1. Regulatory Developments for Risk Management Presented by Bob Cumberbatch Date 14 October 2010

2. Regulation

3. 22 September 20102 Disclaimer: This presentation represents the views of Interactive Data Limited and/or its affiliates (“interactive Data”) for informational purposes only and are not to be published, reproduced, copied, disclosed, or used without the express written consent of Interactive Data.. Interactive Data Limited has made reasonable efforts to ensure that the information contained in this presentation is accurate as at the date of publication but it reserves the right to modify the services described from time to time without notice. Nothing contained in herein should be construed as a representation or warranty. Interactive Data ℠ and the Interactive Data logo are service marks of Interactive Data Corporation, and registered service marks in Australia, European Community, Germany, Japan, Korea, New Zealand, Switzerland, and Taiwan. Pricing, evaluations and reference data are provided in the U.S. through Interactive Data Pricing and Reference Data, Inc. and internationally through Interactive Data (Europe) Ltd. And Interactive Data (Australia) Pty Ltd. This presentation is provided for information purposes only. Nothing herein should be construed as legal or other professional advice or be relied upon as such. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners.

4. 22 September 20103 Systemic risk The good, the bad and the ugly ■The whole system is interdependent and interconnected  Built upon confidence  Can this be modelled?  Is it like forecasting the weather? ■Why was Canada not impacted?  Not one Canadian bank went bankrupt  Not one Canadian bank needed rescuing  Was it luck?  Was it their market regulation?  Was it their approach to investment? ■Why were some banks badly impacted?

5. 22 September 20104 Regulatory tsunami It’s hard to keep up

6. 22 September 20105 Regulations Opportunity or threat – How do you see them? ■Opportunity ■Threat – the 5 stages of regulatory acceptance 1.Denial  “That’ll never happen?”; “They have two hopes…”; “It won’t apply to me… will it? 2.Anger  “Why me? It's not fair!”; “Who is to blame?”; “This will cost £m” 3.Bargaining  “Yes, but…”; “I have a waiver”; “I’ll be ready by…” 4.Depression  “What is the minimum I have to do”; “What is everyone else doing” 5.Acceptance  “It's going to be okay”; “I can't fight it, I may as well prepare for it.”

7. 22 September 20106 The global financial crisis Now it’s about avoiding a recurrence  G20 devised a 92 step action plan to prevent a recurrence  Basel have proposed measures to strengthen liquidity management  Committee of European Banking Supervisors (CEBS) have proposed measures to strengthen liquidity management  National regulators have implemented measures to strengthen liquidity management: –FSA UK –CSSF Luxembourg –APRA Australia

8. 22 September 20107 Strengthening liquidity risk management It’s about avoiding a recurrence of Lehmans  Principle cause was capital inadequacy due to exposures to illiquid assets  Significant exposure to US & UK mortgage business  Lost the market’s confidence making raising capital impossible and its income payments slowed  UK relied upon US parent for funding  2,985 business entities went bankrupt

9. 22 September 20108 Changing the scope of risk management Now it’s about avoiding a recurrence  It is not simply about avoiding risk  It is about taking calculated risks by understanding them and preparing for them –Ignorance is risk  Risk management will become: –More forward looking –Enterprise wide –Data hungry –Processing hungry –Qualitative and quantitative

10. 22 September 20109 Basel III http://bis.org/press/p100912a.pdf

11. 22 September 201010 Basel III Timetable http://bis.org/press/p100912b.pdf

12. 22 September 201011 Liquidity risk The measurement and management of liquidity risk; 10 key drivers 1.Wholesale funding 2.Intra-group liquidity 3.Intra-day liquidity 4.Cross-currency liquidity 5.Retail funding 6.Off-balance sheet liquidity 7.Franchise stability risk 8.Marketable assets 9.Non-marketable assets 10.Funding diversification

13. 22 September 201012 Retail funding For example  Identify retail deposit liabilities and categorise them by value, maturity, estimated speed of outflow, product type, interest rate and other factors  Assess behaviour of these liabilities under normal market conditions and under defined stress scenarios  “Funding is likely to be stickier when retail deposits are covered by deposit protection schemes” Northern Rock branch before and after the Government’s promise to guarantee customers' savings (Telegraph Sep 07)

14. 22 September 201013 Strengthening liquidity risk management – UK “Dear CEO” letter from FSA  Letter sent to CEOs 13 Jan 2010  New regime effective 1 December 2009  CEOs requested to confirm their readiness to the FSA by 12 Feb 2010: 1.New systems and controls have been successfully implemented 2.Plans are in place to ensure accurate reporting when these requirements go live later in 2010

15. 22 September 201014 Strengthening liquidity risk management “Dear CEO” letter from FSA – they will be checking  A cross-section of sample of firms will be checked for: –the firm’s current and Board-approved liquidity risk management policy; –Board minutes and papers setting out and agreeing the firm’s liquidity risk appetite; –terms of reference for all risk committees dealing with liquidity; –copies of all relevant liquidity risk management reports and management information (MI); –liquidity stress testing policy, including full descriptions of the methodology, all assumptions supporting and informing stress testing and examples of the reports and MI produced and used by management; and –the current Board approved Contingency Funding Plan.

16. 22 September 201015 What’s happening now?

17. 22 September 201016 What does this mean?

18. 22 September 201017 Strengthening liquidity risk management How we can help  Instrument reference data  Independent evaluations  Business entity service

19. 22 September 201018 Independent Evaluations from Interactive Data 18 Questions?

20. 22 September 201019 This presentation is provided for informational purposes only. The information contained in this presentation is subject to change without notice and does not constitute any form of warranty, representation, or undertaking. Nothing herein should in any way be deemed to alter the legal rights and obligations contained in agreements between Interactive Data (Europe) Limited (‘Interactive Data’) and / or its affiliates and their clients relating to any of the services described herein. Nothing herein should be construed as legal or other professional advice or be relied upon as such. Interactive Data makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, Interactive Data makes no representation or warranty that any data or information (including, but not limited to, evaluations) supplied to or by it are complete or free from errors, omissions, or defects. Pricing, evaluations and reference data are provided in the U.S. through Interactive Data Pricing and Reference Data, Inc. and internationally through Interactive Data (Europe) Ltd. And Interactive Data (Australia) Pty Ltd. MuniView SM, Basket Calculation Service SM are service marks of Interactive Data Pricing and Reference Data, Inc. PlusFeed SM, DirectPlus SM, PlusTick SM and PrimeTerminal SM are service marks of Interactive Data Real-Time Services, Inc. Interactive Data SM, eSignal ®, BondEdge ®, EXSHARE ® and FutureSource ® and the Interactive Data logo are service marks of Interactive Data Corporation and are all registered to Interactive Data Corporation. Microsoft ® Windows ® is registered to Microsoft Corporation ®. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners. © 2010 Interactive Data (Europe) Limited Limitations

21. 22 September 201020 Thank you