Cyber risk, FRTB and Solvency II

The week on, January 15-21, 2016


CYBER is top of the worry list for op risk managers

FRTB final version is a mixed bag for banks

SOLVENCY II could make the insurance industry more pro-cyclical


COMMENTARY: Cyber is about error as well as terror

It should come as no surprise to anyone that operational risk practitioners picked the cyber threat as their top risk for 2016 in our Top 10 Operational Risks survey. Whether at banks or central counterparties, the danger of a systems failure or a data loss – either to accident, negligence or deliberate attack – is never far from the minds of risk managers.

Reporting requirements are ever-increasing, as are the penalties for non-compliance. Settlement timelines are tightening. Retail and business customers are becoming more intolerant of service delays or interruptions, and governments and regulators demand, at the same time, far better use of customer data for purposes such as anti-money laundering and counter-terrorism, and far better data protection on privacy and security grounds. The potential costs of a failure in a key IT system continue to grow.

But it's important to remember that many of the most damaging cyber risk loss events are not the result of attack by highly skilled criminals, terrorists or intelligence agencies – they are more likely to be the product of poor training, poor design or carelessness. Even when an outside attacker is involved, their job is often made easier by poor or inconsistent security standards at the financial firm. A botched upgrade can take down key systems or destroy vital data just as easily as an external enemy.

"Some CCPs claim they can close out a client in one day; if you have a really large and complicated portfolio, I wonder if that's really possible" – Ulrich Karl, HSBC


The Basel Committee estimates that the final FRTB rules are likely to result in an approximate median capital increase of 22% and a weighted average capital increase of 40% compared with the current framework.


Revised Basel III better reflects bank risk, research finds
Study says 2013 capital rules more in line with actual risk, but can be easily gamed

Ex-Goldman oil trading head seeks to serve 'the little guy'
Ben Freeman, founder and CEO of HudsonField, sees opportunities for non-bank firms in energy lending

ETFs ditch derivatives as investors flock to physical products
Lyxor and Deutsche are switching to physical replication for majority of their ETFs

EU commodity derivatives regulation: 2016 and beyond
Market participants await key deadlines and decisions in year ahead

US dividend tax breaches international treaties, say lawyers
Non-US holders of equity products are now at unfair disadvantage compared with US owners, according to lawyers

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