Promontory Financial Group

Promontory Financial Group, a wholly owned subsidiary of IBM, is a global consulting firm that advises clients on a variety of financial services matters, including regulatory issues, compliance, risk management, liquidity, restructuring, acquisitions, due diligence, internal investigations and cyber security.

Promontory Financial Group
Wholly owned subsidiary of IBM
IndustryFinancial services
Founded2001
Headquarters
Washington, D.C.
,
United States
Number of locations
15
Area served
Worldwide
Key people
Eugene Ludwig
Founder and Chief Executive Officer[1]
ServicesManagement Consulting, Asset Management, Financial regulation
Number of employees
circa 400[2]
Websitewww.promontory.com

Organization

The company was founded in 2001 by Eugene Ludwig, who served as Comptroller of the Currency under President Bill Clinton, and Alfred H. Moses, a partner in the law firm Covington & Burling LLP. Promontory is based in Washington, D.C. and has 18 additional offices and affiliates worldwide, in Atlanta, Beijing, Brussels, Denver, Dubai, Dublin, Hong Kong, Istanbul, London, Madrid, Milan, New York City, Paris, San Francisco, Singapore, Sydney, Tokyo, and Toronto.

IBM announced its planned acquisition of Promontory in September 2016[3] and completed the transaction in November 2016.[4]

Promontory Financial is affiliated with several similarly named companies:[5]

  • Promontory Forensics Solutions, LLC
  • Promontory Growth and Innovation
  • Promontory Human Capital Solutions
  • Promontory Risk Review, LLC

Employees

Approximately 170 of the consultants working for Promontory were former employees of authorities in financial supervision. The news media has sometimes referred to Promontory as a "shadow regulator" for Wall Street.[1]

Former chairman of the United Kingdom Financial Services Authority Sir Callum McCarthy is non-director chairman of Promontory Financial Group (U.K.). Former managing director of the United Kingdom Financial Services Authority Michael Foot is global vice chairman.[6] The branch for Europe in Brussels is currently represented by Raffaele Cosimo who worked before for the Banca Nazionale del Lavoro in Rome. Elizabeth McCaul is partner-in-charge of the firm's New York office.

Former executives include the late former Italian Minister of Economy and Finances Tommaso Padoa-Schioppa, who was chairman of Promontory Financial Group Europe; and previous Assistant Secretary for Financial Institutions, U.S. Treasury David Nason and Federal Reserve Governor Sarah Bloom Raskin, who were managing directors. The ex-chairman of the U.S. Securities and Exchange Commission Mary Schapiro joined Promontory in April 2013 as managing director and chairman of its governance and markets practice, and later became vice chairman of the firm's advisory board.[7]

Engagements

After uncovering foreign exchange losses in its U.S. banking subsidiary, Allfirst Financial Inc., Allied Irish Bank in 2002 engaged Promontory to conduct an internal investigation. Promontory issued the "Ludwig Report", on March 14, 2002. The report detailed how the trader John Rusnak hid losses of $691 million over five years.[8] The report concluded that Rusnak, who was fired for his role in the trading losses, received no active help from within or outside the bank. Promontory found that the internal control mechanisms and audits had been insufficient.[9]

Promontory advised further the government of the United States and from other countries like Cameroon and Iceland.[10]

Promontory was hired to carry out by order of the Holy See a comprehensive investigation of all customer contacts of the Institute for the Works of Religion (Italian: Istituto per le Opere di Religione – IOR), often also called the Vatican bank, on money laundering guided by Elizabeth McCaul (Chief Executive Officer of Promontory Europe) and Raffaele Cosimo (Chief Operating Officer of Promontory Europe).[11][12]

In the aftermath of the subprime mortgage crisis, Promontory was one of several consulting firms selected by federal banking regulators to conduct reviews of loan foreclosures initiated by 16 mortgage servicing companies. Promontory reviewed the foreclosure activities of Bank of America, PNC Financial Services and Wells Fargo, encompassing more than 250,000 loan contracts. Promontory was paid $927 million, which led to strong criticism and doubt about the independence of the examination.[13] A hearing was arranged by the U.S. Senate Banking Committee to assess whether regulators had handed off too much oversight authority to private consulting firms such as Promontory.[14]

New York State Enforcement Action

In August 2015, Promontory entered into an agreement with the New York Department of Financial Services to resolve the state's allegations that it had watered down compliance reports for a UK banking client, Standard Chartered Bank. Promontory agreed to pay a $15 million penalty and abstain for six months from accepting new consulting engagements in New York.[15]

gollark: Just change your computer's time zone.
gollark: In practice, most rules are going to end up very selectively enforced unless they are also very lax.
gollark: I mean, they are somewhat, but worshipping hard work as a terminal value is stupid.
gollark: The alternative is probably Chrome, which is terrible and spies on you constantly.
gollark: I don't remember anything from mine except vague impressions of them being weird and confusing.

References
  1. Horwitz, Jeff; Aspan, Maria (15 March 2013). "How Promontory Financial Became Banking's Shadow Regulator". American Banker Magazine. Retrieved 15 July 2013. With close to 400 employees and some 1,400 consulting engagements under its belt, Promontory Financial Group has built a shadow network between banks and regulators. The firm is a sort of ex-regulator omnibus, capable of forecasting, mimicking and occasionally even substituting for the financial industry's supervisors.
  2. Douglas, Danielle (2 August 2013). "The rise of Promontory" (JavaScript). The Washington Post. Business. Washington, D.C.: With Bloomberg (Financial Services). p. 2 of 4. Retrieved 9 September 2013. With 383 employees from Toronto to Tokyo, Promontory has worked on almost 1,600 projects.
  3. "Promontory Group Signs Up with IBM," Wall Street Journal, September 29, 2016
  4. "IBM Closes Acquisition of Promontory Financial Group," IBM Press Release, November 22, 2016
  5. "Affiliated Companies". Promontory Financial Group. Retrieved 18 July 2013.
  6. "London". Promontory Financial Group. 1 April 2013. Retrieved 30 July 2013.
  7. Julia La Roche (April 2, 2013). "Former SEC Chief Mary Schapiro Is Joining 'Shadow Regulator' Promontory Financial Group". Business Insider.
  8. "Bank Boards Discuss a Report on Losses by Currency Trader," Jonathan Fuerbringer, New York Times, March 13, 2002.
  9. Promontory Financial Group (12 March 2002). "The Ludwig report: implications for corporate governance" [Report to the Boards of Allied Irish Banks, p.l.c., Allfirst Financial Inc. and Allfirst Bank Concerning Currency Trading Losses] (PDF). MCB UP Ltd. Archived from the original (pdf) on 4 March 2016. Retrieved 25 July 2013.
  10. Pierre-Yves Thoraval (15 April 2011). "Report on Iceland Supervision" [Prepared for the Icelandic Authorities, the FME and the IMF] (pdf; 9,2 MB). Banking Supervision. Promontory Financial Group. Retrieved 15 July 2013.
  11. Carol Matlack (2 July 2013). "A Money-Smuggling Scandal Threatens to Sink the Vatican Bank" [Promontory Financial Group will conduct a forensic review and screen the Vatican Bank's client relationships—which some say might be "irreformable"]. Businessweek. Retrieved 27 July 2013.
  12. "Resignations from the executive board". L'Osservatore Romano. 3 July 2013. Retrieved 30 July 2013.
  13. Protess, Ben; Silver-Greenberg, Jessica; Senator Brown, Sherrod (20 June 2013). "Senator Criticizes Lack of Supervision for Banks' Consultants - NYTimes.com". DealBook. The New York Times. Retrieved 15 July 2013. New documents suggest that the Promontory Financial Group, which examined loans for Wells Fargo, Bank of America and PNC, was the highest paid of the consultants. The firm, run by a former comptroller of the currency, Eugene Ludwig, received $927 million for reviewing more than 250,000 loan files, according to documents provided to the Senate Banking Committee and reviewed by The Times.
  14. Protess, Ben; Silver-Greenberg, Jessica (9 April 2013). "Promontory Financial Draws Washington Scrutiny - NYTimes.com" [Former Regulators Find a Home With a Powerful Firm]. DealBook. The New York Times. Retrieved 15 July 2013.
  15. http://www.dfs.ny.gov/about/press/pr1508181.htm
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