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Case Study

New Application Interface to Automate Letter of Credit (LOC) Issuing Processes

Overview

A large financial institution from the US wanted to streamline the process of issuing Letter of Credits (LOCs) to its member banks. These banks were its partners who were depending on its support for liquidity, asset/liability management, and housing, community, and economic development activities. An L/C acts as a promise made by the Bank on behalf of the member to make payments to a third-party beneficiary in the event of a default of performance.  

The daily tasks for the Bank’s employees involved generating several reports: Daily Reports, General Ledger Reconcilement Reports, Daily Transaction Journal Repot, Amortization of Fees, Commitment listing Report, Commitment Summary Report, etc. The older legacy platform made it difficult for the Bank’s employees to perform reconciliations at the end of the day by matching the member bank’s commitment request details, tracing the changes, and finally tallying it with the commitment. The commitment amount mentioned in the LOC is issued after multiple credit check processes. 

The legacy application interface was build using PowerBuilder and migration to Java brought the flexibility required to add new automation capabilities. The migration makes it easy for the bank to make rapid changes in its framework while supporting an open, flexible platform development environment. Using Sun Technologies’ automated migration tools, our Solution Architects completed the project in rapid sprints to successfully launch the new application. It has helped convert all PowerBuilder app functionalities to a Java-supported modern web architecture and interface. 

Our Solution

  • The newly deployed interface allows batch processing for issuing multiple LOCs in one click 
  • The process of notifying the customer closer to the data of renewal has been automated 
  • Digital Bots are helping the Bank’s auditors fetch the required information easily 
  • Auditors can now generate daily and monthly commitment summaries with a simple click 
  • Users can view Renewed Commitments, Commitments to be Renewed and Changes to Renewal Amount, Amortization Fees, etc. 
  • Approval dashboards give administrators the ability to get Pending/Approved/Rejected/Failed commitments in one-click 
  • Approvers get a single dashboard view of all the information needed: Commitment Type, Original Balance, and Status 
  • Auditors can easily view Outstanding Advances, Collateral Availability, Financial Guarantees, Interest Rate Swaps, and Unsecured Credits 
  • The new application streamlines complex processes involving generation of reports such as Transaction Enquiry Report, Transaction Journey Report, Transaction Journal Reports, Financial Guarantee Reports
  • Automation helps to automatically re-calculate fees based on modifications made to the contract
  • The system automatically calculates the credit rate and maturity date
  • Easy Credit Assessment and Analysis feature gives a single pane view of – Collateral, Outstanding Advances, Unsecured Credit, Guarantees, and more.

Challenges

  • Errors in data inputs of credit rates, maturity dates, renewal fees, and related changes.
  • Errors caused by frequent screen changes and switching to new folders in a clunky User Interface
  • Audit reports required double-checks before a Letter of Credit is issued.
  • Auditors had to look through multiple folders to get the required information.
  • Processing large volumes of Letter of Credit (LOC) request documents and collateral pledges caused delays
  • Processing large volumes of Commitment Linkage Changes required more resources
  • Amending large amounts of Commitment Linkage Details required more manual time and effort
  • Error-prone processes to in linking multiple LOCs with Member bank deposits 
  • Monitoring/Adjusting multiple Letter of Credit requests from a Member Bank was a tedious task

How we Helped

  • Our solution architects helped retire the legacy interface used by the Bank’s employee 
  • Smooth transition was made to a new application portal for all PowerBuilder functionalities 
  • Enhanced the security and auditing functionality aligned with user roles and permissions 
  • Manual processes involving queries and generating reports were automated using a RPA Bot 

The Impact

  • 80% faster turnarounds in issuing LOCs
  • 95% tasks related to data retrieval and calculations are automated
  • 75% savings in Auditor’s time spent on manual data collation from multiple systems

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