Presentation Title Presentation Title Second Line

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Charles Schwab and Infosys:Credit Risk Management Platform

©2016 Pegasystems Inc.

Rama BokkaVice President, Brokerage Accounting and Trading Technology, Charles Schwab

Jeffrey StarrVice President, Trading Risk Management, Charles Schwab

Saurangshu C.Principal Consultant, BPM Technology, Infosys

Agenda

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Program summary

Solution overview

Business benefits

The Infosys advantage

Future plans

Program Summary

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Charles Schwab’s Advanced Collateral Management System transformation program kicked off with automating the risk management of credit risk products. It was then extended to margins and retirement accounts and provided a one-stop shop for the mid-office and risk analysts to track and monitor risks and take appropriate corrective actions to protect the firm’s financial interests.

The solution provided a single platform that significantly improved productivity by doing the following:

• Flexibility to offer different margin requirements based on account, concentration, security type, and class

• Streamlined and efficient end-to-end process automation and tools for enrollment into various collateral offerings

• Continuous, near real-time risk monitoring for the accounts in different collateral offerings

• Dynamic risk management capabilities to proactively identify the collateral risk by using methods such as concentration models

• Streamlined process automation and controls to take timely action on accounts under maintenance calls

• Proper audit tracking and regulatory compliance• Enablement of a 360-degree view of the account and its risks

Solution Overview Features That Create Differentiation in the Marketplace

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Risk and compliance management

Finance – brokerage and trading

Pega PRPC7.1, No SQL DB, ESB Middleware, AppDynamics, Microsoft.NET 4.5

Industry

Products

Topics

The collateral management system is the first of its kind in the industry and the firm; it has been rolled out to the firm as a platform for risk and compliance management. It provides the following benefits:

• Integrates ten different bank domains for correspondence with customers, branch services, and advisors; using alerts, emails, letters, and dialers

• Enables case management along with audit trail; a 360-degree account view that makes it easier to answer customer queries

• Acts as a single portal for sellout of orders via Pega integration with other bank domains to protect the firm’s risks

• Enables automated risk monitoring and processing during high market volumes for 10 million accounts daily and its transactions, parameters, and thresholds (that are managed via business rules exposed to end users for values that can change based on the market condition)

Solution View

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BANK BUSINESS

CORPORATE MARGIN RISK

Loans

Margins

Retirement accounts

Order execution

Futures

Portfolio margins

Credit products

Correspondence

Pega 7.1.6

Case management

Business rules management

Presentation services

Integration services

Organization management

Business activity monitoring

Consistency of data

Reliability of information

Automation efficiency

360-degree view

Auditing

Regulatory compliance

Create credit

products

Risk monitoring

platform

Business Benefits

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Optimization of cost: Over US$20 billion worth of margin money that is lent to Schwab Margins customer base for Schwab is now tracked efficiently with 80% auto processing, which means with the current capacity, the products can be released to almost twice the customer base.

Increased customer base: PAL Business Products recorded a 60% year-on-year growth post its release, with a US$4 billion net asset increase. Net customer base is being increased by four times over the next year, for the product.

Minimal risks: The platform has helped Schwab implement better controls around compliance and risk management, and adhere to the rules laid out by FINRA. This has provided Schwab better control, to monitor and take actions on customers, and alert them to adhere to the regulations laid out by FINRA.

Real-time processes: Replaced batch processing with real-time risk monitoring, removing blind spots in intraday monitoring and during the last hour before market close, for the 25,000 highest risk accounts with concentrations events.

Customization capability: Built the ability to customize advanced rates for specific positions and accounts, based on the account or position risk. Developed an equity risk percentage calculation that identified liquidation value of accounts so that the most risky accounts can be prioritized during high market volatility periods.

Business Benefits (cont.)

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Faster decisions: Improved the speed and efficiency of decision-making by eliminating the need for margin reps to search across multiple systems. Straight-through automation parameters can be set by the business depending on market volatility, which gives the firm a better handle on managing risks.

Automation: Built the capability to automate processes like sellout of equities and mutual funds from a single solution.

Scalable and adaptable: Built a platform along with an infrastructure, both of which are now being easily extended to risk and collateral monitoring for the firm’s other trading products like futures and portfolio margins.

Better communication: Improved communication mechanism using letters, real-time emails, alerts to advisors, and autodialers to customers that are automated and can be suppressed based on the configurable business logic being managed by the business itself, within the solution.

Increased capacity: Over 500,000 risks were managed by the solution over the last nine months via case management.

The Infosys Advantage

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• Chose Pega 7 as the platform to deliver the solution after evaluating some other leading BPM products

• Started as a new PEGA 7.1.6 program

• Leveraged OOTB features, which enabled quicker delivery

• Carried out five major business product releases in 2015, on the platform

• Leveraged Infosys BPM CoE and Schwab BPM CoE for code and design governance

The Infosys Advantage (cont.)

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• Used the shared Java environment and shared Oracle instances for solution development and delivery

• Adopted agile methodology for the delivery of the solution. It was supported by a continuous feedback loop so that the business has enough time to provide the solution feedback

• Sufficient sprint testing to preserve the solution quality

• Implemented multiple integrations with ten, different bank domains and developed enterprise components that were reused in the delivery of subsequent projects

• Identified opportunities to bring all functionalities under one solution proactively, thereby preventing a swivel-chair effect for the user and improving productivity

Future plans

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Continuous improvements to the existing business products with monthly releases

Onboarding of new business products onto this platform

Back-end and integration domains to be brought into the agile mode

Regression test automation suite using scriptless test automation tools

THANK YOU