Bank Structured Finance Warehouse Facilities

TAO Solutions Capital Markets SaaS solution is uniquely positioned to provide banks with an out-of-the-box enterprise system that introduces operational efficiencies, addresses operational risk and introduces industry best practices.

The utilisation of banks to provide bank structured finance warehouse facilities has become a major source of finance for third-party lenders. This form of financing compliments Asset Backed Commercial Paper Conduit facilities, however, rather than funding provided via the capital markets, the lending is provided directly via the bank’s balance sheet.

The compliance and reporting requirements for a bank structured finance warehouse facility can vary based on the jurisdiction, the specific bank, and the type of facility. However, TAO Solutions aims to simplify, automate and standardise some common compliance considerations that lenders typically need to adhere to when providing a securitization warehouse facility.

Here are a few examples:

• Dynamic Data Ingestion: TAO Solutions recognises that loan-level data ingestion of various third-party lenders can be overly complex and time consuming. This is particularly relevant when involving multiple asset classes and different reporting formats. As a result, TAO provide bank lenders with a unique amendable data ingestion interface to ingest, store and retrieve data for calculations, compliance assessments and reporting purposes.

• Simplified Transactions Tracking: Top-Ups (Drawdowns) and Repayments of Facilities are tracked throughout the month to monitor funding requirements, determine compliance and provide for cost of funds calculations.

• End-User Configurable Compliance Assessments and Management Reporting: TAO’s software has various unique features to support warehouse facility transaction modelling, compliance assessments and reporting. All aspects of the software are controlled, traceable and auditable. Furthermore, subsequent deals and related reporting packages can be cloned as and when required.

• Supports Know Your Customer (KYC) Regulations: Lenders are generally required to have robust KYC procedures in place to prevent fraudulent and illegal activities from the originator and its lending practices. TAO’s software normalizes the data ingested that can be subsequently used for review, audit and compliance assessment purposes.

• Regulatory Compliance: Lenders must comply with relevant banking and financial regulations, such as those imposed by the central bank or financial regulatory authorities in their jurisdiction. TAO’s software supports regulatory reporting (both in terms of data extracts and reports) needed by a bank to address both established and ad-hoc reporting requirements.

• Documentation and Underwriting Standards: Lenders must maintain accurate information relating to the loans funded within the warehouse facility to confirm that the third-party lenders are meeting the required loan eligibility criteria and portfolio parameters. Proper record keeping is important for risk management, audit purposes and regulatory compliance.

• Monthly Reporting: Third-party lenders are required to provide monthly reports and loan-level data to the bank providing the warehouse facility. These reports may include the trust managers report, cash flow statements, and other relevant information to demonstrate the financial stability and the performance of the loans in the warehouse. TAO can scrape data from these reports and ingest them directly into SecureHub.

• Cost of Funds Calculations (true-ups) and Invoicing: TAO’s software tracks daily the warehouse facility balance movements, and as such, computes on a daily basis the costs of funds for each warehouse customer and generates the invoice for distribution. We also generate true-up values if estimates are provided for the prior period and comparisons to actual results are required.

• Accounting: TAO’s software has a full general ledger supporting both the generation of cash and accruals, supporting both financial statements within the application and extracts to be fed into the general ledger system. 

• Bank Reconciliation: TAO’s software provides a bank reconciliation feature that obtains a bank feed to reconcile movements in bank accounts.
  

In summary, it’s important for the bank providing the securitization warehouse funding programs, to understand and fulfill its operational and compliance requirements. TAO Solutions introduces a unique and innovative structured finance software solution that enables lenders to operate in an efficient and effective manner across multiple geographies.