Six years ago, when Merrill Lynch began looking to unfreeze liquidity through a technology that would integrate balance sheet information, P&L data and risk information, it was a strategic capability that few companies, if any, could claim. The project was eventually dubbed ARCTIC, which stood for Architecture for Regulatory, Credit and Treasury Consolidation, and it envisioned data feeds from a variety of sources in and outside finance that would all be ultimately reconciled back to the balance sheet. The view would be real-time and at a very granular level for those who needed to see the grains.

Clearly, it was cutting-edge, but Merrill Lynch didn't appreciate just how farsighted it was until a short time later when the dimensions of what would be the Basel II international banking accord began to emerge. Very quickly, ARCTIC was catapulted from a great-to-have innovation to a must-have requirement of good compliance that no longer needed to stand the return-on-earnings test. "It's something we now have to do, so we're glad we decided to do it the smart way in the first place and take the wins wherever we could get them," says Marc Baumslag, a Merrill managing director and chief technology officer for liquidity and risk technology. "There's no question that this will let us manage the balance sheet better, reduce manual work by the treasury and finance teams and improve ROE." And even better, Merrill managed to save money on compliance by getting a head start.

The foundation of ARCTIC is a massive, up-to-date database. On top of that will sit liquidity and risk analytics that will be more accurate, complete, integrated and automated than anything Merrill has had, Baumslag notes. The project has already been completed for some balance-sheet lines, he reports. Others are still being fine-tuned, but should be finished by yearend.