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Industry roundup: 12 August

Bottomline launches real-time watchlist screening

Bottomline has announced the availability of a Watchlist Screening (WLS) solution, delivered by lightweight API implementation through the company's SaaS technology. Bottomline says the solution offers faster go-live and is less costly than many alternatives, and that the first North American financial institution and the first multinational corporate customers are implementing WLS.

The solution is available to financial institutions and corporates globally, who can implement it with existing Bottomline secure payments solutions or as a standalone solution. WLS screens originator, beneficiary and counter-party transactions in real-time against official sanctions lists built into the solution and published by international regulatory bodies including the EU, HMT, OFAC, OFSI and UN.  

The integrated sanctions lists allows corporates and financial institutions to:

  • Comply with anti-money laundering (AML)/counter terrorist financing (CTF), know your customer (KYC) and wire transfer regulations (WTR2) - including AML, CTF and KYC screening, and AML and KYC compliance.
  • Centralise and automate transaction sanctions screening, including alerting, workflows and reporting to overcome limited compliance/risk resources available to manage and process large volumes of data.
  • Implement and refine AML/CTF risk models to reduce false positives when identifying and screening sanctioned and high-risk entities.


Systemic cyberattack could present material risk for US banks

US banks are generally well positioned to handle average modelled cyber risk losses; however, tail events from a systemic cyber risk event can be material, according to a new Fitch report, 'Quantifying U.S. Bank Systemic Cybersecurity Risk'.

The financial impact of a cyber event often centres around the reported remediation, or in the case of ransomware, the requested ransom payment. But, the financial cost from a cyber event is likely to extend well beyond just headline figures. Additional costs from these tail events can include data restoration, investigation and response, regulatory legal fines, and brand damage. Cyber risk insurance can mitigate some of these costs.

Fitch collaborated with CyberCube, a cybersecurity quantification company, to model the impact of systemic cyber events on the US banking sector under various cyber risk scenarios. CyberCube’s model focuses on 'single points of failure' (SPoF) for cyber incidents that could impact parts of the US banking system. SPoFs are technologies (e.g. operating systems, cloud service providers etc.) for which connectivity and dependencies are identified by bank. A cyber attack on a particular SPoF may have a cascading impact on the identified connected banks. The infection of a SPoF is a force multiplier creating significantly larger footprints of compromise than in traditional attacks that infect one bank or system at a time. 

For the purpose of this research, Fitch and CyberCube analysed the entire US banking sector of approximately 4,900 banks with over US$1.1 trillion in total revenues. This portfolio went through CyberCube’s proprietary model to quantify the potential impact of cybersecurity incidents on the US banking industry over a one-year period.

The report highlights five key findings from the analysis: a comparison of banks by size and their exposure to systemic cyber risks, an analysis of the average annual loss for the industry, a review of the five scenarios generating the largest modelled losses, performance of rated banks by modelled losses, and the difference in purchasing of cyber insurance at large versus small banks.


ARRC welcomes Refinitiv’s USD IBOR cash fallbacks prototype

The Alternative Reference Rates Committee (ARRC) has welcomed Refinitiv’s prototype publication launch of the ARRC’s recommended spread adjustments and spread adjusted rates for cash products. The launch follows the ARRC’s March 2021 announcement that it had selected Refinitiv to publish LIBOR cash fallback spreads and rates. The initial prototype will not have fallbacks based on the SOFR term rate, but Refinitiv will include them in a second iteration based on the ARRC’s recommendation of the CME term rates.

There are two versions of the Refinitiv USD IBOR Cash Fallbacks - one for consumer cash products, and the other for institutional cash products - and both will be published to 5 decimal places:

  • Refinitiv USD IBOR Consumer Cash Fallbacks are currently based upon compound SOFR in advance plus the ARRC’s recommended spread adjustment, which will be gradually introduced during the 12 months immediately following 30 June 2023. They will be published in 1-month, 3-month and 6-month tenors, both with and without a floor.
  • There are various versions of the Refinitiv USD IBOR Institutional Cash Fallbacks for non-consumer cash products, with the Adjusted SOFR component including SOFR compound in arrears, Daily Simple SOFR and SOFR compound in advance. All of the SOFR compound in arrears and Daily Simple SOFR rates will be available with and without a lookback, observational shift and lockout. Refinitiv USD IBOR Institutional Cash Fallbacks will be published in up to 7 tenors - including overnight, 1-week, 1-month, 2-month, 3-month, 6-month and 12-month - and, unlike their consumer equivalent, there is no transition period.

The ARRC also intends to recommend the term rate version of the fallbacks for the New York Legislation and as the first step in its recommended rates waterfall, but other spread-adjusted rates published by Refinitiv can be used for market participants who have chosen to fallback to other forms of SOFR.

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