05 Jan 2010, Ellen Davis, Risk magazine
Over the past few years, there has been a general trend for greater accounting and auditing disclosure of derivatives positions driven by IAS 39, Mifid and other directives. As banks and asset managers announce large writedowns on structured derivatives portfolios, there is even greater focus on how to protect existing portfolios from the same demise. With the onset of change in the regulatory landscape, it is clear that an important factor for institutions is transparency and consistency. This panel of industry experts – with moderator Ellen Davis, editor of Risk.net – explores issues around derivatives transparency and valuation globally, and in particular in light of the recent financial crisis.
– Ralph Baxter, CEO, ClusterSeven
– Eric Benhamou, CEO, Pricing Partners
– John Collins, head of risk, Rule Financial
– Gavin Lee, CEO, SunGard's Reech business unit
– Brian Sentance, CEO, Xenomorph
Questions posed to the panellists include:
1) Please briefly describe current practices at financial services firms, in terms of the acquisition of, storage and use of valuation data for derivatives transactions. Why have these practices proved problematic?
2) Is the regulatory community doing enough to emphasise the fundamental importance of valuation data issues to financial services firms? What regulatory initiatives or intervention do you think are necessary on valuation data?
3) What initiatives are under way at both banks and buy-side firms to improve valuation data, and address its crucial role in activities such as portfolio reconciliation, dispute resolution and T+0 settlement?
4) What are common roadblocks within organisations to implementing a more robust approach to valuation data? Cost? Culture? Infrastructure? How can these roadblocks be overcome to smooth acceptance?
5) Please expand on the ways in which robust valuation data can be incorporated into risk management modelling, including scenarios and stress testing, to improve the results those models can achieve.
6) How do you envision the environment around valuation data will evolve over the next five years at both banks and buy-side firms? Does the financial services industry have enough momentum behind this issue? Will spreadsheets still be the norm in 2014?