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Circle panorama of urban city skyline, such as if they were taken with a fish-eye lens; Shutterstock ID 1039555912; purchase_order: Circles 2021

Legal entity and booking model optimization

Why global banks and capital markets organizations are re-assessing strategies.

In light of recent banking failures, US and global financial regulators are continuing to increase their expectations for legal entity-oriented governance and risk management. Firms have been required to embrace a deeper understanding of their “booking models,” i.e., where, and how financial instruments are originated and booked, the underlying drivers and rationales, and how any residual risks are managed across the legal entity structure.

While booking model remains a priority for regulators, there are drivers for firms to re-assess entity structures and booking practices as well. Booking model optimization provides firms with opportunities to realize simplification benefits, lower the cost base, optimize capital and liquidity, and enable a more streamlined approach to governance and risk management. In addition, it provides an opportunity - in a competitive banking landscape - to increase revenue generating capacity and provide a greater breadth of products to clients across the globe.

In our paper, we provide the key considerations when optimizing legal entity structures and booking practices. We provide ways that firms can identify the strategic value proposition of optimization, calibrate strategic drivers, and the key actions to take in starting the optimization journey.