New Chase Prepares To Go Live With Global General Ledger Application

Operations staff at the former Chemical and Chase Manhattan banks are busy gearing up for the second phase of their merger. In the run up to the so-called Day Two deadline of July 15, five project teams are preparing to deploy a single organization-wide general ledger and accounting system for the combined global banking group.

Chase's and Chemical's respective parent holding companies merged their operations on April 1 --known internally as Day One--forming a single entity dubbed the Chase Manhattan Corporation.

Day Two will involve the two commercial banks merging their operations to form the new Chase Manhattan Bank.

On that date, merger teams will go live with three fundamental pieces of the combined bank's systems infrastructure: a federal funds transfer system, a Federal Reserve Bank reconciliations system, and Dun & Bradstreet Software's E-series general ledger and accounting system.

Three key systems

"By putting these three systems in place, the bank will be able to effectively manage the remaining 200-odd integrations that will take place over the next 20 months," says Jeff Short, executive vice president of Comtex Information Systems.

New York-based Comtex is the general ledger project's lead consultant. As such, it is providing a range of support services for the merger, including project management, systems integration and end-user training.

Comtex was chosen from a group of ten bidders to supplement Chase's general ledger project management and systems integration teams, according to Peter Fraedrich, financial director of Chase's general accounting operations.

The consulting divisions of the so-called "Big Six" global accountancy houses all bid on the project, he says.

He adds that Comtex had previous experience in carrying out the 1991 merger of Chemical Bank and Manufacturers Hanover. This factor worked in Comtex's favour, says Fraedrich, but its selection was in no way a given.

"We have a sourcing group within the corporation that manages any agreements with outside services that we pursue," he adds. "Part of that effort requires us to put out a request for proposal."

Fraedrich describes switching to a unified global general ledger platform as an immense and crucial component of Chase's overall merger plans.

Receiving timely and accurate general ledger information is vital to the bank, he says, in terms of its ability to effectively manage its global operations as the merger progresses and thereafter.

Team members have to address the myriad project scheduling and operational risk issues inherent in the conversion process, he adds.

The bank's central finance function believes in putting accounting controls "at the source" and has appointed financial controllers and accounting specialists for each of its business units locally, says Fraedrich: "Each business area is responsible for their accounting transactions and all the financial flows for that business."

In addition to gathering and aggregating this accounting information, the centralized general accounting operations group also establishes standards, policies and procedures for each local team's business and systems.

Several hundred project team members have been working closely with business unit end-users to define their reporting and information needs.

The new Chase's merger project team has consulted with business end-users to establish performance metrics, threshold monitoring, trend analysis and systems testing programmes, says Short.

Early warnings

"We have a number of areas integrating on Day Two. Given the significant dollar amounts and transaction volumes we're dealing with, we have to be able to manage that data flow and have early warning systems in place," he adds.

US banks are required to report account balances and portfolio positions to the Federal Reserve on a daily basis, says Short. Such regulatory issues impact on the management of the merger process, he adds.

"If you don't have a confidence level as to the numbers you're getting, you can estimate them for up to three days, but at some point you have to own up to it," says Short. "You really want to minimize the amount of unrecognized or irreconcilable differences produced by the new system."

Minimal changes

A key aspect of the bank's general ledger merger strategy is to minimize the number of changes made to any given employee's daily activities, says Fraedrich.

"Rather than taking a big bang approach where every operating unit and system converts on day one, this gives us the opportunity to integrate our operations at a more manageable pace," he adds.

Ed Giovine and Sam Buttigieg, the bank's project team leaders, have assembled five separate multidisciplinary teams to carry out the general ledger merger process.

Several hundred bank staff and Comtex project consultants will at one time or another contribute to this effort.

The individuals participating were chosen for their specialized knowledge of the combined bank's functional business and systems requirements, says Giovine.

Logical v functional

Organizing the ledger systems conversion project into logical units as opposed to functional disciplines was one of the lessons learned during Chemical Bank's merger with Manufacturers Hanover in 1991, he adds: "We designed the project so that each general ledger project team has the range of skills needed to bring an entire function from its design phase into production."

The various project team leaders meet each week to review their progress, assess their readiness and modify their plans as needed, Giovine says.

"In a project of this scale, you're constantly reassessing your plans and adjusting them according to actual developments," he adds.

The entire general ledger systems planning and conversion process is being thoroughly documented, says Fraedrich. Project team members are making extensive use of IBM's Lotus Notes software to do this, he adds.

The documentation aspects of the merger also involve representatives from the bank's internal audit department.

These auditors are recording and evaluating each project stream's plans and progress, says Fraedrich: "All the documentation and minutes of our planning meetings are on Notes. Anybody involved in the project has access to it."

Dun & Bradstreet's E-series general ledger system taps into the new Chase's so-called Corporate Information Interchange System (CIIS) to capture the low-level data required by the bank's regulatory and reporting functions, says Giovine.

The CIIS data cache and interface also supplies information to a range of other strategic, downstream information systems, he adds. These include the bank's asset/liability, market risk and credit risk management systems.

Information from the general ledger system itself is used by the bank's credit officers and is incorporated within its so-called Global Exposure System (GES). This system is used by bank staff to manage credit risks inherent in its financial products, says Giovine.

For instance, loan officers use GES, among other tools, to review and rate the credit quality of the bank's commercial loan portfolio (RMO, June 3).

IBM mainframe

The E-series general ledger data repository resides on an IBM mainframe at Chase's Delaware data centre.

The system is currently receives daily data updates from all the bank's respective branches, operating units and subsidiaries worldwide, says Fraedrich.

Chase's general ledger project team is two-thirds of the way through a 45-day parallel test of the Dun & Bradstreet application. This will culminate on July 1 when the general ledger project team initiates the systems conversion process.

Accounting controls

The conversion will result in the E-series general ledger system being used to support the financial accounting, control and management information needs of all the combined bank's operating units and subsidiaries.

In addition to the two banks' US and overseas retail branch networks, these include the entire range of their wholesale banking operations, including commercial lending, capital markets sales and securities trading.

The combined bank's operation also include holding company subsidiaries, such as securities broker/dealer Chase Securities, and bank subsidiaries such as the Chase Manhattan Mortgage Corporation, the bank's mortgage origination and servicing subsidiary.

Accounting and management information systems data from all these operating units is now being transmitted into the two banks' existing general ledger systems as well as into the new centralized E-series system.

Operations staff are now entering accounting information directly through the banks' two existing PC-based general ledger systems interfaces into the E-series data repository.

Additional information is also captured electronically from business units' operations and back office processing systems.

Once this globally integrated accounting and control infrastructure is in place and live, the team can move forward to install common PC-based front-ends to the E-series system, adds Fraedrich.