ENTERPRISE RISK SOLUTIONS

Solutions for Balance Sheet Management

Moodys Analytics offers a powerful combination of software and advisory services for essential balance
sheet and liquidity risk management. The RiskConfidence solution Moodys Analytics enterprise
asset and liability management (ALM) software solution integrates ALM, liquidity risk management,
funds transfer pricing (FTP), and business and regulatory reporting capabilities onto a single platform
with a common data source and single engine strategy. This is supported by comprehensive balance
sheet management and liquidity services such as gap analysis, roadmap enhancement, benchmarking
and model validation.

The Challenge: More Holistic and Forward-looking Balance Sheet Risk Management in a
Stricter Regulatory Environment
The industry and regulatory response to the market dislocations that began in 2008 have sparked renewed interest in ALM.
More traditional ALM approaches did not foresee or prevent the credit crisis which emerged in 2008. This acknowledgment
of industry gaps and the emergence of strong regulatory reform is changing the way banks perform their asset and liability
management. To remain competitive, banks must improve risk measurement and management to better align risk and capital.
In particular, ALM professionals are being challenged to tie risk to decision making in a more holistic and granular way.

Comprehensive Balance Sheet Management

Moodys Analytics offers an essential combination of software and services for more effective and streamlined balance
sheet management.

Gap Analysis, Policy Improvements, Governance

Design & Model Management

Interest
Funds Transfer Liquidity Risk
Rate Risk
Pricing (FTP) Management
Management

Industry Benchmarking & Best Practices

Enterprise-wide Asset Liability Management
The RiskConfidence solution goes beyond the traditional ALM feature set by creating a high value front office balance sheet management
solution. It integrates enterprise-wide analytics for stress testing, interest rate risk management and funds transfer pricing, leveraging chart
of accounts, balance sheet strategy and multi factor behavior model for single entity and holding company consolidation.

INPUT DATA STREAMLINE PROCESS REPORT RESULTS

Bank Data Interest Rate Risk:

Scenario Analysis and Business &
Rates/Spreads Stress Testing Regulatory Reporting 99 Forecast Balance Sheet
Foreign Exchange (FX) 99 Income Statement
Volatility RiskConfidence 99 Net Interest Income Sensitivity
Market Value Assumptions Liquidity Risk:
Balance Sheet Strategy Parameter Deal Mapping
New Volume Assumptions 99 Liquidity Gap
Mark to Market Behavior Modeling Chart of Accounts 99 Stress Testing
Prepayment Assumptions Funds Transfer Pricing Formula Builder 99 Basel III (Liquidity
Deposit Decay Coverage Ratio, Net Stable
Deposit Modeling Value at Risk (VaR) Funding Ratio)
Line of Credit Draw (LOC)
Draw/Repayment Funds Transfer Pricing
Data Consolidation & Management Market Risk: VaR

Moodys Analytics offers a robust platform, modeling expertise and comprehensive data resources for essential asset liability management.

The Toolbox
Multi-Currency Capability allows users to run scenario analysis
on exchange rates to measure balance sheet Foreign Exchange
(FX) risk exposures. The solution also permits the quantification of
FX exposure to improve FX risk management strategies.
Chart of Account (COA) Structure organizes all financial
instruments on a banks balance sheet into a tree-like structure
and is the fundamental building block for risk methodology,
assumptions, and navigation. The solution maintains a single
COA to ensure compatibility of data, processing and results
and provides a high level of consistency between all levels of
the application. Contractual characteristics, client behavior, FTP
methods, and more, can all be specified at the account level.
Market Data Manager centrally manages all capital markets
time series to ensure coherent and uniform usage across the
enterprise. The interest rates, foreign exchange rates, currencies,
counterparties and market data is easily accessible to assign
scenario based assumptions to each forecasted computation.
Balance Sheet Strategy Capability permits users to specify
future balance sheet activity based on their most recent bank data.
Users have the flexibility to target new volumes, average balances,
or ending balances. The Balance Sheet Strategy can be constructed
in the Excel software environment and is integrated with the cash
flow engine, allowing for dynamic net interest income simulations
under multiple scenarios or to forecast the economic value of
equity across time and under multiple interest rate scenarios.

Advanced Formula Builder permits users to exercise a high
degree of customization through a scripted language that is easy
and intuitive. It leverages mathematical operators and functions
in order to access and manipulate bank data, market data, or cash
flow engine results.
Parameter Deal Mapping (PDM) groups financial instruments at
the deal level into cohorts of deals that can be used to parameterize
different types of behavior, assumptions, and calculations. PDM
offers users a high degree of flexibility in grouping bank deals
together for specific analysis computations and the granularity to
assign behavioral assumptions to those deals.

2 MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT

The Solution: Essential Software for Liquidity Risk, Interest Rate Risk and Funds Transfer
Pricing Management
Manage Liquidity Risk
Leverage the RiskConfidence solution to calculate key liquidity risk measurements, such as the liquidity gap and buffer, and perform advanced
liquidity modeling. Quantify sources and uses of funds, taking into account both contractual and optional cash flows. The RiskConfidence
solution is natively integrated with Moodys Analytics Basel I, II and III regulatory capital calculation software - RiskAuthority solution. It
calculates the new Basel III liquidity ratios Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

Compute Net Interest Income and Economic Value of Equity

The Balance Sheet Strategy feature and Market Data Manager allow you to quickly and accurately produce dynamic net interest income
simulations across multiple interest rate and economic scenarios. Leverage the cash flow engine to produce the sensitivity for the
economic value of equity.

Define Multi-Factor Behavior Models

The multi-factor behavior model allows users to leverage their understanding of client behavior and embedded optionality. Users can
leverage the tool to create multi-factor behavior models using pre-defined or user-selected factors, multi-dimensional look-up matrices
and multiplier matrices, and unit settings.

Perform Advanced Deposit Modeling

Precise cash flow modeling of non-maturing deposits allows for realistic use cases where balances and deposit rates change and interest
payments take place at different time intervals. The model also accounts for compound interest.

Leverage Dynamic Credit Line Utilization

A dynamic credit line utilization methodology allows the modeling of contingent credit usage, which varies with the economic environment
and the credit quality of borrowers. Forecasts of usage for balance sheet and off-balance sheet commitments are incorporated into the
liquidity and earnings analysis in order to provide a holistic view of the facilities commitments/exposure of an institution.

Manage Funds Transfer Pricing (FTP)

RiskConfidence offers a powerful matched-maturity FTP capability used to measure business unit performance. The model features
custom Dynamically Linked Library (DLL) functionality used to implement institution specific transfer pricing needs. The software allows
for custom DLLs that offer complexity in the computational approaches, while still having the user-friendly results of those computations.

Define transfer pricing settings either at the account or the

PDM level. Matched maturity FTP calculations are performed
at the Instrument level including deal level adjustments to
the base transfer pricing curve.

Perform Integrated Scenario Analysis

The solution is natively integrated with Moodys Analytics enterprise risk stress testing solution Scenario Analyzer to understand the
impact of changing market conditions on the balance sheet, portfolios of loans, individual loans and/or internal ratings models.

MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT 3

The Difference
Built-in Data Management
The RiskConfidence solution leverages Moodys Analytics powerful enterprise risk platform RiskFoundation to consolidate and store
ALM, regulatory and financial risk management data. A single cash flow engine allows users to manage interest rate risk management,
capital management, liquidity risk management, and performance measurement calculations. A common data source for capital markets
data, retail origination information, and institutional distribution/securitization channels fosters communication and consistency across
the enterprise. Consistent data quality checks increase the reliability and accuracy of the underlying data.

Comprehensive Financial Risk Management

The RiskConfidence solution quantifies sources and uses of funds, taking into account both contractual and optional cash flows for
purposes of liquidity risk management and compliance, funds transfer pricing and balance sheet forecasting. It offers unparalleled accuracy
computing daily cash flow-based projections. Additionally, the solution is extensible allowing users to leverage other products for Basel III
regulatory capital and liquidity calculations, integrated stress testing and risk and finance data management.

Powerful Balance Sheet Analytics

RiskConfidence covers a wide array of assets, liabilities, and complex derivative instruments, including non-standard constant installment
loan categories and non-maturing deposits. Users can leverage the solution to:

F orecast optional cash flows based on simple to complex  alculate historical Value at Risk (VaR) for both the
C
behaviors via a multi-factor behavior model trading book and the banking book

Calculate precise contractual and optional cash flows  anage line of credit facilities with three proprietary
M
draw and repayment approaches
Maintain data integrity during ETL process
Improve data during ETL process

Plan new volumes for purposes of dynamic net interest income simulation with Defining, uploading, and reviewing market rates, economic indices, and
an intuitive user interface and powerful formula builder for defining new volume currencies is easy with the intuitive RiskConfidence solution user interface.
functions and specifying interrelationships between other accounts. State of the art analytics enable trading desk quality calculations.

4 MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT

Balance Sheet and Liquidity Management Services
Effective Implementation Services
Our team of experienced professionals will implement the RiskConfidence solution across your organization, train your users, and help
you maximize your software investment from day one. With over 50 ALM installations and counting, our experienced implementation
specialists will work with you to plan your project, set milestones and align work streams with your business to help you meet your
objectives.

Comprehensive Advisory Services

Leverage Moodys Analytics experienced balance sheet practitioners for advisory services covering gap analysis and roadmap
enhancements, benchmarking and validation, balance sheet management policies and governance and modeling expertise. Our
experienced practitioners evaluate an institutions balance sheet management policies and methodologies, and compare them to relevant
regulatory requirements and industry best practices, helping firms stay on top of regulatory and industry developments.

Industry Best Practices and Regulatory Developments

GAP Analysis Industry Risk Appetite ALM &

& Roadmap Benchmarking Policies & Liquidity
Enhancements & Validation Governance Management

Gap Analysis and Roadmap Enhancements

Our advisors provide a quantitative and qualitative assessment of an institutions ALM data, software and policies, liquidity methodology
and in-house models. The assessment ensures that the liquidity and ALM/FTP management practices are consistent with shareholders
expectations, the institutions strategic plan, and the relevant regulatory requirements. We provide a detailed set of reports with findings,
guidelines and recommendations to improve analytics, infrastructure, and software, as well as an analysis of the coverage, quality and
density of the institution s data across different dimensions.

Industry Benchmarking and Validation

Moodys Analytics leverages its unique data and modeling expertise to validate and benchmark existing models, to meet new and stricter
regulatory requirements. We normally break the project down into four distinct phases, ensuring effective knowledge transfer throughout
the process.

PHASE 1: Perform PHASE 2: Develop PHASE 3: Execute PHASE 4: Summarize

Risk Assessment & Model Validation Models, Validation, & Findings and Create
Gap Analysis Procedures Benchmarking Documentation

Validate project plan Undertake data Perform model Complete model

Understand models
Perform risk
assessment analysis
Undertake data
segmentation analysis
completeness analysis
Implement accuracy
analysis
Perform conceptual
soundness
Methodology Review
Benchmarking
validation test plan validation work plan
to preapproved test Perform detailed model
procedures and data gap analysis
Prepare model
validation reports for
internal stakeholders
and regulators

MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT 5

Policies and Governance
We evaluate the appropriateness of balance sheet policies and governance based on the institutions size, regulatory requirements, desired
future state, and business strategy. Our team provides detailed reports with recommendations to improve policies and governance so
clients can maximize their balance sheet and liquidity management across the enterprise. The team also designs processes to capture a
wide array of data to monitor an institutions liquidity and ALM practices, including market data, assets, liabilities, off-balance sheet items,
counterparties, data on collateral, as well as credit ratings across the business and related systems.

ALM and Liquidity Model Management

Our experienced practitioners help institutions create, validate and integrate bespoke models, facilitating more effective and granular
balance sheet management. The models allow institutions to accurately capture the dynamics of assets and liabilities by calibrating their
ALM systems to bespoke behavioral models and estimation results. Our balance sheet modeling services cover liquidity and solvency
management, collateral management and funding, balance sheet management and liquidity stress testing.

REGULATORY LIQUIDITY ALM / FTP / LIQUIDITY

CUSTOM LIQUIDITY MANAGEMENT LIQUIDITY STRESS TESTING
MANAGEMENT MANAGEMENT

Liquidity Coverage Ratio
Net Stable Funding Ratio
Behavioral models: Cash flow simulation Cumulative Cash Flow Analysis
- Non-Maturity Liabilities Liquidity allocation Scenario Simulation
- Short-Term Liabilities ALM Collateral Inflow / Outflow
- Usage and Revolving FTP Analysis
Credit Facilities Collateral Stress Testing
- Prepayments Funding Stress testing
Funding models Comprehensive Liquidity
Margin and collateral management Analysis and Review (CLAR)
Selloff scenarios & haircuts Early warning models
Contingent Liquidity & Buffers
Duration of Equity & Profitability

Leverage our ALM and Liquidity Management Services to Answer Key Questions including:

How do I meet the new regulatory requirements covering ALM, funding and liquidity, and stress testing?
Are our FTP model and liquidity management assumptions sound?
How do we establish liquidity and FTP best practices?
Does our FTP model incorporate the right drivers and meet the relevant regulatory requirements?
Is our FTP model implemented and calibrated correctly?
Do our behavioral models produce meaningful results?

Consultative Client Engagement

Moodys Analytics approach is characterized by close cooperation, continuous communication, and knowledge transfer. Our practitioners
work hand-in-hand with the project sponsor to identify and mitigate project risks, conduct engagement opportunities, and keep clients
fully informed of progress.

Trusted Expertise
Moodys Analytics is widely recognized for delivering high-quality analytics to the marketplace, developed both for standard use as well as
on a custom basis. Our breadth of industry and client experience has given our practitioners a strong understanding of the challenges our
clients face when building, benchmarking, and validating models that can withstand the scrutiny of regulators and internal and external
stakeholders.

6 MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT

Moodys Analytics Delivers Comprehensive Enterprise Risk Solutions
Moodys Analytics offers comprehensive, modular and robust solutions to effectively and efficiently manage risk. Our solutions are built
around a common data platform RiskFoundation which consolidates, cleanses and stores the organizations risk and finance data.
Dedicated applications for loan origination and spreading management, economic and regulatory capital calculations, enterprise stress
testing, ALM and liquidity risk management and business and regulatory reporting are integrated with the RiskFoundation platform.
Additionally, Moodys Analytics unique data covering C&I, CRE and Retail PDs & LGDs, macroeconomic scenarios and Moodys Ratings
Delivery Service feeds the platform.

The Balance Sheet Solution Family

The RiskFoundation platform includes a common datamart optimized for managing risk and finance and delivers business reporting
and intelligence, an administrative console, customization toolkits and grid computing functionality.

Scenario Analyzer coordinates the stress testing process across the enterprise, centralizing a wide range of Moodys Analytics, third-party
and proprietary models and data.

The RiskAuthority solution delivers comprehensive regulatory capital and liquidity calculation and management for Basel I, II and III.

Regulatory Reporting Module creates, validates and submits regulatory reports for over 50 countries and over 3000 reports.

The RiskFrontier software is the credit portfolio risk management and economic capital solution trusted by leading financial
institutions worldwide.

The RiskOrigins software is a risk-focused, workflow-driven software platform that allows commercial lenders to streamline and
standardize their underwriting process for commercial credit facilities.

The RiskAnalyst software gives you a comprehensive and consistent view of your firms counter-party risk by combining financial
spreading, credit analysis and robust data storage using one flexible, secure enterprise platform.

MOODYS ANALYTICS SOLUTIONS FOR BALANCE SHEET MANAGEMENT 7

CONTACT US
Visit us at moodysanalytics.com or contact us at a location below:

AMERICAS EMEA ASIA (EXCLUDING JAPAN) JAPAN

+1.212.553.1653 +44.20.7772.5454 +85.2.3551.3077 +81.3.5408.4100
clientservices@moodys.com clientservices.emea@moodys.com clientservices.asia@moodys.com clientservices.japan@moodys.com

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