essential if you’re working with field technicians. Since you’ll not always be with them in the field, it’s always important to establish a proper communication channel to ensure information reaches them in time. With FieldElite field service management software, electricians receive notifications and details about tasks assigned to them via the FieldElite mobile app.

On the other hand, office-based staff can access the report with the details of the job once the electrician completes the given task. This implies that both the electricians and the office-based operators can get communication instantly, enabling them to see and manage their workloads. Individual electricians can close jobs on-site and proceed to the next task without having to do paperwork reporting. For this reason, electricians can complete multiple tasks within a short time, which improves their overall productivity.

High Accuracy

With FieldElite field service management software, missing data or incomplete information is a thing of the past. Electricians no longer have to deal with paperwork, which can be daunting and time-consuming, yet with a million and one errors. With FieldElite advanced mobile features, all field service processes and operations are automated. The electricians are left with quite little to do, and that minimises data entry errors.

Because the managers get real-time updates from the field techs, they can accurately maintain and track the field processes. With FieldElite mobile features, managers can get information regarding the job status, the actual time of arrival, and the time taken to complete the task. With such updates, the electricians are better placed to do the job well without wasting much time, thus improving their overall productivity. 

Improved Co-ordination With The Team 

Apart from improving the productivity of the electricians, FieldElite improves coordination with the entire management team. For instance, an electrician can be assigned new tasks within the same area where they’re currently assigned instead of sending another to complete a task in that same place. FieldElite makes this possible by always capturing the current location and job status.

Whenever a new request is made in an area, FieldElite first checks the database to confirm if there is an electrician already assigned in that area. If the status of the ongoing assignment is complete or almost complete and the new task request can wait for the remaining time, the electrician in the field would be assigned the new task. By doing so, the business saves on cost and time and minimises movements. 

Improved Customer Satisfaction

As an electrician, you’ll only be satisfied if the service you offer makes the customer happy. Apart from fixing their wiring problems, they?d be happy if you responded quickly to their request. This is only made possible with field service management software. With FieldElite, managers can notify the electricians on the service requests in their respective areas, allowing them to respond to the call within a very short time. Not only does this give you some level of satisfaction as the business owner but it’s also a win for the company. 

Make your field work-flow better with FieldElite, and improve the productivity of your electricians. With FieldElite releasing regular and timely updates, users aren’t left behind whenever there are changes in the field service industry. The updates introduce new features and capture new standards to ensure that you get the best experience with the software at all times.

Spreadsheet Risks in Banks

No other industry perhaps handles such large volumes of critical financial data more than the banking industry. For decades now, spreadsheets have become permanent fixtures in the front-line reporting tool sets of banks, providing organised information when and where needed.

But as banks enter into a period of heightened credit risks, elevated levels of fraud, and greater regulatory scrutiny, many are wondering if continued reliance on spreadsheets is a wise decision for banks today.

The downfall of Lehman Brothers which eventually led to its filing for Chapter 11 bankruptcy protection on September 15, 2008, served as a wake up call for many institutions across the globe to make a serious examination of their own risk management practices. But would these reforms include evaluating the security of user developed applications (UDAs), the most common of which are spreadsheets, and putting specific guidelines as to when they can – or cannot be – used?

Banks and Spreadsheet Use

Banks have been known to utilise spreadsheets systems for many critical functions because most personnel are well-acquainted with them, and the freedom of being able to develop customised reports without needing to consult with the IT department offers flexibility and convenience. In fact, more than having a way to do financial budgeting and analysing customer profitability, even loan officers and trade managers have become reliant on spreadsheets for risk management reporting and for making underwriting decisions.

But there are more than a few drawbacks to using spreadsheets for these tasks, and the sooner bank executives realise these, the sooner they can adopt better solutions.

General Limitations

Spreadsheets are far from being data base systems and yet more often than not, they are expected to act as such, with figures constantly added and formulas edited to produce the presumably right set of reports.

In addition, data integrity is always a cause for concern as most values in spreadsheets are entered as manual inputs. Even the mere misplacement of a comma or a negative sign, or an inadvertent ?edit? to a formula can also be a source of significant changes in the outcome.

Confidentiality risk is also another drawback of the use of spreadsheets in banks as these tools do not have adequate?access controls to limit access to only authorised individuals. Pertinent financial information that fall into the wrong hands can lead to a whole new set of problems including the possibility of fraud.

Risks in Trading

For trading transactions, spreadsheets can prove to be of immense use – but only for small market volumes. As trade volumes increase and the types vary, spreadsheets are no longer a viable solution and may likely become more of a hindrance, with calculations taking longer in the face of bigger transaction amounts and growing transaction data.

And in trading, there is always the need for rigorous computational functions. Computing for the Value at Risk (VaR) for large portfolios for instance, is simply way beyond the capabilities of spreadsheets. Banks that persist in using them are increasing the risk of loss on those portfolios. Or, they can be opening up?opportunities for fraud?as Allied Irish Bank (in the case of John Rusnak – $690 million) learned the hard way.

Risks in Underwriting

Bankers who use spreadsheets as their main source of information for underwriting procedures also face certain limitations. Loan transactions require that borrowers? financial data be centralised and easily accessible to risk officers and lending officers involved in making decisions. With spreadsheets, there is no simple and secure way of doing that. Information can be pulled from different sources – individual tax returns, corporate tax documents, partnership documents, audited financial statements – hence there is difficulty in verifying that these reports adhere to underwriting policies.

Spreadsheet control and monitoring

Financial institutions which are having difficulty weaning themselves from the convenience and simplicity that spreadsheets offer are looking for possible control solutions. Essentially, they want to find ways that allow them to continue using these UDAs and yet somehow eliminate the?spreadsheet risks?and limitations involved.

Still, the debate goes back and forth on whether adequate control measures can be implemented on spreadsheets so that that the risks are mitigated. Many services have come forward to herald innovative solutions for better spreadsheet management. But at the end of the day, there really is no guarantee that such solutions would suffice.

More Spreadsheet Blogs


Spreadsheet Risks in Banks


Top 10 Disadvantages of Spreadsheets


Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry


How Internal Auditors can win the War against Spreadsheet Fraud


Spreadsheet Reporting – No Room in your company in an age of Business Intelligence


Still looking for a Way to Consolidate Excel Spreadsheets?


Disadvantages of Spreadsheets


Spreadsheet woes – ill equipped for an Agile Business Environment


Spreadsheet Fraud


Spreadsheet Woes – Limited features for easy adoption of a control framework


Spreadsheet woes – Burden in SOX Compliance and other Regulations


Spreadsheet Risk Issues


Server Application Solutions – Don’t let Spreadsheets hold your Business back


Why Spreadsheets can send the pillars of Solvency II crashing down

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