Examples of Business and Operations Transformations, Risk Management, Regulatory Solutions that added Strategic and Tactical Value to Banking, Insurance, Mortgage, Capital Markets Clients

These are a few examples of projects and programs our team members have developed and managed during their careers to improve Investment management, Portfolio risk-management, Liability and Hedging restructuring, and Balance-sheet management.
Development of a New Asset Hedging Product to Solve Macro Hedging Issues

Senior management of a large financial institution wanted to reduce overall funding and hedging cost of its investment portfolio, as measured over time. To solve the corporate strategic problem, one of our Lead Advisors championed development of a new financing product, that would act as a synthetic hedge to the linked assets by reference and also provide matched funding without encumbering the linked assets.

Product implementation required coordinating with several internal different departments and with the regulator, including moving agenda forward while forging agreements between stakeholders. Our Lead Advisor developed the transaction from concept until issuance of the first security for US$3 billion.

The synthetic CMO product significantly reduced financing and hedging costs of referenced mortgages over their life.  Additionally, several parts of this innovative product's financial engineering and infrastructure were later adopted for other programs.

Development of New Funding Program to Cost-effectively meet Regulatory issue

A financial institution's regulator asked it to reduce debt rollover risk to a tighter threshold. This required raising ratio of long term debt to total debt outstanding. Senior management was interested in issuing large volume of long term debt at the lowest possible cost. The problem was that existing programs bound the company to a calendar and there was not sufficient demand for fixed rate debt to be issued without substantially moving the market adversely.

One of our Lead Advisors, championed and implemented a new funding program to issue multi-billion dollar issue sizes of Floating-rate Notes indexed to LIBOR and Fed Funds. Within three months the institution was was in compliance with the tighter threshold. This new floating rate program provided sustainable long-term funding. In addition to reducing the debt roll-over ratio, this solution of issuing floating rate notes was also the lowest cost solution. 

Development and Enhancement of Funding Products for Economic value

Beyond the Vanilla variety of Callable Bonds with options types of American, Bermudan, European, and Canary that carry Fixed-rate Coupons, our Lead Advisors and Executive Consutants have introduced and enhanced several debt funding and hedging products over their careers, and those products continue to provide economic value to the issuing institutions, everyday.

Our lead Advisors are among leading authorities on the construction of such bonds and their valuations. Some esoteric bonds that our lead Advisors have implemented and seen investor popularity explode, include: 

  • Bonds with Put-option types:

    • Estate Feature Notes

    • Extendible Notes

    • Puttable Notes based on Credit events

  • Hybrid of Fix and Floating-rate Coupons:

    • Symmetric or Asymmetric Step-up and Step-down Coupons

    • Float-Fix Rate Notes

    • Fix-Float with a Floor and Cap,

  • Rate-Contingent Coupons and Indexed to External Reference:

    • Range Accrual Notes as Fix or Floating-rates, with Fix or Variable-rate Ranges

    • Callable Floating-rate notes with a Cap and Floor

    • Callable Zeros coupon Notes

  • External Reference Linked Notes:

    • Fed-Funds based Floating rate notes

    • Credit-Linked Notes

    • Mortgage prepayment linked Notes

Liability Portfolio Re-structuring for Solving Needs of Balance-Sheet

Senior management of a financial institution wanted to rebalance debt and portfolios for regulatory and economic considerations.  One of our Lead Advisors championed and supervised execution of a tender offer for several billion US dollars of floating-rate notes.

Senior management deemed the repurchase a huge success. The financial institution accepted more than 27% of the tendered notes and paid cash to investors. To date, this remains as the largest liability-restructuring transaction for any company in the world.

Granular Measurement of Market-risk at a Portfolio Segment level
Senior management of a large financial institution wanted to evaluate an alternative risk measurement and management framework of its investment portfolio at a disaggregated level, and then aggregate up.
One of our Lead Advisors led a team of analysts, developers, and project managers to develop a working proof-of-concept solution, “Project segmentation”, in participation with Blackrock Solutions.
Project Segmentation, an innovative pilot project was designed to partition the Institution's Investment portfolio into similar characteristic categories to measure and manage risk at a dis-aggregated level. This required each asset segment with its own risk limits, RoE criteria, and specific funding and hedging techniques. Developed over two years, the proof-of-concept model was shown to work.
Strategic Paper (for Process & Staffing) to Meet Regulatory and Social Goals
Large financial institutions often struggle to make sufficient progress on fulfilling their social goal mandates.  Affordable Housing is one of them, and it will have a renewed focus with Dr. Ben Carson in charge of HUD.
One of our lead Advisors developed a Strategic plan for Affordable housing for a large financial institution.  Within 10 weeks of discovery and interactions with market participants and internally within the institution, our Advisor delivered a presentation that detailed a multi-prong approach to obtain goal rich loans, through Single Family channels and with support from the Institution's Investment portfolio.
The final delivery was a comprehensive presentation to senior management of the institution.  The strategic plan was adopted and implemented, along with hiring of senior level staff for the functions.
Scenario Frameworks for ALM and Tail- risk Management
Several of our Lead Advisors and Executive Consultants have developed Monte-Carlo simulations, Scenario based techniques to devise risk management frameworks and action plans for their financial institutions. 
The frameworks provide simulations or scenarios for interest-rates, yield curve shapes, mortgage and credit spreads, volatility, prepayment sensitivities, and default expectations.  Along these lines, business functions have to be managed to provide sustained profitability within defined risk-tolerance. Of course, any model produced results are best overlaid with an experienced understanding of markets, catalysts, and influencers based on current affairs and market expectations.
When markets are uneasy, our frameworks & concepts become very handy, and our Advisory becomes even very helpful.

FIRM Advisors, LLC -- A minority owned and operated company of Practitioner Subject Matter Experts from the Industry