The digitization of banks will quickly spread out to Front and Back Offices.

In the transition period, the success or failure of this process will be decisive for the future of the banks, but at the end of the process, digitization will become a standard and will not be a differentiating property of banks anymore.

A key prerequisite for successful management of the transition process is a consistent nomenclature and a comprehensive description model of the properties of financial instruments. This is precisely what FIDM™ offers.

When developing a large software system, such as a core banking system, a uniform systematic nomenclature is a key element of long-term success.

FIDM™ and the data model for description of positions and transactions, the “Middle Office data Model” (MODM), provide such uniform nomenclatures for the entire securities operations of financial service providers (banks, insurers, stock exchanges, clearing houses, etc.).

FIDM™ is a comprehensive and consistent concept for structuring information on financial instruments and therefore can serve as a blueprint for complete financial instrument databases.

In Switzerland, the financial instruments data bases of both the major banks and SIX Financial Information AG are based on FIDM™. Also a large number of companies in the financial sector are users the Value data Feed VDF of SIX Financial Information AG and therefore in part are familiar with FIDM™.

During the financial crisis, it was found that many banks were not in a position to bring together position, price and risk data from, in some cases, hundreds of database to enable proper risk control and management of the bank.

In 2013, the Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) issued new principles and thereby massively increased the regulatory requirements for effective aggregation of risk data and for risk reporting (BCBS 239).

FIDM™ and the data model for description of positions and transactions, “Middle Office Data Model” (MODM), provide the ideal basis to meet these requirements.

Implementation of BCBS 239 in particular requires a consistent database or a system distributed databases for all financial instruments and positions. Implementation therefore requires exactly the same activities as required for development of a securities database and a position database.

The data models are the decisive factor for the success of the implementation of these databases. The data models form the basic structure for the necessary calculations and for aggregations over bank divisions and beyond. FIDM™ and MODM have been specially developed to provide an overall view of all positions, for the valuation of financial instruments and for calculating the required key figures. These data models thus form an ideal basis for meeting the requirements of BCBS 239.

The data models FIDM™ and MODM enable financial institutions to carry out key tasks within the BCBS 239 requirements:

• Establishing a target vision: how shall the contents and organization of a large number of securities databases look like in the future?
• Establishing of a bank-wide uniform nomenclature and of unique identifiers
• Documentation of existing data models, the actual data content, data processes and data flows
• Elaboration of a concept for a stepwise transition from the existing data models and data content to the uniform data architecture
• Definition of data governance at executive level including competences and resources.

With support by ECOFIN, the uniform data architecture and the transition of the data contents according to the requirements of BCBS 239 can be managed within a reasonably short period.

Correct valuation of financial instruments requires all conditional and unconditional cash-flows of these instruments to be taken into account. The necessary information is available from a database structured according to FIDM™.