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11:43 AM
Phil Britt
Phil Britt
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Citizens Unfazed by Changing Regs

Bank finds solution to compliance quandary right under its nose.

One of the top challenges to compliance is that the rules sometimes change with little advance notice, leaving a bank scrambling to change technologies, procedures or both. Such was the case with Flint, Mich.-based Citizens Banking Corp. ($7.8 billion in assets).

In the second half of 2004, the Public Company Accounting Oversight Board (PCAOB) released documents that questioned the validity of using spreadsheets for producing financial results. The PCAOB's opinion handcuffed some banks, including Citizens, that had used Excel or other spreadsheet programs to generate financial results. Bank executives first realized they would have to change their financial reporting processes at a mid-December meeting with the external audit committee, according to Citizens CFO Charles Christy.

Although spreadsheets are flexible and provide quick results, they do not provide transparency. In order for Citizens to continue to rely on spreadsheets, every cell in every document would have to be validated, a far too cumbersome and time-consuming process to produce year-end financial reports on time, relates Linda Lorenz, the bank's financial systems manager.

Fortunately, the bank already was using an application that could solve the problem. Citizens had installed enterprise planning, forecasting and reporting software from Toronto-based INEA more than a year earlier. More than 200 of the bank's managers and commercial bankers were using the software for budget forecasting, funds transfer pricing, and standard and ad hoc reporting. Christy and Lorenz quickly realized the application might also be able to handle the bank's compliance needs.

The bank also called Metavante (Milwaukee), which provides Citizens' general ledger application. But there wasn't enough time for the vendor to develop the necessary reporting software, Lorenz notes. The time constraints also prevented the bank from looking at solutions from other providers.

The time crunch notwithstanding, any other technology implementation would have had to start from scratch, meaning it would have been much more expensive, notes Lorenz. "The documentation and everything else we needed [for INEA] was already built in."

Been There, Done That

So the bank worked with INEA to add the necessary Excel-related functionality to the application. Since the bank already was running the reporting and forecasting software, no changes to its IT environment were necessary, Lorenz points out.

It took about six weeks for the additional functionality to be developed, installed, tested and verified. The process started in mid-December 2004 and was ready to go live by the end of January.

"By providing a set of formula definitions to INEA and leveraging its analytical capabilities, we were able to build a set of templates that allow information to flow through and automate much of the report generation process," Lorenz says. The software also gives users enhanced analytical capabilities for internal strategic planning, she adds.

Citizens uses the INEA application for all Securities and Exchange Commission reporting and Federal Reserve call reports. The software provides not only the reports, but also the necessary documentation to "show why the numbers are what they are," Lorenz explains. The bank plans to leverage the solution to support other regulatory reporting in the future as well, she adds.

"We had our external auditors [Ernst & Young] look at [the INEA application] when we filed our 10-K. They said it was one of the better control processes they had seen," Lorenz notes.


INSTITUTION: Citizens Banking Corp. (Flint, Mich.).

ASSETS: $7.8 billion.

BUSINESS CHALLENGE: Alter financial reporting procedures on short notice to comply with changes in rules.

SOLUTION: Toronto-based INEA's enterprise planning, forecasting and reporting software.

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