Two D.C. firms that have ear of bank execs form alliance

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WASHINGTON — Normally it's their financial services clients that are entering partnerships or otherwise adapting amid disruptive change. Now Treliant and Federal Financial Analytics are doing the same.

The two well-connected D.C. firms, which provide different banking-policy-related services, have established a one-stop shop to guide financial institutions through uncertain business and policy times.

Treliant and FedFin are not merging, their principals make clear, but rather they have established an alliance to give clients streamlined access to each firm’s specialty.

“We’re still [in] separate lanes but now we’re on the same road,” said Karen Shaw Petrou, co-founder and managing partner of FedFin, which she runs with her husband, Basil Petrou.

FedFin’s lane is to run analyses for financial institutions to assess the regulatory effects of strategic decisions, such as the impact of capital and liquidity rules on development of a new product.

“We run it through the regulatory ringer,” said Petrou. Her firm values trying to give clients a sense of future policy reforms as they weigh their strategic options. Petrou is frequently quoted in the news media on the shifting policy landscape.

Treliant, meanwhile, specializes more in helping firms work through their real-time compliance issues, including correcting past mistakes.

But a decade after the financial crisis, companies are no longer taking a backward view. Debates about federal banking policies are shifting, and the results are uncertain. Lawmakers and regulators are considering new reforms from revisions of anti-money-laundering rules to an overhaul of the housing finance system. The financial industry’s digital transformation is leading banks and nonbanks to consider charter choices, new partnerships or in-house product development.

In such a dynamic landscape, the two firms, which are not disclosing any financial aspects of their partnership, say clients are not satisfied with just compliance assistance or forward-looking policy analysis. They want both.

“Clients need support with their day-to-day operations, and less frequently they need support with things that have happened in the rearview mirror: lookbacks, corrections for errors made. That has been a tried-and-true part of the Treliant business model, helping them deal with prior mistakes … while helping them with day-to-day,” said B. Scott Fisher, who became Treliant’s CEO in May. The firm was founded in 2008 by former Federal Reserve Board Gov. Mark Olson, who died last year.

“The beauty of this precedent-setting alliance is that FedFin exists to interpret what is … around the corner,” Fisher said.

Petrou said FedFin does not typically take its regulatory analysis a step further to look at compliance-related issues from a strategic decision, such as following anti-money-laundering requirements or avoiding fair-lending violations.

The two firms have worked together on projects before, Petrou said, but “there’s a limit to what you can do when you’re not in an alliance where … you’re thinking ahead.”

“The synergy of an alliance gives us a lot more business power to solve problems quickly without having to think through subcontracting arrangements,” she said.

Fisher used the example of a financial institution that is in the process of correcting past AML-related problems but may want to outsource part of the activity in the future.

“They want to know what’s the legislative movement happening in the space,” Fisher said. “They need guidance on what to do. That to me is a classic example of where the call came into Treliant, but … we would work collectively with FedFin. There’s a backwards-problem-fix element to the job. Then there’s a go-forward strategic decision that the firm is trying to make about building this to stand the test of time.”

A lot of the recent considerations around federal policy involve technology. Newer fintech providers are weighing whether to become part of the federally regulated sphere, either through longstanding bank charter types or the Office of the Comptroller of the Currency’s new special-purpose bank charter for tech-focused institutions.

A nonbank could alternatively partner with a bank. Banks are examining how to expand their fintech offerings either by developing products in-house or joining forces with a third-party vendor. Meanwhile, lawmakers and regulators are considering new policies around regulatory sandboxes, who has access to consumer financial data, and steps to strengthen the security and privacy of that data.

“The market is changing, particularly in the innovative space,” Petrou said. “Particularly with all the new charters and the new products and the new pressure on consumer data, the decision criteria are beginning to change.

“Now we can say, ‘Yes, we can, and we can provide with Treliant all of the strategic analysis you need, not just some of it.’ ”

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