7RZDUGVDQ,R7%DVHG:DWHU0DQDJHPHQW6\VWHP

IRUD&DPSXV

3UDFKHW9HUPD$NVKD\.XPDU1LKHVK5DWKRG3UDWLN-DLQ0DOOLNDUMXQ65HQX6XEUDPDQLDQ%KDUDGZDM$PUXWXU0
60RKDQ.XPDU5DMHVK6XQGDUHVDQ

'HSDUWPHQWRI(OHFWURQLF6\VWHPV(QJLQHHULQJ

(OHFWULFDO&RPPXQLFDWLRQ(QJLQHHULQJ'HSDUWPHQW

'HSDUWPHQWRI&LYLO(QJLQHHULQJ

5REHUW%RVFK&HQWHUIRU&\EHU3K\VLFDO6\VWHPV
,QGLDQ,QVWLWXWHRI6FLHQFH%DQJDORUH


$EVWUDFW:HGLVFXVVWKHGHVLJQDQGSUHOLPLQDU\UHVXOWVRIDQ DLPLVWRLQVWUXPHQWWKHZDWHUWDQNVDFURVVWKHFDPSXVILJXUH
,R7 EDVHG V\VWHP IRU PDQDJHPHQW RI WKH ZDWHU GLVWULEXWLRQ RQDVLQJOHZLUHOHVVVHQVRUQHWZRUNLQWKHILUVWSKDVH
V\VWHPLQDODUJHFDPSXV,QSDUWLFXODUZHIRFXVRQWZRVSHFLILF
FRPSRQHQWVRIWKHV\VWHPDORZFRVWXOWUDVRQLFEDVHGZDWHUOHYHO
VHQVRU DQG D VXE*+] EDVHG FDPSXV VFDOH ZLUHOHVV QHWZRUN WR
FRQQHFW WKH VHQVRUV :H GHVFULEH WHFKQLTXHV WR DFKLHYH D ODUJH
VHQVLQJGLVWDQFHWKDW PDNHVWKHPVXLWDEOHIRULQVWDOODWLRQDFURVV
RYHUKHDG WDQNV 2+7 DQG JURXQG OHYHO UHVHUYRLUV */5 7KH
ZLUHOHVV QHWZRUN ZKLFK XVHV VXE*+] UDGLRV FRQQHFWV WR D
JDWHZD\ WKDW FDQ XSORDG WKH GDWD RQOLQH IRU YLVXDOLVDWLRQ DQG
DQDO\WLFV
,QGH[ 7HUPV,R7 6PDUW FLWLHV :DWHU PDQDJHPHQW
8OWUDVRQLFOHYHOPHDVXUHPHQW

,,1752'8&7,21
$URXQG  ELOOLRQ SHRSOH RU DOPRVW RQHILIWK RI WKH
ZRUOGV SRSXODWLRQ OLYH LQDUHDVRI ZDWHU VFDUFLW\ >@ DQG E\
ZDWHUVFDUFLW\LVH[SHFWHGWRDIIHFWPRUHWKDQELOOLRQ
SHRSOHKXUWLQJ DJULFXOWXUDO ZRUNHUV DQG SRRU IDUPHUV WKH
PRVW >@ :DWHU VFDUFLW\ LV DPRQJ WKH PDLQ SUREOHPV WR EH
IDFHG E\ PDQ\ VRFLHWLHV DQG WKH ZRUOG LQ WKH VW FHQWXU\
:DWHU XVH KDV EHHQ JURZLQJ DW PRUH WKDQ WZLFH WKH UDWH RI
SRSXODWLRQLQFUHDVHLQWKHODVWFHQWXU\DQGDOWKRXJKWKHUHLVQR
JOREDOZDWHUVFDUFLW\DVVXFKDQLQFUHDVLQJQXPEHURIUHJLRQV
DUHFKURQLFDOO\VKRUWRIZDWHU>@,QVXFKSODFHVODUJHVWRUDJH
WDQNVDUHXVHGDVLQWHUPHGLDU\EXIIHUVWRVPRRWKRXWWKHZDWHU 

GLVWULEXWLRQ DQG PHHW SHDN GHPDQGV ,Q DGGLWLRQ PRVW 
KRXVHKROGV DQG RIILFHV DOVR KDYH ODUJH ORFDO VWRUDJH WDQNV WR )LJ6HQVRUGHSOR\PHQWDQGWKHFRUUHVSRQGLQJQHWZRUNWRSRORJ\LQWKH
KHOS IXUWKHU PLWLJDWH WKH YDULDELOLW\ GXH WR WKH ODFN RI [ ,,6FFDPSXV7KHJDWHZD\FROOHFWVWKHGDWDIURPWKHVHQVRUVDWWKH
ZDWHU VXSSO\ IURP WKH XWLOLWLHV 8QUHJXODWHG VWRUDJH RI ZDWHU 2+7VDQG*/5VDQGXSORDGVWRWKHLQWHUQHW2+7VHQVRUVFRQQHFW
FDQOHDGWRZDWHUKRDUGLQJZLWKVWRUDJHRIXSWR[WKHGDLO\ GLUHFWO\WRWKHJDWHZD\DQGDOVRDFWDVUHOD\VIRUWKH*/5VHQVRUV
XVDJH RI ZDWHU LQ ORFDO KRXVHKROG WDQNV LQ VRPH FLWLHV 7KLV
2XU NH\ FRQWULEXWLRQ LV D ORZ FRVW XOWUDVRQLF ZDWHU OHYHO
OHDGV WR LQHIILFLHQW GLVWULEXWLRQ RI ZDWHU WR WKH FRQVXPHUV
VHQVRU WKDW FDQ PHDVXUH WKH OHYHO RI ZDWHU LQ WDQNV XS WR D
HVSHFLDOO\LQWLPHVRIVFDUFLW\
GHSWK RI  P DQG FRQVHTXHQWO\ WKH YROXPH LQ YDULRXV
:LWK WKH DGYHQW RI WKH ,QWHUQHW RI 7KLQJV WKH ZDWHU
RYHUKHDGWDQNVDQGJURXQGOHYHOUHVHUYRLUVDFURVVWKHFDPSXV
GLVWULEXWLRQV\VWHPLVDQDWXUDOFKRLFHIRULQVWUXPHQWDWLRQZLWK
7KH PRWLYDWLRQV EHKLQG GHYHORSLQJ XOWUDVRQLF ZDWHU OHYHO
DQHWZRUNRIVHQVRUVWKDWFDQFRPPXQLFDWHZLWKHDFKRWKHUDQG
VHQVRUVDUHWZRIROG)LUVWO\DOWHUQDWLYHPHWKRGVRIZDWHUOHYHO
JDWKHUGDWDIRUDQDO\WLFVVRWKDWPRUHHIILFLHQWGLVWULEXWLRQDQG
PHDVXUHPHQWVXFKDVDEXR\RUSUHVVXUHVHQVRUV>@DWWKHEDVH
PDQDJHPHQWRIZDWHUDQGLWVUHODWHGDVVHWVLVSRVVLEOH
RIWKHWDQNDUHLQWUXVLYHDQGWHGLRXVWRLQVWDOODQGPDLQWDLQDWD
:H KDYH HPEDUNHG RQ D SURMHFW WR FUHDWH D 6PDUW :DWHU
ODUJH VFDOH 7KH\ DOVR FRPH ZLWK WKH ULVN RI FRQWDPLQDWLRQ
'LVWULEXWLRQ 6\VWHP ZLWK WKH ,,6F FDPSXV DV D WHVW EHG 7KH
6HFRQGO\WKHHDVLO\DYDLODEOHXOWUDVRQLFVHQVRUVLQWKHPDUNHW
FDPSXVLVUDWKHUODUJHZLWKDVL]HRIDERXWNPNP2XU
DUHHLWKHUVKRUWRQPD[LPXPGLVWDQFH>@RUDUHWRRH[SHQVLYH
2XUVHFRQGFRQWULEXWLRQLVDVXE*+]FRPPXQLFDWLRQQHWZRUN

,(((
0+]WRFRYHUWKHUDWKHUODUJHGLVWDQFHVEHWZHHQWKH 7KHVH WUDQVGXFHUV DUH IRXQG WR KDYH PXOWLSOH UHVRQDQW
WDQNV 7KLV SDSHU GHVFULEHV WKH GHVLJQ RI ERWK WKH VHQVRU DQG IUHTXHQFLHVZKLFKLVWKHUHDVRQWKLVPRGHOZDVFKRVHQVLQFH
WKHQHWZRUN:HEHJLQZLWKUHODWHGZRUNLQVHFWLRQ,,IROORZHG HDFK5/&EUDQFKUHSUHVHQWVRQHUHVRQDQWIUHTXHQF\7RGHULYH
E\ GHVFULELQJ WKH GHVLJQ RI WKH VHQVRU LQ VHFWLRQ ,,, 7KH WKH YDOXHV RI FRPSRQHQWV LQ WKH PRGHO WKH WUDQVGXFHU LV
QHWZRUNLVGHVFULEHGLQVHFWLRQ,9SRZHUPDQDJHPHQWLVGHDOW FKDUDFWHULVHG XVLQJ DQ LPSHGDQFH DQDO\VHU IRU IUHTXHQFLHV
ZLWKLQVHFWLRQ9DQGUHVXOWVDUHGLVFXVVHGLQVHFWLRQ9, EHWZHHQN+]WRN+]DWSRLQWV$WIUHTXHQFLHVZHOO
 DERYH WKH UHVRQDQW IUHTXHQFLHV 5V /V DQG &V KDYH QHJOLJLEOH
LQIOXHQFH RQ WKH LPSHGDQFH FXUYH DQG WKH LPSHGDQFH HTXDOV
,,5(/$7(':25. & $W VHULHV UHVRQDQW IUHTXHQF\ /V DQG &V FDQFHO HDFK RWKHU
,Q DQ HDUOLHU HIIRUW .XGYD HW DO >@ SURSRVHG D UHDOWLPH RXW DQG WKH LPSHGDQFH HTXDOV WKH SDUDOOHO FRPELQDWLRQ RI 5V
ZDWHUEDODQFHPRQLWRULQJV\VWHPIRUDFDPSXV7KDWZRUNXVHG DQG & :H WKXV REWDLQ WKH HTXDWLRQV IRU WKH UHVRQDQW
DQRIIWKHVKHOIXOWUDVRQLFOHYHOVHQVRU+&65>@ZKLFKLV IUHTXHQFLHVDV

PRXQWHG DW WKH WRS RI WKH WDQN ,W VHQGV D WUDLQ RI XOWUDVRXQG 6HULHVUHVRQDQFH 

SXOVHVDW.+]WRZDUGVWKH ZDWHUVXUIDFHDQGPHDVXUHVWKH
WLPH WR UHFHLYH WKH UHIOHFWHG ZDYHV E\ VHQVLQJ ZKHQ WKH 3DUDOOHOUHVRQDQFH ZKHUH 

UHIOHFWHG HGJH FURVVHV D WKUHVKROG 7KLV DSSURDFK ZRUNV ZHOO
ZKHQWKHUHFHLYHGVLJQDOVDUHODUJHLQDPSOLWXGHDQGKHQFHLWV
UDQJHZDVOLPLWHGWRDERXWPZKLFKLVLQVXIILFLHQWIRUODUJH
GLVWULEXWLRQ WDQNV WKDW FDQ EH DV GHHS DV  P )RU VXFK ODUJH
GHSWKV D FRUUHODWLRQ EDVHG DSSURDFK VKRXOG EH XVHG WR GHDO
ZLWK WKH VHYHUH DWWHQXDWLRQ RI WKH UHIOHFWHG SXOVHV DV ZHOO DV
ZLWKPXOWLSOHUHIOHFWLRQV
,QDQRWKHUUHODWHGZRUN3LSHQHW>@XVHVD%OXHWRRWKEDVHG
QHWZRUN RI VHQVRUV WR FROOHFW GDWD LQWR D FOXVWHU KHDG IURP
YDULRXV UHJLRQV RI WKH SLSH QHWZRUN 7KH FOXVWHU KHDGV WKHQ
FRPPXQLFDWHZLWKDVHUYHUXVLQJ*607KHGDWDLVDQDO\VHGWR
VLJQDOOHDNVRUSLSHEXUVWV 

,QRXUFDPSXVWKHZDWHUWDQNVDUHGLVWULEXWHGUDQGRPO\DQG
VRPH RI WKHP DUH IDUWKHU WKDQ D NLORPHWUH DZD\ IURP HDFK )LJ([WHQGHG%9'0RGHORIWKHXOWUDVRQLFWUDQVGXFHU
RWKHU+HQFHVROXWLRQVOLNH=LJEHH:L)LDQG%OXHWRRWKGRQRW
$V WKHUH DUH WZR XQNQRZQV DQG WZR HTXDWLRQV / DQG &
ZRUN ZHOO *60*356 LV D SRVVLEOH RSWLRQ +RZHYHU WKH
YDOXHV FDQ EH IRXQG HDVLO\ )RU GLIIHUHQW SDLUV RI UHVRQDQW
SRZHUFRQVXPSWLRQRIWKHVHPRGHPVLVVLJQLILFDQWO\KLJKDQG
IUHTXHQFLHVGLIIHUHQW5/DQG&YDOXHVDUHFDOFXODWHG,QRXU
WKLV GULYHV XS WKH V\VWHP FRVW FRQVLGHUDEO\ >@ +HQFH ZH
H[SHULPHQWV ZH IRXQG WZR RU WKUHH UHVRQDQW SHDNV GHSHQGLQJ
KDYH H[SORUHG WKH XVH RI VXE*+] UDGLRV WR EXLOG D ZLUHOHVV
RQ WKH WUDQVGXFHU $W D WLPH RQO\ RQH 5/& EUDQFK LV
QHWZRUNWRWUDQVIHUWKHVHQVRU\LQIRUPDWLRQWRDJDWHZD\7KH
FRQVLGHUHGDQGRWKHUVDUHQHJOHFWHG$VKLJKOLJKWHGLQ>@WKLV
JDWHZD\WKHQXSORDGVWKHGDWDWRDFORXG
PHWKRGGRHVQRWZRUNZKHQWZRUHVRQDQWSHDNVDUHYHU\FORVH
,,,8/75$6281'%$6(':$7(5/(9(/6(1625 WR HDFK RWKHU EHFDXVH LQ WKDW FDVH WKH VHULHV UHVRQDQW
IUHTXHQF\RIWKHVHFRQGSHDNZRXOGEHDPELJXRXV,QRXUORZ
$VPHQWLRQHGLQVHFWLRQ,ZHQHHGHGWRGHYHORSDORZFRVW
FRVWWUDQVGXFHUVWKHWZRSHDNVOLHDURXQGN+]DQGN+]
ZDWHUOHYHOVHQVRUWKDWFDQZRUNLQWDQNVKDYLQJDGHSWKRIXS
UHVSHFWLYHO\
WR  P :H KDYH XVHG DQ XOWUDVRXQG EDVHG V\VWHP DV WKLV
DOORZVXVWRPRXQWWKHVHQVRUVRXWVLGHWKHZDWHU:HXVHDSDLU
RIXOWUDVRQLFWUDQVGXFHUVWKDWDUHPRXQWHGXQGHUWKHOLGRIWKH
WDQN7KHXOWUDVRXQGSXOVHVUHIOHFWRIIWKHVXUIDFHRIWKHZDWHU
DQG DUH SLFNHG XS E\ WKH UHFHLYLQJ WUDQVGXFHU 7KH WLPH RI
IOLJKWEHWZHHQWUDQVPLWWHGDQGUHFHLYHGXOWUDVRXQGLVPHDVXUHG
WR REWDLQ WKH GLVWDQFH EHWZHHQ WKH WRS RI WKH WDQN DQG WKH
VXUIDFHRIZDWHU*LYHQWKHGLPHQVLRQVRIWKHWDQNWKHYROXPH
RIZDWHULVFRPSXWHG
2QH RI WKH NH\ GHVLJQ UHTXLUHPHQWV LV WR DFKLHYH JRRG
HQHUJ\ HIILFLHQFLHV VR WKDW ORQJ EDWWHU\ RSHUDWLRQ LV DFKLHYHG
.HHSLQJ WKLV LQ PLQG WKH GHVLJQ RI WKH VHQVRU LV EULHIO\

GHVFULEHGQH[W
)LJ&RPSDULVRQRIVLPXODWHGDQGH[SHULPHQWDOGDWDRI,PSHGDQFHYV
$7UDQVGXFHU&KDUDFWHULVDWLRQ )UHTXHQF\FXUYHRIWUDQVGXFHU

7KH XOWUDVRQLF WUDQVGXFHUV FDQ EH PRGHOOHG E\ WKH

([WHQGHG%XWWHUZRUWK9DQ'\NH0RGHODVVKRZQLQILJXUH
%0D[LPLVLQJWUDQVPLWWHGHQHUJ\ 7KH DPSOLILHU XVHG LV WKH 7, 9&$
9 ZKLFK LV D WZR
7R PD[LPLVH HQHUJ\ HIILFLHQF\ LW LV LPSRRUWDQW WR WUDQVPLW VWDJHYROWDJHFRQWUROOHGDPSOLILHU9 9&$FRQVLVWLQJRID/RZ
DW WKH UHVRQDQW IUHTXHQFLHV 7KH LPSHGDQFFH FXUYH RI WKH 1RLVH 3UHDPSOLILHU /13 DQG D D 9ROWDJH *DLQ $PSOLILHU
SLH]RHOHFWULF WUDQVGXFHU VKRZV WZR SHDNV DQGGGHDOV ZLWK RQO\ 9*$ :H QHHG FRQWUROODEOH JDLQ Q EHFDXVH WKH DPSOLILHU ZLOO
WKH HOHFWULFDO SURSHUWLHV RI WKH WUDQVGXFHU 6RPH SDUW RI VDWXUDWHXQGHUKLJKJDLQLIWKHUHIOHFWLQJVXUIDFHLVFORVHWRWKH
HOHFWULFDOHQHUJ\GLVVLSDWHGDFURVVWKHUHVLVWRUJHWVFRQYHUWHGWR WUDQVPLWWHUDQGZKHQWKHUHIOHFWLQJ JVXUIDFHLVIDUDQGWKHJDLQ
DFRXVWLF ZDYHV 7KRXJK VLPXODWLRQV RI WKHH GHULYHG PRGHO LVORZWKHDPSOLILHUZLOOQRWDPSOLI\ I\WKHVLJQDODERYHWKHQRLVH
VXJJHVWWKDWSRZHUWUDQVPLWWHGDWWKHWZRUHVRRQDQWIUHTXHQFLHV IORRU 7KH GLIIHUHQWLDO RXWSXW RI WKH DPSOLILHU LV FRQYHUWHG WR
VKRXOGEHVLPLODULWLVSUDFWLFDOO\REVHUYHGWKDDW
ZKLFK FDQ DOVR EH FRQVLGHUHG DVV DQ $0 GHPRGXODWRU IRU
 HQYHORSHGHWHFWLRQ7KH5&ILOWHUDOVRVHUYHVDVDQDQWLDOLDVLQJ
+HUH  LV WKH SRZHU WUDQVPLWWHG LQWR WKH PHGLXP DQG
LVWKHSRZHUGLVVLSDWHGDFURVVWKHUHVLVWRRU7KLVLQGLFDWHV
WKDW WKHUH LV D GLIIHUHQFH LQ HIILFLHQF\ RI HOHFWULFDO WR
PHFKDQLFDOHQHUJ\FRQYHUVLRQDWGLIIHUHQWUHVRRQDQWIUHTXHQFLHV
GXHWRPHFKDQLFDOORDGLQJ
7R LQFUHDVH WKH UDQJH KLJKHU VLJQDO HQHUUJLHV QHHG WR EH
WUDQVPLWWHG 7KLV FDQ EH DFKLHYHG E\ LQFUHDDVLQJ WKH YROWDJH
DPSOLWXGHRIH[FLWDWLRQRIWKHWUDQVPLWWHU+RZ ZHYHULQFUHDVLQJ
WKH YROWDJH EH\RQG D FHUWDLQ SRLQW GRHV QRW SURYLGH D
FRPPHQVXUDWH LPSURYHPHQW LQ WKH UHFHLYHGG VLJQDO VWUHQJWK
,QVWHDG ZH LQFUHDVH WKH QXPEHU RI SXOVHV WUDDQVPLWWHG VR WKDW
RXU FRUUHODWLRQ EDVHG UHFHLYHU FDQ VHH D ODUJHU VLJQDO HQHUJ\
:HDOVRREVHUYHWKDWGXHWRLQHUWLDWKHSLH]RHOHFWULFWUDQVGXFHU
WDNHVVRPHWLPHWREXLOGXSWRPD[LPXPDPSOOLWXGHZKLFKSXWV
D ORZHU ERXQG RQ WKH PLQLPXP SXOVH GGXUDWLRQ IRU WKH
H[FLWDWLRQ
&7UDQVPLWWHU&LUFXLW
$EORFNGLDJUDPRIWKHWUDQVPLWWHUFLUFXLWLLVVKRZQEHORZ
VLQJOHHQGHGVLJQDODQGVHQWWRDSDDVVLYHORZSDVVILOWHU5&
ILOWHU
(0HDVXUHPHQW
7KH PLFURFRQWUROOHU XVHG LV WKHH 7, 06335 ELW
$50FRUH0ZLWKN%5$07 7KHZDWHUOHYHOLVPHDVXUHG
RQFHHYHU\PLQXWH7KHJDLQRIWKHDDPSOLILHUDQGWKHQXPEHURI
F\FOHV WUDQVPLWWHG DUH VHW EDVHG RQ
R WKH SUHYLRXV UHDGLQJ RI
GLVWDQFH VLQFH WKH OHYHO RI ZDWHHU LV H[SHFWHG WR FKDQJH
JUDGXDOO\7KHFRQWUROOHUWKHQVZLWFFKHVWKHWUDQVPLWWHUVGULYHU
FLUFXLW VXFK WKDW D %DUNHU FRGH >@
> LV WUDQVPLWWHG E\ WKH
WUDQVGXFHU %DUNHU FRGHV DUH ILQ QLWH VHTXHQFHV RI OHQJWKV
EHWZHHQDQGKDYLQJYHU\VKDUUSDXWRFRUUHODWLRQIXQFWLRQV
ZLWKVPDOOVLGHOREHV7KHELW%DDUNHUFRGH^
` LV XVHG IRU WUDQVPLVVLRQ 2QFH
2 WKH WUDQVPLVVLRQ LV
FRPSOHWH WKH FRQWUROOHUV ELW $'&
$ VWDUWV UHFRUGLQJ DW 
N6DPSOHVVIRUPVUHFRUGLQJDWR RWDORIVDPSOHV7KLV
GDWD LV VDYHG LQ WKH FRQWUROOHUV 5$0 ZKHUH DQ LQ VLWX
FRUUHODWLRQZLWKWKHWUDQVPLWWHGSDWWWHUQLVGRQHWRREWDLQDSHDN
ZKLFK FRUUHVSRQGV WR WKH UHIOHFWLRQQ RII WKH VXUIDFH RI ZDWHU
7KH SDUDPHWHUV IUHTXHQF\ VDPSOLQJ UDWH DQG GXUDWLRQ RI
VDPSOLQJDUHDOOFRQILJXUDEOH


 )LJ&RUUHODWHGGDWDIURPFRQWWUROOHUIRUPDQGP
)LJ%ORFNGLDJUDPRIWUDQVPLWWHUU
6LQFH WKH JDLQ LV VHW EDVHG RQ WKH SUHYLRXV UHDGLQJ RI
7KHGULYHUFLUFXLWFKRVHQIRUWKHWUDQVPLWWWHULVDSXVKSXOO GLVWDQFHDQLQLWLDOLVDWLRQVHTXHQFHLLVQHHGHGWRVHWWKHJDLQIRU
RXWSXWGULYHU7RWHP3ROH2XWSXW$Q/&PDDWFKLQJFLUFXLW>@ WKH ILUVW UHDGLQJ )RU WKH ILUVW UHDGLLQJ WKH FRQWUROOHU ILUVW VHWV
KDV EHHQ XVHG IRU PDWFKLQJ WKH WUDQVGXFHHU DQG VZLWFKLQJ WKH JDLQ IRU WKH PLGSRLQW LH  P
P DQG WKHQ LWHUDWHV WKURXJK
QHWZRUN7KHFRPSRQHQWVYDOXHVIRUWKHPDWFFKLQJFLUFXLWVDUH WKH UDQJH KXQWLQJ IRU WKH DFWXDO UHDGLQJ 7KH LQLWLDOLVDWLRQ
GHULYHGIURPWKH([WHQGHG%9'0RGHOIRUWKHHN+]EUDQFK VHTXHQFH WDNHV EHWZHHQ  DQG  UHDGLQJV WR SLQSRLQW WKH
'5HFHLYHU&LUFXLW GLVWDQFH6XEVHTXHQWO\RQHUHDGLQJ JLVWDNHQSHUVDPSOH,IWKH
GLVWDQFHPHDVXUHGLVQRWLQWKHYLFLQ QLW\RIWKHSUHYLRXVUHDGLQJ
7KHEORFNGLDJUDPRIWKHUHFHLYHULVVKRZQQEHORZ
D VHFRQG UHDGLQJ LV WDNHQ ,I WKH UHDGLQJ LV VWLOO QRW LQ WKH
YLFLQLW\WKHV\VWHPUHLQLWLDOLVHV
,91(7:2
25.


$1HWZRUNQRGHV
)LJ%ORFNGLDJUDPRIUHFHLYHU QWKHQHWZRUN
7KHUHDUHWKUHHW\SHVRIQRGHVLQ
 *DWHZD\
 7KHJDWHZD\UHFHLYHVGDWDIURPDOOVHQVRUVDQGIRUZDUGVLW 6LPLODUO\HDFK*/5FRPPXQLFDWHVZLWKWKHFORVHVW2+7LQLWV
WR WKH FORXG EDVHG VHUYHU DQG UHFHLYHV FRPPDQGV IURP YLFLQLW\ 7KH JDWHZD\ LV PRXQWHG RQ D WRZHU LQ WKH FHQWUDO
JDWHZD\VHUYHUDQGWUDQVPLWVWKHPWRWKHVHQVRUVHQGQRGHV DGPLQLVWUDWLRQEXLOGLQJRIWKHFDPSXV
7KH JDWHZD\ UDGLR LV DOZD\V LQ UHFHLYHU PRGH %XW RQFH D )RU WKLV WRSRORJ\ WKH PHDVXUHG VLJQDO TXDOLW\ LQ WHUPV RI
SDFNHW LV UHFHLYHG LW FKHFNV IRU SHQGLQJ FRPPDQGV IRU WKH WKH UHFHLYHG VLJQDO VWUHQJWK 566, DQG WKH SDFNHW HUURU UDWH
VHQGHU DQG WUDQVPLWV WKHP LI DQ\ DQG WKHQ VZLWFKHV EDFN WR 3(5 SHUIRUPDQFH RI WKH YDULRXV OLQNV IRU GLIIHUHQW WUDQVPLW
UHFHLYHPRGH(YHU\FRPPDQGKDVWREHDFNQRZOHGJHGE\DQ SRZHUVHWWLQJVDUHVKRZQLQWKH7DEOHV, ,,,QWKHVHWDEOHV
$&.ELWLQWKHQH[WSDFNHWIURPWKDWVHQVRUQRGHIDLOLQJZKLFK WKH OLQN QXPEHU LV WKH OLQN FRPLQJ RXW RI WKH QRGH ZLWK WKH
WKHFRPPDQGLVUHWUDQVPLWWHG VDPH QRGH QXPEHU IURP ILJXUH  IRU WKH HQG QRGHV )RU WKH
 UHOD\ QRGHV LQ WKH ILJXUH WKH OLQN FRUUHVSRQGV WR WKH OLQN
 (QGQRGHV LQIRUPDWLRQIURPWKHUHOD\QRGHWRWKHJDWHZD\
7KH HQG QRGHV DUH DW WKH HGJH RI WKH QHWZRUN DQG DUH
DWWDFKHGWRWKHVHQVRUV7RDFKLHYHORZSRZHUWKH\DUHGXW\ 7$%/(,566,$1'3(53(5)250$1&(2)5(/$<72*$7(:$</,1.6
)25',))(5(1775$160,77(532:(56(77,1*6
F\FOHG WR ZDNH XS SHULRGLFDOO\ FROOHFW GDWD IURP FRQQHFWHG
VHQVRUVDQGWUDQVPLWWKHPWRWKHJDWHZD\,PPHGLDWHO\DIWHUD G%P G%P G%P
WUDQVPLVVLRQWKH\HQWHULQWRWKHUHFHLYHPRGHIRUDYHU\VKRUW /LQN1R 'LVWDQFHP
566, 3(5 566, 3(5 566, 3(5
GXUDWLRQ  PV WR UHFHLYH DQ\ FRPPDQGV EHIRUH JRLQJ WR
       
VOHHS 7KHVH QRGHV DOVR VXSSRUW DQ DGGLWLRQDO FRPPDQG
HQDEOHG ORZ SRZHU PRGHRIRSHUDWLRQ ZKHUHLQ WKH IUHTXHQF\        
RIFRPPXQLFDWLRQLVUHGXFHGZKLOHIUHTXHQF\RIUHDGLQJIURP        
VHQVRUVLVXQFKDQJHG7KLVDOORZVSDFNLQJDQXPEHURIVHQVRU
UHDGLQJVLQWRDVLQJOHUDGLRWUDQVPLVVLRQ        
        
 5HOD\QRGHV 
7KHVH DUH PRGLILHG HQG QRGHV WKDW FDQ DOVR EHKDYH DV D
UHOD\ IRU VRPH RWKHU HQG QRGH 6R WKH\ FDQ QRW RQO\ WUDQVPLW 7$%/(,,566,$1'3(53(5)250$1&(2)(1'12'(725(/$</,1.6
GDWDIURPWKHLURZQVHQVRUEXWDOVRUHOD\WKHGDWDIURPDQRWKHU )25',))(5(1775$160,77(532:(56(77,1*6
HQGQRGHWKDWSHHUVZLWKLW7KH\DUHFRQILJXUHGWRUHWUDQVPLW
/LQN 'LVWDQFH G%P G%P G%P
WKH HQG QRGH SDFNHWV WKH\ UHFHLYH 7KHVH QRGHV VXSSRUW WZR
1R P 566, 3(5 566, 3(5 566, 3(5
ZD\ FRPPXQLFDWLRQ DQG FDQ UHOD\ FRPPDQGV IURP WKH
JDWHZD\WRWKHHQGQRGHV        

%1HWZRUNGHVLJQ        

5DWKRG HW DO >@ FRPSDUH WZR VXE*+] UDGLRV 7H[DV        
,QVWUXPHQWV &&'. DQG 6HPWHFK /R5D L0$ 7KH
       
,,6F FDPSXV ZDV FDWHJRULVHG LQWR YDULRXV HQYLURQPHQW W\SHV
DQGWKHSDWKORVVH[SRQHQWZDVHVWLPDWHGLQHDFKHQYLURQPHQW        
W\SH7KHNH\UHVXOWVRIWKHVXUYH\LQGLFDWHGWKDWLQFOHDUOLQH        
RIVLJKWWKH&&'.SHUIRUPVEHWWHULQ3DFNHW(UURU5DWH
3(5 ZKHUHDV ZLWK IROLDJH DQG REVWUXFWLRQV L0$
PDUJLQDOO\ RXWSHUIRUPV &&'. GXH WR D EHWWHU SK\VLFDO 7$%/(,,,32:(5%8'*(7
OD\HU7,&&'.JLYHVEHWWHU566,DQGKHDGHUHIILFLHQF\ 0RGXOH
2SHUDWLQJ
9ROWDJH &XUUHQW 'XUDWLRQ (QHUJ\
DQG LV WKHUHIRUH WKH VXE*+] UDGLR VHOHFWHG IRU WKH PRGH
LPSOHPHQWDWLRQRIWKHQHWZRUN,WFDQWUDQVPLWXSWRG%P $FWLYH 9 P$ V P-
6HQVRU
WKHUHE\LPSURYLQJLWVUDQJHDQGUHGXFLQJLWV3(57KHVXUYH\ 6WDQGE\ 9 $ V -
UHVXOWV RI >@ LQGLFDWHG WKDW LW LV SRVVLEOH WR KDYH D VWDU 
7UDQVPLVVLRQ 9 P$ PV
QHWZRUNIRUDOOWKHRYHUKHDGWDQNV2+7EXWWKHFKDOOHQJHLV P-
WRFRQQHFWWKHJURXQGOHYHOUHVHUYRLUV*/5WRWKHQHWZRUNDV 
5HFHSWLRQ 9 P$ PV
P-
WKHLUJURXQGOHYHOSUHYHQWVOLQHRIVLJKWFRPPXQLFDWLRQWRWKH 5DGLR
5HFHSWLRQ
JDWHZD\7KHVROXWLRQWRWKLVLVWRFRQILJXUHWKH*/5QRGHVDV 9 P$ PV X-
VWDQGE\
HQGQRGHVDQGDQHDUE\2+7QRGHDVDUHOD\QRGH2+7VWKDW 6OHHS 9 X$ V X-
DUHQRWLQWKHYLFLQLW\RIDQ\*/5FDQEHFRQMXUHGVLPSO\DVDQ
HQG QRGH 7KH UHVXOWLQJ QHWZRUN WRSRORJ\ LV D WUHH DQG LV 0LFUR $FWLYH 9 P$ V -
VKRZQ LQ ILJXUH  ZLWK WKH HQG QRGHV FRUUHVSRQGLQJ WR WKH FRQWUROOHU 6OHHS 9 X$ V P-
JURXQG OHYHO UHVHUYRLUV VKRZQ DV VWDUV WKH RYHUKHDG WDQNV DV
7RWDO     -
UHG FLUFOHV DQG WKH JDWHZD\ DV DQ DUURZ 7KH 2+7V DUH
QXPEHUHG  WKURXJK  DQG FRQQHFW GLUHFWO\ WR WKH JDWHZD\ 
7KHOLQNVLQ7DEOH,,UHIHUWRWKHFRQQHFWLRQEHHWZHHQHDFK*/5
DQGLWVFRUUHVSRQGLQJ2+7)RUHDFKOLQNLQEERWKWKHVHWDEOHV
WKH FROXPQ FRUUHVSRQGLQJ WR WKH VKDGHG FHHOOV LQGLFDWHV WKH
RSWLPL]HG SRZHU WUDQVPLW SRZHU OHYHO FKRVHQ IRU WKH
GHSOR\PHQWWKDW PLQLPL]HVWKHSRZHUFRQVXP PSWLRQ)RUFDVHV
ZLWK QRQ]HUR SDFNHW HUURU UDWH WKHH KLJKHU OHYHO
FRPPXQLFDWLRQSURWRFROZLWKUHWULHVHQVXUHVVWKDWSDFNHWVDUH
HYHQWXDOO\FRPPXQLFDWHG

932:(56<67(0
6LQFH WKH VHQVRU QRGHV DUH GHSOR\HG LQ KLJK WDQNV WKH\
QHHG WR EH PDLQWHQDQFH IUHH DV PXFK DV SRVVVLEOH  +HQFH ZH
KDYH GHVLJQHG WKHP WR EH SRZHUHG E\ VROODU SDQHOV  7KH
VSHFLILFDWLRQVRIWKHEDWWHU\DQGVRODUSDQHOKKDYHEHHQDUULYHG
DW DIWHU WDNLQJ LQWR DFFRXQW WKH ZRUVWFDVH LLQVRODWLRQ GXULQJ
PRQVRRQ SHULRGV ZKHQ WKHUH LV VLJQLILFDQW FFORXG FRYHU 7KH 
SRZHU VXSSO\ LV GHVLJQHG WR VXSSO\ 9 WR WKH 063 )LJ6FDWWHUSORWRIPHDVXUHHGYVDFWXDOGLVWDQFH
PLFURFRQWUROOHU DQG WKH FRPPXQLFDWLRQ FKLS DQG VXSSO\ WZR
SURJUDPPDEOH YROWDJHV ZKLFK DUH VHW WR 9 DQG 9 IRU WKH )LIW\ UHDGLQJV DUH WDNHQ HYHU\  FP DQG KLVWRJUDPV DUH
VHQVRU ERDUG ZLWK SRZHU JDWLQJ 1L0+ EDWWWHULHV VRXUFH WKH SORWWHGDWHDFKGLVWDQFH)LQDOO\DOOOWKHKLVWRJUDPVDUHPHUJHG
SRZHUDQGDVRODUSDQHORIUDWLQJ:9LLVXVHGWRFKDUJH LQWRDVLQJOHVFDWWHUSORWDVVKRZQLQ QILJXUH7KHVSRWVLQWKLV
WKH EDWWHULHV LQ WZR VWDJHV EXFN FRQYHUWHU IRROORZHG E\ OLQHDU JUDSKLQGLFDWHWKHFRQFHQWUDWLRQRIUUHDGLQJVLQDQDUHD&OHDUO\
UHJXODWRU IRU HIILFLHQW FKDUJLQJ 7KH TXLHVFHHQW FXUUHQW RI WKH DFFXUDF\LVEHWWHUDWVKRUWHUGLVWDQFFHV:HGHWHUPLQHGWKDWRXU
SRZHUVXSSO\ERDUGLVPLQLPL]HGWRP$7KKHV\VWHPWDNHVD VHQVRU KDV DQ DFFXUDF\ ZLWKLQ 
RI IXOO VFDOH ZLWK
UHDGLQJRQFHHYHU\PLQXWHDQGWUDQVPLWVWKHVDDPH&RQVLGHULQJ LPSURYHGDFFXUDF\DWVKRUWHUGLVWDQ QFHV)XUWKHUH[SHULPHQWVDW
IRXUP$KEDWWHULHVZLWKDXWLOLVDWLRQIDFWRRURIZHJHW D VZLPPLQJ SRRO LQGLFDWHG WKH VHHQVRUV SHUIRUPHG ZLWK WKH
DURXQGNF\FOHVRIRSHUDWLRQZKLFKPDNHV WKHV\VWHPZRUN VDPHDFFXUDF\DVWKDWREVHUYHGZLWK KWKH$OXPLQLXPERDUG
IRU DSSUR[LPDWHO\  GD\V 7KLV LQ FRQMXQFWWLRQ ZLWK D VRODU $SLFWXUHRIWKHLQVWDOODWLRQRIWKKHVHQVRURQDWDQNLVVKRZQ
SDQHO HQDEOHV WKH V\VWHP WR DFKLHYH FRQWLLQXRXV RSHUDWLRQ LQ ILJXUH  7KH V\VWHP ZDV DOVR LQ
QVWDOOHG LQ D *URXQG /HYHO
ZLWKRXWQHHGLQJIUHTXHQWEDWWHU\FKDQJHV7KHHSRZHUEXGJHWLV 5HVHUYRLU */5 LQ WKH FDPSXV ZLWK D UHOD\ SODFHG RQ D
VKRZQLQWDEOH,,, QHDUE\ 2YHUKHDG 7DQN 2+7 DQG G WKH JDWHZD\ VHWXS D IHZ
KXQGUHG PHWUHV DZD\ 'DWD ZDV FR ROOHFWHG HYHU\ PLQXWH IURP
9,5(68/76
WKHWDQNDQGZDVHQFDSVXODWHGLQWRSDFNHWVDQGWUDQVPLWWHGWR
7KHRYHUDOOV\VWHPEORFNGLDJUDPLVVKRZQQLQILJXUH7KH WKHUHOD\ZKLFKWKHQIRUZDUGVLWWR RWKHJDWHZD\7KHJDWHZD\
GHVLJQHGVHQVRULVIDEULFDWHGDQGIRXQGWRKDYYHDUDQJHRIP XQSDFNVWKHUHFHLYHGSDFNHWDQGXS SORDGVWKHOHYHOGDWDRQOLQH
ZLWKDQDFFXUDF\RIRIIXOOVFDOH7KH PHWKRGRORJ\IRU WR D *RRJOH $SS (QJLQH DSSOLFDWWLRQ )LJXUH  VKRZV WKH
WHVWLQJWKLVLVDVIROORZVWKHVHQVRUVDUHVHWXSLQDFRUULGRUDQG FROOHFWHGGDWDIRUKDOIDGD\
D ODUJH $OXPLQLXP UHFWDQJXODU ERDUG LV XVHGG DV WKH UHIOHFWRU
7KH HQYLURQPHQW RI WKH VHWXS LV LQGRRUVV ZLWK PLQLPDO
GLVWXUEDQFHVLQWKHPHGLXP




)LJ,QVWDOODWLRQRQDWDQN7KHVHQVRUWUUDQVGXFHUEORFNLVDWWDFKHGWRWKH
ULPDQGIUHHO\KDQJVWRHQVXXUHDYHUWLFDOGLUHFWLRQ

)LJ6\VWHPEORFNGLDJUDP

 &RSLQJ ZLWK :DWHU 6FDUFLW\ &K KDOOHQJH RI WKH VW &HQWXU\
)LJ/HYHOGDWDFROOHFWHGIURPDWDDQN
$ IHZ JOLWFKHV LQ WKH GDWD FDQ EH VHHQ WKDW FFDQ EH VPRRWKHG
DIWHUDFTXLVLWLRQ7KHYDULDQFHLQWKHUHDGLQJVLLVZLWKLQFP
9,,&21&/86,216
:H KDYH GHVFULEHG DQ ,R7 V\VWHP FRQVLLVWLQJ RI FXVWRP
VHQVRUVLQWHUFRQQHFWHGYLDDVXE*+]EDVHGZ ZLUHOHVVQHWZRUN
7KH VHQVRU VXEV\VWHP XVHV XOWUDVRQLF UDQJLLQJ WR GHWHUPLQH
ZDWHUOHYHOVLQODUJHWDQNVLQWKHGLVWULEXWLRQV\\VWHP2SWLPLVHG
FLUFXLWU\DQGDOJRULWKPDOORZHGDFKLHYLQJDUUDQJHRIXSWR
PZLWKDQDFFXUDF\ZLWKLQRIIXOOVFDOOHXVLQJORZFRVW
WUDQVGXFHUV,QLWLDOGHSOR\PHQWUHVXOWVDUHHQFRRXUDJLQJDQGDVD
QH[WVWHSZHZLOOLQVWUXPHQWDOOWKHWDQNV$IIXUWKHUDGGLWLRQLV
WR LQFOXGH FRQWURO YDOYHV VR WKDW ZH FDQ FUHDWH D VPDUW
GLVWULEXWLRQV\VWHPZKLFKGLVWULEXWHVMXVWHQRXXJKZDWHUWRHDFK
WDQNWRVDWLVI\WKHORFDOGHPDQGV
$&.12:/('*0(17
:HWKDQN0U$ORN5DZDWIRUWKHGHVLJQ RIWKHHQFORVXUH
:HWKDQN0U6KHHWDO.XPDUDQG0V$QMDQDRI'HSWRI&LYLO
(QJLQHHULQJ ,QGLDQ ,QVWLWXWH RI 6FLHQFH IRU GLVFXVVLRQV :H


WKDQNWKH5REHUW%RVFK&HQWUHIRU &\EHU3K\VLFDO6\VWHPVDW
,QGLDQ,QVWLWXWHRI6FLHQFH%DQJDORUUHIRUIXQGLQJWKHSURMHFW
5()(5(1&(6
>@ 81'3 +XPDQ 'HYHORSPHQW 5HS SRUW %H\RQG 6FDUFLW\ 3RZHU
3RYHUW\ DQG WKH *OREDO :DWWHU &ULVLV 8QLWHG 1DWLRQV
'HYHORSPHQW3URJUDPPH
>@ 81'3 +XPDQ 'HYHORSPHQW 5HSRUW 6XVWDLQLQJ +XPDQ
3URJUHVV 5HGXFLQJ 9XOQHUDELOLWW\ DQG %XLOGLQJ 5HVLOLHQFH
8QLWHG1DWLRQV'HYHORSPHQW3URJ JUDPPH
>@ )RRG DQG $JULFXOWXUH 2UJDQL]DWWLRQ RI WKH 8QLWHG 1DWLRQV
81)$2
>@ $P\ /H /LTXLG/HYHO 0RQLWRULQ QJ 8VLQJ D 3UHVVXUH 6HQVRU
7H[DV,QVWUXPHQWV
>@ &\WURQ 7HFKQRORJLHV +&65 8OWUDVRQLF 6HQVRU  3URGXFW
8VHU0DQXDO
>@ 9LJQHVK .XGYD HW DO 7RZDUGV D UHDOWLPH FDPSXVVFDOH ZDWHU
EDODQFHPRQLWRULQJV\VWHP,Q9/6 6,'HVLJQ
>@ ,YDQ6WRLDQR/DPD1DFKPDQ6DP P0DGGHQ3LSHQHW$ZLUHOHVV
VHQVRU QHWZRUN IRU SLSHOLQH PRQLLWRULQJ ,Q ,((( ,QWHUQDWLRQDO
6\PSRVLXP RQ ,QIRUPDWLRQ 3URFFHVVLQJ LQ 6HQVRU 1HWZRUNV
&DPEULGJH0DVVDFKXVHWWV
>@ &K3DSDJHRUJLRXDQG7K/DRSRXORV0RGLILFDWLRQRIUHVRQDQFH
FKDUDFWHULVWLFVRIXOWUDVRQLFWUDQVGX
XFHUVE\WKHGULYLQJFLUFXLW,Q
3URFRI;9,,,0(.2:RUOG&RQIHUHQFH'XEURYQLN
>@ *DU\ 3HWHUVHQ /PDWFKLQJ WKH RXWSXW RI D 5,7(& JDWHG
DPSOLILHUWRDQDUELWUDU\ORDG
>@5D\PRQG 6 )UHQNHO &RGHG SXOVHH WUDQVPLVVLRQ DQG FRUUHODWLRQ
IRU UREXVW XOWUDVRXQG UDQJLQJ IURP D ORQJFDQH SODWIRUP
0DVWHUVWKHVLV8QLYHUVLW\RI0DVVDFKXVHWWV$PKHUVW
>@1LKHVK 5DWKRG HW DO 3HUIRUPDQFH DQDO\VLV RI ZLUHOHVV GHYLFHV
IRU D FDPSXVZLGH ,R7 QHWZR RUN ,Q :LUHOHVV 1HWZRUNV
0HDVXUHPHQWV DQG ([SHULPHQWWDWLRQ :RUNVKRS KHOG LQ
FRQMXQFWLRQ ZLWK :L2SW  &RQIHUHQFH 0XPEDL