Helping banks avoid big regulatory fines is the stock in trade of John Byrne, CEO of Corlytics.
His team of lawyers, mathematicians and technologists uses software to scour tens of thousands of edicts to home in on exactly what regulators cite as key problems that led to actions against financial institutions so that others can avoid them. These actions also include the steps that can be taken to right the situation, something banks can follow as guidelines.
“It’s root cause analysis,” Byrne told FierceCEO of the company that was set up in 2013.
Often these edicts can be close to 250 pages long, and Corlytics takes the onus for finding the causes off the bank and puts it on itself.
“If you analyze the regulations they will tell you how to do the right thing,” Byrne said.
For instance, the Office of the Comptroller of the Currency might mention “inadequate internal controls” in levying a fine in a 230-page document. Corlytics will pull that and other passages out for client banks, who pay a subscription fee. Corlytics’ research is used by regulators, financial institutions and their advisers.
Since 2009, 54,000 regulatory documents have been published from 130 different regulatory bodies in G20 countries, and many of these new regulations have yet to be enforced, Byrne said. The Corlytics database has thousands of enforcement cases, and it continues growing. Each case is read by two specialist lawyers providing metadata and insight, then analyzed by banking risk analysts and data scientists.
Bank regulators have really stepped up their game since the 2008-2009 financial crisis, but the field of scrubbing regulations using software is nascent. Most of the research is still done by hand.
Byrne feels he has a niche and can turn Corlytics into a $1 billion company eventually. “It’s a brand new space with much opportunity,” he said.
Byrne started Corlytics four years ago after working in middle office software in banks.
“I could see the disconnect between the operations of a bank and its legal department,” he said. “There is very little investment in this area, so there could be a crisis at any time.”
Fast Five with John Byrne
When did you know you wanted to be a CEO?
In college, when I set up my first software company.
What keeps you up at night?
The amount of regulatory change. It makes our business more difficult to keep ahead of.
What is the most important trait of a leader?
Decisiveness. You have to make the right decisions so you can continue going in the right direction.
What's the key to finding new opportunities for revenue?
Creativity and imagination. You have to look in places where no one else is looking.
What will the industry look like in 10 years?
In 10 years, this industry is going to be transformed from people reading documents to machines reading them. It will be a whole new and accepted industry approach.