The super-ledger
The emerging requirements have brought the role of the GL under close scrutiny over the last few years. The GL was the traditional accounting heart of the bank. It was a large and relatively simple organ that sat at the centre of the bank’s infrastructure. However, as regulatory demands have multiplied, so the GL has struggled to keep pumping. The requirement that has particularly broken the GL in many organisations has been IFRS. This makes demands that are not suited to the classic GL, with the need for parallel valuations for fair value and amortised value. As a result, the trend is towards a slimmed down GL, with one or more separate data repositories for all non-core accounting activities. The repository might be viewed as a data warehouse or data mart, as a sub-ledger, or – increasingly used – a ‘super-ledger’, with the ‘sub-ledger’ tag felt to describe something that is in some way subservient to the GL. Interestingly, the GL heavyweights, Oracle and SAP, have both been working for some time on banking specific sub- or super- ledger offerings. Other suppliers, such as Financial Architects and Fernbach (Wolters & Kluwer and Moody’s, respectively), had a reasonable claim to have been in this space for longer still; IBM’s Algorithmics-derived Algo Suite might be similarly classified, albeit coming from the risk management side rather than accounting. Oracle has come up with its Financial Services Accounting
Hub (FSAH), or FAH as it has become, with the ‘Services’ dropped. It is a repository that can be fed by a bank’s core systems. The first point of contact is a rules-based layer which facilitates the consolidation of data. The information is intended to be reconciled back to the transactions, an important consideration for regulatory requirements. The FSAH/FAH is intended to provide centralised accounting rules, alongside the transaction information, with the chart of accounts linked back to the latter. The aim is streamlined, consistent accounting policies underpinned by the ability to drill-down into the underlying data. Financial and global management reporting come off
the one consolidated
repository. SAP has taken a similar tack, albeit with a few changes of
direction behind it. In the 1980s and first half of the 1990s, core accounting customers used SAP’s flagship ERP platform, R/3, and its predecessors as the central GL and MIS. In the second half of the 1990s, SAP worked with a number of customers on a banking analytics offering which came to be called Strategic Enterprise Management (SEM) for Banking. The initial focus
was profitability analysis, with First Chicago NBD as one of the early takers. The offering moved into the associated areas of asset and liability management, limit management, and credit and market risk management. The major shift of accounting and risk management coming together persuaded SAP to build its Business Intelligence Warehouse from around 2000, bringing extended MIS and reporting functions. Work was done with a couple of banks, including HVB, in the areas of profitability and limits. However, as SAP EMEA consultant, Hamish Newlands, subsequently admitted, when SAP went to market with the solution it was met with ‘stony silence’. This was because, by this time, any discretionary spending was being directed at IFRS and Basel II. After ‘a lot of head scratching’, from 2001, SAP decided to build a large sub-ledger which could connect to a GL. This saw the emergence of its Bank Analyzer, an analytical application for managing financial instruments with the objective of constituting a complete, integrated finance and risk architecture. There is an accounting rules engine and process management functionality, allowing SAP to claim a solution that is capable of delivering accounting and risk- based information on a single, consistent basis. By the second quarter of 2006, Oracle’s FSAH/FAH was
just being rolled out on a ‘controlled release’ basis, with a full production release planned for the end of the year. Oracle was claiming – but not naming – ‘lead banks’ in the US, Australasia and Europe as early adopters. These banks had helped with the design and development of the offering – ‘shared effort, shared benefits’, as Oracle’s Stephen Skrobala put it. At that stage, the supplier was looking for other lead banks with ‘a commitment to state-of-the-art ledger architectures’, with a particular desire to find one in the area of retail banking. FAH is intended to link to any GL environment and to any
relevant transaction systems. Following Oracle’s acquisition of I-flex Solutions, integration commenced in the second quarter of 2006 between I-flex’s Flexcube platform and FAH, as well as with I-flex’s own data warehouse, Reveleus, which fairly quickly came to form a key part of Oracle’s compliance suite (Wells Fargo, Citibank and Wachovia all selected Reveleus in the first half of 2006, allowing Reveleus CEO, S. Ramakrishnan, to claim that ‘a quarter of US banking assets will pass through Reveleus’). Oracle has also worked with Fernbach to provide the IFRS calculation engines. Over at SAP, by April 2006 it was on version 5.0 of Bank Analyzer, although there was still a fair amount of functionality
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