Challenges and Opportunities in Fixed Income Management for Banks
In Chile's competitive financial market, banks face significant challenges in managing their fixed income portfolios, due to outdated systems and complex regulatory environments, which compromise operational agility and financial returns.
To remain competitive and adaptable, these institutions must undergo a digital transformation that optimizes their transactional operations and allows them to respond swiftly to market changes. Traditionally, such transformations have been risky, costly, and time-consuming. This article explores the specific challenges faced by Chilean banks and how a SaaS system like VMetrix can help overcome them.
Fixed Income Management Challenges
Most of the banks in Chile that have treasury systems had to go through painful implementation processes that required millions of dollars and took years to become operational. Even today, they have to face large expenses for maintenance and updating of software and hardware, in order not to suffer obsolescence.
A critical issue in the financial industry is the limited availability of modern fixed income management systems. This limitation forces banks to rely on outdated software, heightening operational and reputational risks.
Furthermore, the systems currently available in Chile often lack customization for local market conventions, such as accurate valuation at local rates and proper handling of the UF (Unidad de Fomento) in portfolio valuations. This oversight leads to additional costs for continuous improvement projects and a heavy internal workload.
What about market information? Bank traders and portfolio managers often have to trade assets with low liquidity. Obtaining reference prices to optimize their operations implies additional costs with information providers, or involves great effort and time to perform their own calculations in tools such as Excel.
Also, when they need to register new issues in order to trade, the implementation of these instruments can take up to weeks. All in all, this has an impact on the Time-to-Market so necessary to take advantage of market opportunities.
VMetrix: The next generation in financial technology
Historically, banks had no choice but to put up with the limitations of their treasury management systems, because switching them involved long and expensive contracting and implementation phases. Consequently, many banks resorted to using Excel or developing their in-house tools.
VMetrix has transformed the playing field with its SaaS (Software as a Service) solution. Unlike traditional systems, VMetrix enables comprehensive management of fixed income portfolios, with 95% of financial instruments preloaded, Chilean market conventions integrated, and projection and discount curves modeled along with built-in regulatory reporting.
Unlike the years of implementation and large investments required by portfolio management systems available in Chile, VMetrix is ready to be fully operational in only 3 months, and is contracted on a subscription basis, which is unique in the market.
How VMetrix Addresses Market Challenges
VMetrix supports the Chilean market conventions, and delivers them parameterized. This applies to, for example, TERA, par value calculation, Yield to Price and Price to Yield.
The system uses financial mathematical formulas to model reference prices for low liquidity assets.
If there is a new issue, VMetrix has a specialized team to model the instrument immediately and make it available for trading. It also allows for in-house issuance of time deposits, bonds and bills of exchange.
It has parameterized curves to value the instruments, and also provides market inputs, such as prices and rates.
VMetrix has preloaded multiple currencies and inflation indexes for operations, such as Chilean pesos, UF, dollars, euros, and many more.
On the same platform, users can set investment limits per portfolio, maintain historical transaction records for audit purposes, and automate accounting reports tailored to business needs.
The system has the calendars of each country configured and updated, for greater accuracy in financial planning regarding issues such as coupon payments and amortizations. It also automatically reflects the new payment date according to the specifications of each instrument.
All these functionalities are provided as a service, with no additional cost or need for new development projects.
VMetrix redefined the way Fixed Income is managed in Chile, offering banks a solution that not only complies with regulatory and market requirements, but also improves efficiency and reduces costs.
