Case Studies

BDO has extensive experience in providing solutions to all sectors of the financial services industry:

• Banking case studies
• Capital markets case studies
• Investment fund case studies
• Insurance and retail financial services case studies

Banking case studies

Valuation manual

Following the volatility in the market over the past year, our client, a UK subsidiary of a large foreign bank, realised that it required a document formalising both the control procedures and valuation methods for the range of financial instruments held in its portfolio.  We were engaged to write the valuation manual following consultation with both the UK subsidiary and the parent company.

The engagement involved expert services such as:

• Providing a detailed review of the requirements of valuation of financial instruments under FRS 26 and IAS 39;
• Providing an analysis of valuation requirements  and recommendations under the regulatory framework;
• Delivering best practice valuation techniques for a wide range of financial instruments including equities, options, ABS, MBS, Convertible bonds, repo, CDS and foreign exchange instruments; and
• Identifying practical governance and internal control procedures that should be implemented at the subsidiary to comply with best practice procedures.

We delivered the first best practice valuation manual to the subsidiary that has subsequently been used across the bank’s network and in discussions with the banking regulator.

IFRS and US GAAP Advisory for new repo product

As part of a combined UK and US BDO team we provided to LCH Clearnet, the European clearing house, accounting advisory services as part of a new repo product launch.

Using our IFRS and US GAAP reporting specialists combined with our banking team we worked with LCH to structure the product in such a way to produce an optimal accounting result for its members.
Our work with LCH demonstrated our strong financial instrument standard expertise under both IFRS and US GAAP, our ability to practically apply this to financial products and capability to address, as one team, all European and US aspects. 

Internal audit solution for a major global bank

We currently provide a fully outsourced internal audit service for the London operation of a top 150 world bank.  Working closely with local management and the head office internal audit function we provide an assurance solution which focuses on the key risks specific to the branch.

On an annual basis we carry out a comprehensive risk workshop exercise with senior management which maps the risks and controls specific to the branch.  Our annual internal audit programme then focuses on assessing the effectiveness of the controls identified, reporting to management and following up on recommendations.

The service is a cost effective internal audit solution which provides our client with a full assurance service from a team with deep, specialist skills covering the financial, regulatory, IT and treasury aspects of banking operations.

Capital adequacy review for a UK retail bank

We recently conducted a detailed review of the individual Capital Adequacy Assessment Process documentation of a mid-tier retail bank operating in the United Kingdom.

This work involved a comprehensive review of the underlying forecasts and related assumptions, the company’s capital allocation to specific risks, its overall risk assessment process and key risks identified, to aid the bank in finalising its own assessment of its capital needs.

Our team also assisted the bank with internal training to ensure its staff are up to date on regulatory developments and will soon be assisting the client with its Pillar 3 disclosure development.

Hybrid Tier 1 capital advisory for an international bank

Through our specialist tax team, we advised on the tax implications of a hybrid tier 1 issue by an overseas bank, including whether this should be booked in the London branch.   Consideration was given to the regulatory and tax consequences both on the issue and regarding the on-lending of the funds.  Key to this was an understanding of the parameters imposed to quality as Tier 1 capital and an application of the UK tax rules to these, including the impact on the notional branch capital adjustment.

Back to top

Capital markets case studies

Fast growing UK institutional stockbroker

In 2002, we assisted with the FSA authorisation process and advised on the capital structure of a UK institutional stock-broking firm following the departure of an institutional trading team from an international financial services group.

Since then, in addition to acting as the company’s auditors, BDO has assisted with CRD implementation, established tax efficient planning and acted as reporting accountants on the admission to the AIM Market in 2006.

Back to top

Investment fund case studies

Real estate assurance and tax planning services

We currently act for a new real estate investment manager and related funds set up by a well-known individual in the industry. In addition to aiding with the FSA application for the new LLP, we were appointed as auditors and tax compliance agents to the new entity. Since then, our relationship has grown to encompass tax advice on the funds' transactions, including cross-border advice involving the UK and German BDO firms, and local fund advice by our Guernsey member firm.

Virgin Green Fund

We have acted for the Virgin Green Fund and its related fund manager since its inception in 2007. The fund invests in the renewable energy and resource efficiency sectors primarily in Europe and the Americas. We assisted in the set up and structuring of the Cayman-based fund and its managers in the UK and USA.

In particular we helped to advise on the optimal tax structure for the fund and fund managers on both sides of the Atlantic. Since incorporation we have continued to provide a multi-territory service, combining our UK, USA and Cayman firms - with specialist input from other BDO offices as required. These services include audit, taxation, valuations, structuring and accounting support. We are also helping to try identify potential investor and investment targets for the fund.

Back to top

Insurance and retail financial services case studies

Income recognition advice to an independent financial adviser (‘IFA’)

The timing of income recognition has been a problematic issue for IFAs for some time with a number of variety of policies being adopted in respect of commissions and fees.
Based on our knowledge obtained from working with major firms of IFAs and our technical knowledge of relevant Financial Reporting Standards and other technical pronouncements we were able to provide comprehensive advice on best practice for accounting for the income receivable on specific products.

Audit and tax assurance for an international reinsurance group

We provide external audit services and tax assurance for an international group that specialises in reinsurance underwriting and the provision of direct marketing services for insurers.

We work closely with the client’s staff and with the board of directors to understand the business and its challenges. We meet regularly with the head of internal audit to maintain our knowledge of the projects he is undertaking and their impact on the business and on the financial information.

Back to top