Fad Diets and NSFR What is NSFR Net

Fad Diets and NSFR

What is NSFR? • • Net Stable Funding Ratio is a Basel III Capital Requirement set by the G-20 The Federal Reserve and the FDIC implemented NSFR in US law. • NSFR applies to bank holding companies with over $250 billion in assets or • over $10 billion in on-balance-sheet foreign exposure. • It applies in a modified form for bank holding companies with $50 -$250 billion in assets. NSFR reports must be provided quarterly to the public through a website or quarterly financial statements. If reports aren’t provided, institutions can be fined or regulators can insist on capital charge changes. What is 8 of 9? • • 8 of 9 is a next generation Reg. Tech company that translates complex financial regulation into simple solutions. We strive to build a world where regulatory compliance is automated and easy to understand. Our tools capture, store, and monitor regulatory content so you can focus on doing what you do best. We built our business model with normal humans in mind. 2

Watching Your NSFR Weight Think of NSFR as another fad diet from the regulators with the same data you are already using for other stress tests. Equity and liabilities multiplied by specific stability factors Available Stable Funding Weight Required Stable Funding Weight 100 0 0 100 * Equity and assets multiplied by specific risk and liquidity factors * Note: Institutions subject to the modified ratio must maintain ASF levels above 70%. 3

NSFR Nutritional Facts NSFR requires you to count your “capital calories” which change depending on the products you trade in. Liability Type ASF Weight Asset Type RSF Weight Capital 100% Cash 0% Long Term Borrowing (12 m+) 100% OBS 5% Securities • Level 1 • Level 2 5% 50% 0% 85% Client Deposits • Current • Savings • Time 90% 95% Other Deposits / Short Term Borrowing • 1 m – 6 m • 6 m - 12 m 0% 50% Loans • . . . to Banks • . . . to Other Borrowers Trading / Pension Liabilities 0% Derivatives 100% Bank Deposits 0% Other Assets 100% 4

How This New Diet May Impact Your Business Capital on Hand (Most stable source of funding) Derivatives (Requires 100% stable funding) Short-term Loans (Requires less stable funding than long term) Long-term Loans (Requires more stable funding than short term) 5

How Do You Shape Up Against Others Watching Their Weight? This new diet may seem tough, but not impossible! In fact, according to 2012 IMF data, most of the world is already complying with the NSFR. Source: https: //www. imf. org/external/pubs/ft/wp/2014/wp 14106. pdf 6

Why facing NSFR is so challenging There are five major obstacles in implementing NSFR. 1. The underlying data is unreliable or is not in the format required to make a regulatory determination. Bad Data! 2. Regulation overlaps with itself and other regulations and puts pressure on SMEs. Regulatory Rat Nests! 3. The regulations are complex and constantly changing. Changing Regulations! 4. Internal processes within financial institutions are also constantly changing. 5. Insufficient Governance and Granularity Lot of Complexity! No Audit trail! Compliance required by January 1, 2018! 7

Don’t Worry, You’re Already Collecting The Data You Need! Chances are, your organization is not coordinating, but the underlying data is the same. NSFR DFAST EMIR • Requires accounting of derivatives values (MTM or other) • Requires accounting of collateral value • Requires quarterly accounting of on and off balance sheet items • Requires accounting of held securities • Requires accounting of customer deposits and loans 8

How can help you with NSFR. 8 of 9 believes that all regulation should be broken down into ones and zeros. All data falls into one of the following categories. Data that needs to be Data Internal External to the customer Other Service Providers Non Regulatory Data (e. g. Pricing Data) Regulatory Answer! Created 8 of 9’s real time Reg. Oil™ Engine 3 rd Party Data Cleanse Up to date regulatory status and rules 8 of 9’s Business Logic Engine Output of data cleanse prepared in appropriate rules engine formatting Fully auditable, controlled, accurate, up-todate answer, transaction by transaction

Steps To Tracking NSFR Compliance Receive Client Data Examine Data Format & Categories Model Logic Engine Based On Rule Teach Program To Understand The Various Categories In Terms Of The Rule Assign Regulatory Weights To Each Category Program Engine To Add Up Various Categories And Apply Weight Factor Have Program Take The Converted Values And Run Ratio Calculation Report NSFR Level • 8 of 9 will monitor the regulations for changes and keep the model up-todate! • Data points from NSFR are interchangeable with other regulatory requirements. • We can test hypothetical situations to see if a change in business will alter compliance status. 10

Help us help you. We look forward to working with you soon! Chief Nerds Address Phone & Fax Online CEO Mary Kopczynski, J. D. /Ph. D. COO Matthew Fand, J. D. /M. B. A. 8 of 9 1115 Broadway 11 th Floor New York, NY 10010 Phone: 917 -261 -3901 Email: info@8 of 9. nyc Website: www. 8 of 9. nyc 11