A REPORT

ON

Process Improvements in Reconciliations

BY

Name of Student:

ID No:

Malavika G Nair

2012A1PS460G

AT

J.P. Morgan Chase & Co., Bangalore

A Practice School-II station of

BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, PILANI

(June, 2016)

ACKNOWLEDGEMENTS
I am very grateful to Jamie Dimon and J.P Morgan Chase, Bangalore for providing us with an
opportunity to take up my project here. I sincerely thank BITS Pilani for giving me this
opportunity to pursue my Practice School II at such a reputed organization. I express my
heartfelt gratitude to the Dean, Practice School Division for offering me this PS-II program. I
express my special gratitude towards Mr. Nikhilesh R Panamgipalli for guiding me with their
valuable suggestions at every stage of my report. I would also like to thank all the team heads
and all the employees working under various departments for providing me with valuable
information for writing my report. I would like to express profound gratitude to each and every
person who has helped me understand the delicate intricacies of corporate investment banking
for their invaluable support, encouragement, supervision and useful suggestions throughout
and answering all my queries without hesitation. Their moral support and continuous guidance
enables me to work on the project successfully.

BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE

PILANI (RAJASTHAN)

Practice School Division

Station: J.P. Morgan Chase

Centre: Bangalore

Duration: 5 Months
Date of submission: June 8, 2016
Title of the project: Corporate Investment Banking and Reconciliations
ID Nos/Names/Disciplines of Students:
2012A1PS460G/Malavika G Nair/B.E (Hons.) Chemical Engineering

Name(s) of the PS faculty: Mr. Krishnamurthy Bindumadhavan

Key words: CIB, Reconciliation, Process Improvements in Reconciliation Process
Project Areas: Reconciliation of EMEA Coupon Payments, Process Improvements

Abstract: The project is in the area of reconciliations for EMEA Coupon Payments to match off
statement credit/debit against ledgers. The project was a root cause analysis to find out the
areas of improvement to reduce breaks associated with the same. The final deliverables
included identifying reasons of an increased number of ledger breaks and recommendations to
reduce toe same. Also, the areas of refining the process of reconciliation were also identified.

Signature(s) of Students(s)

Signature of PS Faculty)

Date: June,2016

Date: June,2016

Table of Contents

Acknowledgements

Abstract

1.Introduction

2.Fixed Income Collection

3.Process Improvements

10

4.Root Cause Analysis

11

5.Recommendations

13

6.Conclusion

14

References

15

1. Introduction
1.1 Introduction of the company

An American multinational banking and financial services holding company - JPMorgan Chase
& Co. is the largest bank in the United States. The four major areas that JPMC deals with being
Asset Management, Corporate Investment Banking, Corporate Commercial Banking and Fund
Accounting.

Corporate and Investment Bank

J.P. Morgan Corporate & Investment Bank possesses all the best-in-class and global elements
required to effectively serve their clients into the future.
The Corporate & Investment Bank leads transactions aimed at helping their clients succeed. The
support they provide clients ripples through the economy, creating jobs and providing financing
for growth and investment domestically and across the globe.
With their breadth of capabilities in Banking, Markets and Investor Services, they provide bestin-class services to companies, governments and institutions globally. Their scale, global
presence and balance sheet strength allow us to make markets when others are unable to do
so, provide liquidity in tough market conditions and maintain safe custody of client assets
through volatile markets.
However, commercial banking operations are limited to United States only. The operations
of J.P Morgan Global Service Centre in India, which is primarily a back end office is classified
under three wings for the Corporate and Investment Bank: Market, Investor Services and
Banking.

2. Fixed Income Collection

CIB in JP Morgan Global Service Centre in India is a back-end office which supports the
whole company. It has three broad wings, namely: Market, Investor Services and Banking.

The team which I was involved with comes under Investor services. Under Investor
Services, the team was part of a broader team called IB Redemptions which dealt with the
approval of payments of coupons, redemption of bonds, depot coupons, triparty claims
and pass coupons. It also processed the receivables and payables to the company which
involves contacting different clients and sending claims for the same.
2.1 Depot Coupons:
Bonds are debt instruments on which coupon payments are paid at regular intervals..
Depot coupon payments are those which are collected for JPMC itself. There are no other
clients involved in this. The clearing house is called Euroclear which sends out a report on
a daily basis from which the redemptions, and coupon payments are done. On a daily
basis, they receive funds from agents like Euroclear, DTC and other local markets.
2.2 Triparty Claims:
Triparty claims are deals which involve three parties. Here, a trade is done for a client on
behalf of another party which is done for a third party.
Everyday on the payment date, the payments of triparty claims or depot coupons which
needs to be done are received. This data which includes the cash amount and record date
are cross checked with the main frame system which calculates and maintains the details
using information from Bloomberg. If the details match or are within tolerance, the
transaction is approved and the ledgers are generated. These ledgers are daily monitored
for breaks and this process acts as a control function for the above.
2.3 Redemptions:
The team deals with only redemption trades with no withdrawal of securities. So, on the
maturity date, the middle office books the trade and it is approved by the back end office
when it is obtained from the Euroclear report. Also, everyday a report on Delayed items
are made and sent to a list of recipients.
3. Process Improvements
3.1 Project Overview:
Throughout the Asset servicing, Fund Services and Securities Processing department, a
project on operational excellence is carried out. Operational excellence is achieving the

best results out there by the most efficient use of resources, time and effort,.i.e doing first
class business in a first class way which is the JP Morgan motto.
For the successful implementation of the project, process improvement ideas need to be
organized, prioritized and automated in the best possible way. There are two ways to
improve business processes: Through automation and through process improvement
techniques.
3.2 Automation:
A technology support team called as Rapid Action Delivery(RAD) has a set of automation
tools which can be utilized to automate some of the identified redundant processes.
Automation can be done on two levels:
Tactical Automation : Automation using less digitized space meeting short term goals.
E.g Building macros for a mainframe system used only for a specific process.
Strategic Automation: Automation using more digitized space meeting long term process
improvement goals.
Eg. Upgrading the capabilities of the main frame system itself.
3.3 Process Improvement Techniques:
1. Process Mapping:
Business process mapping refers to activities involved in defining what a business entity
does, who is responsible, to what standard a business process should be completed, and
how the success of a business process can be determined.The main purpose behind
business process mapping is to assist organizations in becoming more efficient. A clear
and detailed business process map or diagram allows outside firms to come in and look at
whether or not improvements can be made to the current process.
Business process mapping takes a specific objective and helps to measure and compare
that objective alongside the entire organization's objectives to make sure that all
processes are aligned with the company's values and capabilities.
Once a process has been mapped to the very detail, one can identify areas of
redundancies, scope of improvement and even elimination of non value adding processes.
Lower the number of decision points in a process, easily can it be automated.
2. Identification of VA, NVA and ENVA processes:
Value Added activities are that which bring an end value to the customer. It is something

the customer is willing to pay for.

Non value added processes are those which the customer is not willing to pay for, while
essential NVAs are those which are absolutely necessary. For example, Audits, reporting
and other control functions to minimize errors are not something the customer would pay
for but nevertheless they are required to ensure efficiency and accuracy.
3. T.I.M.W.O.O.D.S
This is a tool identify the areas of a process where there is a waste of time, energy or
resources.
T- transportation: Unnecessary shift of work
Inventory: Useless inventory taking up storage space
Motion: Keeping resources accessible
Waiting Time
Over-processing: Unnecessary processes
Over Producing: Production without being aware of the demand.
Skills: People with wrong skill sets at the job
4. Fish-bone Diagram
A fish bone diagram is a way to identify the different cause of a problem:
5.Pareto analysis:
This 80/20 rule: 80% of the errors can be avoided by removing 20% of causes. This tool is
to identify the key focus areas to solve a problem

4. Root Cause Analysis

Defining the problem :
When the funds received from the various agents are in line with those generated by the
mainframe system which obtains its data from Bloomberg, the items are coded resulting in the

generation of ledgers. These coded ledgers and the received statement credit or debit is fed
into a web-based application which acts as a control on the reconciliation activity. When
payments do not go through or items are not coded due to difference in funds received, it
creates ledger breaks. The number of these breaks in the Nostro account was way over than
what was deemed healthy.
Objective: The objective of an RCA study is to find the reasons for the unprecedented amount
of breaks and propose solutions to bring down the same.
Since the problem is caused by multiple factors, a fishbone diagram was used to find the
reasons after studying through sets of data.

Fig 4.1

5. Recomendations:

1.Manual Reconciliations

Strategic automations which improve the capability of the

main frame system would prove useful in the long term.

However since this is controlled by a different team and has
some difficulties to implement, tactical automations were
done by the use of macros. Macros have been developed
which has semi-automated the process reducing the time for
processing to half of before.
2.Large
discrepancies
reference data

in Since we do not receive any information from agents that

how long funds are delayed, these items could still be under
static. Pre-pay date reconciliation can be done to reduce the
number of items which should be submitted to the
instrument support team to amend and bring in line with the
funds received from agents.

Lack of planning on high Pre-pay date reconciliation has been done by means of early
volumes
processing of SWIFTs received which has brought down the
number of static amendments to be made.
Delay in response
MO/static data team

from Due to the highly hierarchical structure, delay in responses

are always a big problem. Instead of reaching out to Middle
Office for excusable amounts manual adjustments can be
made from the coupon control side which would bring down
the breaks. Keeping a strict upper limit on the number of
days an item should be under static amendments is another
key thing to be done.

Ownership of breaks

Clear cut definition of domains of different payments to be

standardized as sometimes it is not clear which coupon
payments are to be processed by the fixed income nostro
team

Unrefined Process

Establishing clear timelines for resolution of breaks should

be made a high priority.

No tracking of items under Creating a share-point excel sheet and providing status
static
updates daily to take immediate and effective action when
required.

6. Conclusions
Process improvement methods are highly effective in improving the overall efficiency of a
poorly designed process . Challenging the status-quo is the most important thing here. By the

application of various process improvement ways which included automation and

nonautomation techniques, the breaks under this nostro account for fixed income coupon
collection was brought down to a healthy number.

References
1.

Fundamentals of Business Process Management By Marlon Dumas, Marcello La Rosa, Jan

Mendling,
2. http://www.tradefinancemagazine.com/

3.

http://www.investopedia.com/

4.

http://en.wikipedia.org/