2. Oracle Financial Services Analytical Applications: Improving sustainability in banks through liquidity and capital management Austin Trippensee Financial Services Analytical Applications Asian Banker Summit Hong Kong April 7, 2011

3. The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

4. What did you know? 5 years ago – What was your worst-case stress scenario for the U.S. Financial Markets? – Did you know who Barack Obama was? 3 years ago – Did you think oil would go above USD 140/bbl? – Would you have bought gold at USD 1,400/ounce? 1 year ago – How did your stress tests include Egypt or Libya? – Do your stress tests include natural disasters? Japan, Haiti, Iceland, etc © 2011 Oracle Corporation – Proprietary and Confidential

5. Liquidity Risk Management Challenges Basel III Regulations – Going Beyond Liquidity Gaps 2 Liquidity risk measures to be calculated based on detailed prescriptive guidelines on how to treat inflows and outflows: Liquidity Coverage Ratio – identifies the amount of high liquid assets that need to be maintained to withstand a supervisor specified stress scenario Net Stable Funding ratio – measures the amount of stable long- term funding that needs to be maintained Liquidity Risk Measures Increased focus on intra-day liquidity Liquidity Reporting to cover – contractual mismatch, funding concentration, Unencumbered Assets, Market Related Monitoring Monitoring & Reporting In addition banks need to comply with the qualitative guidelines issued on liquidity management Qualitative Guidelines 5 © 2011 Oracle Corporation

6. Liquidity Risk Management Challenges Current Situation Liquidity Risk management gets significant attention with reinforced principles and prescriptions from regulators (BIS, FSA, FDIC, APRA, OSFI, etc) Liquidity Stress Testing highlighted as a key industry-wide weakness Increasing Regulatory Pressures Liquidity Risk becomes an Enterprise concern which highlight disconnects with other risks and company-wide business practices Inter-relationships between Credit, Market and Liquidity Risks not understood Inadequacy of “Silo’d” Approach to Risk Management Stress testing carried out as a standalone exercise and the results not used in the strategic decision making process of the institution Stress Scenarios are not uniformly applied and additionally do not cater to severe liquidity events across all risk silos Liquidity management process limited to estimation of liquidity gaps Weakness in Current Liquidity Risk Stress Testing Practices Current management, analytical and resolution approaches to Liquidity Risk are not transparent, responsive or flexible Materiality Assessment of Liquidity Risk non-existing Liquidity Risk Management Process an inflexible “Black Box” 6 © 2011 Oracle Corporation

7. Liquidity Risk Management Challenges “To meet these challenges, I need to…” Ability to respond on an intra-day and on-demand basis to regulatory requirements and marketplace events Build comprehensive library of stress scenarios that are consistent with enterprise use and reflect regulator needs catering to market-wide and idiosyncratic requirements Meet all Regulatory Compliance Requirements in a Timely Manner Adopt a simple and transparent solution that allows regulators to understand the defined Stress Scenario, the impact on underlying data and the calculation process Enterprise wide involvement to effectively assess liquidity profile and Cross-functional team that is able to understand and model inter-relationships across risk categories Create a Transparent and Auditable Stress Testing Program Develop funding strategies based on anticipated market conditions and associate those with stress scenarios Identify net exposure after mitigating strategies and manage the institutions risk appetite Develop Multiple Alternative Counterbalancing Strategies Develop a process of timely availability of Liquidity reporting and dashboarding Provide a means for management, board and supervisors to be well satisfied with “explanatory detail” for critical issues Establish Supervisory & Management Dashboards 7 © 2011 Oracle Corporation

8. 8 Liquidity Risk Management Process Flow Define Liquidity Time Buckets Near Term Buckets for Operational purposes Long Term Buckets for Strategic Decision making Execute Contractual Run Contractual data from bank’s systems Contractual gaps without overlaying assumptions Highlights liquidity concentration on the balance sheet Define Baseline Assumptions using Baseline Rules By business user BAU assumptions on roll-over, run- offs, delinquencies, margin requirements due to market movements, Execute Baseline Run Compute business-as-usual cash flows and gaps based on BAU behaviour assumption Compute liquidity ratios under BAU Define Stress Scenarios Idiosyncratic and systemic scenarios Worsening of BAU assumptions Regulatory and internally modeled Stress varies by dimensions such as Legal Entity, Currency, Etc Execute Stress Scenarios Assess cash flows, gaps and ratios under stress scenarios Intra-day assessment Assessment under multiple scenarios Counterbalancing Define credible counterbalancing strategies – asset sale, repo rollover, new repos Assess gaps under each counterbalancing strategy Maintain audit trail of results Materiality Assessment & Action Planning Liquidity profile based on qualitative and quantitative assessment Identify and manage liquidity hotspots on an operational and strategic level Advanced Reports Regulatory reports in pre-specified templates Management reports and dashboards on gaps, ratios and counterbalancing results Heat maps 1 2 3 4 8 7 6 5 9

9. 9 Stress Testing Challenges “To meet these challenges, I need to…” Behavioral Assumptions Bring together the entire portfolio. Define Base Case At the individual risk factor level Groups of risk faScenario, the impact on underlying data and the calculation process Enterprise wide involvement to effectively assess liquidity profile and Cross-functional team that is able to understand and model inter-relationships across risk categories Define Shocks Develop funding strategies based on anticipated market conditions and associate those with stress scenarios Identify net exposure after mitigating strategies and manage the institutions risk appetite Develop Multiple Alternative Counterbalancing Strategies Develop a process of timely availability of Liquidity reporting and dashboarding Provide a means for management, board and supervisors to be well satisfied with “explanatory detail” for critical issues Establish Supervisory & Management Dashboards 9 © 2011 Oracle Corporation

10. A Day in the Life: Day 10 of Monthly Reporting Cycle © 2011 Oracle Corporation 10

11. Monthly CycleEvent Day 10: 9:00 AMMonthly reports due in 2 days Day 10: 9:15 AMRegulator requests modification to submission Day 10: 9:22 AMEconomic event happens Day 10: 9:26 AMCFO wants revised profitability estimates Day 10: 9:27 AMCRO requests new stress run to assess impact Day 10: 9:30 AMRegulatory capital run submitted with regulator modifications Day 10: 11:00 AMRegulatory run completed (1:29:21) Day 10: 11:00 AMProfitability run submitted per new specifications Day 10: 12:46 PMProfitability run completed (1:46:00) Day 10: 12:46 PMNew stress liquidity run submitted Day 10: 12:56 PMStress run completed (0:10:06) A Day in the Life: OFSAA with Exadata Changes the Game © 2011 Oracle Corporation 11

12. A Day in the Life: Enterprise Risk Dashboards © 2011 Oracle Corporation 12

13. Summary Liquidity risk management should leverage organizational excellence across all risk areas Models continue to evolve to address micro & macro economic factors across all risk types Organizations will need flexibility to adapt to changing conditions Systems need to manage libraries of scenarios and be able to support intraday analytics Must support risk culture across entire organization © 2011 Oracle Corporation – Proprietary and Confidential 13