What next?
Editor's letter
The beginning of May was dominated by fears of a global pandemic, although the initial media frenzy rapidly reduced to reflect the true low risk of widespread fatalities from swine flu. Nevertheless, op risk managers have been dusting off their pandemic business continuity plans and incorporating pandemics into their routine stress tests. The renewed focus on stress testing and a heightened realisation that bad things happen all the time that can severely affect the financial services industry ensured banks acted fast to cover all their bases. After coping with bird flu and SARs, banks seem to be rather more well prepared to deal with issues arising from global pandemics than from, say, a 30% fall in house price values ...
Bankers in the UK at least have been able to breathe a sigh of relief now that the media spotlight has been turned away from them, thanks to the MP expenses scandal hitting the headlines. MPs have supplanted bankers as the number one figures of public hatred, which hopefully should allow banks a period of calm to ensure they are making good progress with preparing for the imminent wave of new regulation. That said, there is still a good degree of panic in the banking community as risk managers attempt to second-guess what the supervisors will come out with next. The latest rumours focus on the betas used to calculate op risk capital charges for firms taking the standardised approach to op risk management. Rumours are circulating that the betas will be raised from 12-18% to 18-20%. This has been denied by sources, but such a move would not be surprising - the betas were initially set as a best guess and are due for review, especially in light of the crisis (see page 10). But these rumours are likely to provide more fuel to the fire of the Basel Committee conspiracy theory, which suggests that the Committee is seeking to raise capital at banks any way it can, including by raising the betas for firms taking the standardised and basic indicator approaches. We will continue to follow this story but for now at least it seems the Basel Committee is busy sorting out the market and credit risk aspects of Basel II, and it will be a while before it turns its attention to op risk charges.
Have a good month!
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Risk management
Beware war exclusions in cyber insurance, risk managers told
Risk Live: Experts say policy wording is tightening up following rise in ransomware attacks
Top 10 operational risks for 2024
The biggest op risks for the year ahead, as chosen by senior industry practitioners
Top 10 op risks: AI fears drive cyber risk to record high
External fraud re-enters top 10; change management now a top five concern
Harsh judgements: why Stateside lenders are upping the Q-factor
As CRE stalls, qualitative adjustments are forming a larger part of US banks’ credit risk allowances
As FCMs dwindle, regulators fear systemic risk
Panellists highlight dangers of clearing membership becoming more concentrated
Bank credit risk: how well do you know your counterparties?
As financial markets evolve, evaluating the complex credit risk exposures of non-bank counterparties is crucial for effective risk management, says Quantifi’s Dmitry Pugachevsky
EU index managers face funding risks as US moves to T+1
Rotations from European to US assets will need prefunding due to slower EU settlement
CCPs show support for daily stress margin tools
Anti-procyclicality measure floated by HKEX official sparks interest from rivals including Nasdaq
Most read
- As FCMs dwindle, regulators fear systemic risk
- Top 10 operational risks for 2024
- Top 10 op risks: AI fears drive cyber risk to record high