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Home > Derivatives Resources > Case Studies > Insight Solutions

First Calgary Financial Case Study

Hedge Accounting Insight Saves Time and Improves Productivity at First Calgary Financial.

THE CUSTOMER

First Calgary Financial is Calgary's largest locally-owned, full-service financial institution and the ninth largest credit union in Canada, with assets under administration exceeding $3 billion. It provides service through 16 branch locations; telephone, internet and mobile banking; a Contact Centre and Automated Banking Machines to over 80,000 members in the greater Calgary area. Services include: Retail Financial Services, Business Banking, Consumer Financing and Investment Services. First Calgary Financial has been named one of Canada's 50 Best Managed Companies for 11 consecutive years by the National Post, one of Alberta's Top Employers by Mediacorp Canada, a Green 30 Company and one of the Top 10 Most Admired Corporate Cultures in Western Canada.

THE NEED

Recognizing that its members require a myriad of choices when it comes to managing personal finances, First Calgary Financial offers a complete line of financial products and services, utilizing strategic partnerships to streamline an array of services to its clients. The credit union enters into derivatives contracts in order to hedge against interest rate fluctuations, buying and selling as is strategically appropriate.

However, First Calgary Financial did not have a system in place to verify its counterparties' valuations, leaving it with no choice but to rely on externally provided quotes. The credit union needed a fast and accurate valuations system to ensure it was getting an accurate price for its hedging contracts. Valuations needed to be calculated at least once a week, so it was essential to find an independent, third-party solution that would not only enable the Treasury team at First Calgary Financial to run valuations in-house, but would also ensure that the process was smooth and timely.

THE SOLUTION: HEDGE ACCOUNTING INSIGHT

When researching the different systems available in the market, ease of use and efficiency were key criteria. First Calgary Financial also wanted a Software-as-a-Service solution, so setup and system maintenance could be kept to a minimum. "It was important for us to select a tool that was web-based and intuitive," says Brian Graham, Manager Treasury, First Calgary Financial.

In order to meet these needs, First Calgary Financial selected Hedge Accounting Insight, a web-based derivatives valuation and hedge accounting solution from FINCAD, a vendor highly recommended to the credit union. The system provides First Calgary Financial with the independent and accurate derivatives valuations it needs to verify counterparty valuations in an easy to use, intuitive interface, thereby saving considerable time and instilling confidence in the outputted numbers.

Reliable and Independent Valuations

Having a significant swap portfolio to value, it is critical for First Calgary Financial to understand the mark-to-market value of its hedges. This gives First Calgary Financial more negotiation power and confidence when reviewing quotes and deciding which contracts to enter into.

Prior to selecting FINCAD, First Calgary Financial did not have a valuations pricing tool in place. According to Brian Graham, "We were going into the market blind, with no way of checking whether or not the counterparty was quoting an accurate 'live' rate. Now, we have confidence in the numbers. We're sure of the inputs and we're confident of the outputs." With Hedge Accounting Insight, First Calgary Financial is able to obtain better prices when entering into contracts because its counterparties know that the credit union has access to an industry standard and accurate pricing tool.

Saving Time through Automation

Manual approaches can be complex, time consuming and error-prone. Hedge Accounting Insight's automation capabilities help First Calgary Financial save considerable time and reduce the chance of human error. According to Brian Graham, before implementing FINCAD's hedge accounting solution, "It could take up to a few hours to receive a quote from a counterparty. Now the process takes only a matter of ten to fifteen minutes. Instead of waiting for the counterparty to look to the market for a quote, we can use Hedge Accounting Insight, and within minutes have a reliable estimate of the value of the swap at any given time, enabling us to make quick decisions if necessary."

This tenfold increase in time savings allows First Calgary Financial to quickly respond to and take advantage of market changes in interest rates. "We can now buy or sell hedges in response to spikes in interest rates, (something that is quite time sensitive), allowing us to cut down our reaction time in activities that affect our bottom line." Since calculations are run automatically (daily, weekly, monthly, quarterly or on demand), First Calgary Financial is also valuing its derivatives more frequently, so the Treasury team can react more quickly to changes in its net derivatives positions.

Fully Transparent & Built-In Documentation

Hedge Accounting Insight's detailed reports provide First Calgary Financials' Treasury team with an audit trail and allow them to see the math, market data and methodology used in the calculations, so they can now easily answer any questions that are raised by internal or external stakeholders. With the ability to download valuation reports anytime or to receive them directly in the user's inbox, First Calgary Financial can also quickly disseminate its documentation throughout its team.

"The built-in documentation is very helpful, particularly the PDF reports," explains Brian Graham. "Hedge Accounting Insight is a good piece of software for us to use and our auditors are comfortable with the whole process now. I'm very happy with Hedge Accounting Insight – it works really well for us."

THE FUTURE WITH HEDGE ACCOUNTING INSIGHT

As the business grows, First Calgary Financial plans to continue using Hedge Accounting Insight to support its derivatives operations. By having more visibility into its portfolio performance, First Calgary Financial can now support its hedging strategy, and is better protected against movements in the market. And the ability to do so quickly allows First Calgary Financial to take advantage of time sensitive fluctuations, in addition to spending more time focusing on core business functions. Furthermore, the treasury team can add trades and hedges without having to invest in new hardware or software. "We plan on expanding our use of Hedge Accounting Insight in the future as we extend our instruments," says Brian Graham. "It has enabled us to gain a deeper insight into our derivatives and act accordingly, positively impacting our bottom line."

Download in PDF

We couldn't be happier with Hedge Accounting Insight. As a web-based solution, it's easy to use and hassle-free to implement, saving us considerable time. With its automated reports and built-in documentation, Hedge Accounting Insight has enabled us to gain a deeper insight into our derivative portfolio and act accordingly, positively impacting our bottom line.

Brian GrahamManager Treasury,
First Calgary Financial