Fast Forward FHLBank Chicago

The days of banking being seen as an ultra-conservative industry are all but over. Technology has disrupted the banking and financial services space, with the landscape almost unrecognizable from just a decade ago. Even the sector’s oldest institutions have had to move with the times to take on the challenge laid down by new market entrants born in the tech era. Banks have spent billions of dollars building infrastructure to satisfy the new demands of customers who expect to have digital services available at their fingertips.

The Federal Home Loan Bank of Chicago (FHLBank Chicago) is part of the Federal Home Loan Bank system of 11 institutions that was formed in 1932 as a government sponsored enterprise to support mortgage lending and community investment. Today, the FHLBanks, as they are known, provide access to billions of dollars in low-cost funding to approximately 6,600 of America’s banks, credit unions, insurance companies, and community development financial institutions.

These banks have become a core part of their communities, enabling many of their members to access funding when other avenues have been closed to them. But like any modern business, the network of banks has had to modernize, with the Chicago branch a shining example of the progress that has been made.

Speaking to Digital Bulletin, Steven Overbeek, FHLBank Chicago’s Senior Vice President, Managing IT Director, says that the bank began its digital transformation journey back in 2019.

“We are changing our technology stacks, moving away from Java and traditional .NET into more of a .NET core angular tech stack,” he says. “We’re also starting a modern engineering initiative, which is the bank’s adoption of DevSecOps. We see that as being a multi-year journey which we’ll be working on throughout much of 2023 and 2024 to really bring automation to the bank.”

Eric Geiger, Chief Technology Officer at FHLBank Chicago, says their tech ambitions are “to be as modern and cutting edge as we can be, while still maintaining an acceptable risk profile for the business”.

“Technology is critically important in the financial sector,” he continues. “Everything that’s happening is based on the movement of cash, the movement of data, and all of that at the back end has huge technical infrastructure running behind it. You cannot move a penny without hitting a number of different solutions.”

The breakneck speed of modern financial markets means that having up-to-date information readily available is more important than ever. An organization’s Counterparty Credit Risk System (CCRS) is a prime example as it informs a bank of its risk of suffering a loss because of a failure of another party to meet its obligations. FHLBank Chicago is a significant mover in the Federal Funds, Reverse Repo and derivatives markets, and needed more timely information on its exposures.

As part of its digital transformation, it was decided that significant investment was needed to rethink the bank’s CCRS, which was originally built in 2007. Previously, employees were managing the institution’s exposures on a spreadsheet, with information entered into the system using batch processing, meaning records would be updated overnight, rather than in real-time.

“The CCRS needed to be addressed,” says Overbeek. “It was very difficult and costly to maintain. It also didn’t have real-time data, so we relied on batch processing to get the data into the system.”

The technology leadership team decided to take its CCRS project to the market and settled on software development consultancy NVISIA, which also has a base in Chicago.

“One of the things that really stood out was NVISIA’s technical capabilities, their ability to partner with the bank, to help guide us and consult us on some of the best tools and technologies to leverage as we move forward in this space. They were very price competitive, they were very easy to work with and ultimately delivered a great product for the bank,” says Overbeek.

The system has been built with intraday capabilities meaning FHLBank Chicago staff can view up-to-the-minute updates on their positions throughout the day, removing a layer of risk.

“The new system is benefiting the bank as it’s much easier to maintain our source code and rollout changes for our membership. In addition, it’s much more scalable, and we’ve got greater visibility into the overall stability and health of the application,” says Overbeek.

As NVISIA was working side-by-side with FHLBank Chicago to rebuild the CCRS, it had to take into account the modernization being undertaken across the bank’s entire IT infrastructure.

Michael O’Malley, Vice President, Manager Member Support Systems at the Federal Home Loan Bank of Chicago, says: “We are one of the very first banks in North America that is on AWS cloud, 100% on the cloud. So NVISIA really understood how the cloud works with the different service structures, technology and the coding language that we needed. They really helped us build an app that covered all our bases.”

As part of its work, NVISIA’s team worked with their banking counterparts to understand how it saw its technology transformation developing over the coming years so that it could produce something that would stand the test of time. Mindful of the need for environments to be maintained, NVISIA introduced Kubernetes on the AWS platform the bank was running as well as Terraform, an open-source infrastructure-as-code software tool. The team leveraged pipelines for the build with the overall goal of helping the bank modernize its tech stack.

Automation was also central to the new system that FHLBank Chicago required, says Overbeek. “Automation is critical for everything that we do within IT, looking at the way that we produce our software and looking at more competitive and faster ways to develop a higher quality product for our business partners.

“We’ve done that with our adoption of agile recently, through the adoption of modern engineering technologies, and by leveraging DevSecOps. And it’s really the focus of what we want to do here at the bank to produce a higher quality product through a faster period of time for our business partners and our members.”

The new CCRS is “night and day compared with the old system,” according to Virxhini Gjonzeneli, Executive Vice President and Group Head, Member Support and Strategy, FHLBank Chicago.

“It is built on an open architecture. So over time if we decide to make changes or add new types of investments we can do that in this framework. And it is very scalable, it allows us to have all of our exposures in one place where previously we needed to manage it in several different places, including spreadsheets. It also has a system where we can make changes fairly easily.

“So, if we do want to add one of those new products, it will not take a lot of technology time to do that. But most of all, it’s much more user-friendly. I can go in there and I can see pretty easily what my exposures are and understand the reporting in a much easier way.”

Such is the success of the project, FHLBank Chicago and NVISIA are embarking on a new project that will see the bank’s member portal re-platformed, reveals O’Malley. “This is going to be close to a two-year project for our member’s portal where they carry out all of their transactions, where they can see advances and letters of credit. We’ve just finished discovery on the new project, and they’ve really helped us reimagine how our new portal will look and function. We’re really, really happy with how things are going [with NVISIA].”

Building modern infrastructure is central to FHLBank Chicago’s stated ambition to be at the forefront of technology adoption in the financial sector. As outlined by Geiger, the bank wants to push the boundaries as much as possible within the framework of the financial sector. It also sees burnishing its reputation as a technology innovator as being key to attracting and retaining some of the leading technology talents in Chicago and the surrounding areas.

“Just keeping pace with what’s happening in the industry is standard for us. Our goal is to really make a number of fundamental changes each year,” says Geiger. “That means we’re going to keep up with new ways of working with our partners, as well as streamlining the number of platforms we’re working across for the benefit of our members.

“We believe this is a really exciting place to work because we are a small team – there’s only about 500 of us here – where you can make a fundamental change. The voice of the developers and the architects are critically important here. We listen to these folks and they have the opportunity to influence what our solutions are going to be and how they’re going to be built.

“There is a chance here to work on technology that is exciting and on projects that you’re not going to see at other banks. It’s things you’d find at modern fintechs, small, agile teams working with really modern technologies – that is very hard to beat in the financial world.”

On FHLBank Chicago’s commitment to diversity, equity, and inclusion, and the bank’s wider commitment to building a thriving culture for its employees and members, Cedric D. Thurman, Executive Vice President, Chief Diversity Officer, and Group Head, Community Investment and Diversity, Equity and Inclusion, tells Digital Bulletin: “Our mission, vision, and how we think about diversity, equity, and inclusion is built upon three pillars. It’s about things we value, which is all perspectives, things we’re committed to be doing, which is really being an industry leader, and how we inspire others, our internal and our external stakeholders, as a result of that.

“Regardless of what you think about diversity, equity, and inclusion, we want to hear from you because that perspective helps shape what we do as an organization. We want to be an industry leader, we don’t want to just be a participant in this. We want to show people how you make diversity, equity, and inclusion part of your business strategy.”

Gjonzeneli adds: “Diversity, equity, and inclusion is a huge part of what makes the Federal Home Bank of Chicago, the Federal Home Bank of Chicago. We want to make sure that we are representative of our district, and the two states [Illinois and Wisconsin] that we represent.”

Ashish Tripathy, Senior Vice President, Member Strategy and Solutions, FHLBank Chicago, says the ability to break silos of management to get access to executives across the bank is a key differentiator from other businesses.

“I am able to speak to anybody in the business. I can get access to the senior managers in almost every department and talk about ideas, which is not just my job, and no one tells me why are you thinking beyond the box. I just love the fact that I’m able to think about this business as if I own the business.”

Thurman says that ability to engage with peers and C-level executives gives people a value that is reflected by a low level of turnover compared with the industry average and, in turn, is a key tool in the bank’s recruitment process.

“No organization wants to have high turnover. You really want your people to be here. You want your people to feel like they can add value here. You want them to feel like they can build careers here. That makes it easy to attract talent and add value back to our members, which is really our core mission. If our employees are happy here and enjoy what they do every day, that’s going to bring value back to our members.”