Capital Cost Calculator: A Business Plan

January 2016

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The Capital Cost Calculator is a new idea in financial markets that gives traders, treasury groups and end-user clients the ability to project capital charges based on a range of internal and external factors, including a bank’s real time liquidity position. An important functionality of the calculator is scenario analytics that allow traders to recommend alternatives to clients that may reach the same economic objective while incurring lower capital charges. In a balance sheet constrained marketplace, the ability to keep costs low while meeting client needs is a principal concern. The calculator is a means to solving both these objectives.

While the concept of the calculator is straight-forward, the operations, technology and data management can be complex. Organizations must consider where both internal and external data will come from, what formulas will be used, who will own the business aspects of the calculator and whether a build or buy strategy makes the most sense. Like any project, answering these questions requires a coherent, consistent strategy and will consume internal resources to resolve.

This Finadium research report is written as a business plan template for market practitioners looking to create a Capital Cost Calculator for their organizations. The report develops the ideas of the calculator and answers generic questions that may arise. Firm-specific issues are left to each firm for their own resolution.

This report should be read by trading, treasury, operations and technology professionals considering how best to incorporate and capture capital charges in daily client activity, and to streamline proactive capital management across the firm. The report may also be helpful to technology vendors and service providers working to improve data transparency and reporting to their clients.

This report is 25 pages with 6 exhibits.

TABLE OF CONTENTS

■ Executive Summary

■ What is a Capital Cost Calculator?
– The Revenue Impact

■ Calculator Objectives
– Product Coverage
– Scenario Analysis

■ Business and Technology Considerations
– Business Ownership
– Product Ownership
– Technology Options and Vendors
– Data Management

■ Next Steps in the Project Plan
– What Happens If We Take No Action

■ About the Authors

■ About Finadium