Indirect clearing, FVA and the Top 10 op risks

The week on, January 20–26

TOP 10 OP RISKS for 2017

INDIRECT CLEARING RULES too demanding, warn EU regulators

FVA: off the mark

Commentary: The race goes on

Cyber risk topped the list of operational risks this year, as it did last year. For operational risk practitioners around the world, the threat continues to be severe. Although regulation due next year – the EU General Data Protection Regulation – imposes huge fines on companies that lose control of customer data, the risks of fraud, theft and sabotage also remain high, and are continually evolving.

But loss of customer data is not the only form of cyber risk – and threats of denial of service attacks and other forms of sabotage continue to evolve at incredible speed. The trend towards devices connected to the internet – the 'internet of things' – provides a multiple-order-of-magnitude increase in machines that can be hijacked as part of a distributed denial of service attack on a target such as an online banking portal, and security in many of them is hopelessly inadequate.

Cyber attacks as part of a ‘hybrid war' strategy are also likely to be a feature of 2017. And this is not simply a concern for countries with undesirable neighbours; cyberspace is largely borderless, and this will make it easier to launch untraceable and indiscriminate attacks against key infrastructure, to deter or disrupt foreign policy. It will also increase the risk that an attack, or the tools used to carry it out, will spread beyond the intended target.

Protecting key national infrastructure has been a focus for governments for several years, but the energy industry has now also warned that its own trading systems could be vulnerable, with an almost equally disastrous effect.



The 42 asset management firms that responded to a survey by two industry associations have only put in place some 250 of the more than 3,000 credit support annexes (CSAs) required to cover their existing non-cleared trading relationships. Roughly 200 of those CSAs were completed by just three firms, while 28 of the 42 survey respondents have yet to complete any of the CSAs needed to continue trading non-cleared derivatives after March 1.



"[The Republican bill to change commodity regulation] just makes things very difficult. We already do extensive cost-benefit analysis and I think that we do a good job of that. I think [the bill] specifies some other details about how you do the [analysis] which I think could make it difficult" – Former CFTC chairman Timothy Massad



‘Great rotation' highlights clash over risks in factor investing
Gaps in performance of apparently similar products rekindle debate on index construction

Mifid equivalence delay threatens Hong Kong dual-listed stocks
HSBC, Stan Chart and Prudential shares could face trading disruption in 2018

US dealers face trading lockout from small Japanese banks
Lack of substituted compliance for Japan's small bank margin rules causing concern

Citi axes second Asia-Pac clearing head in 18 months
Instability at the top despite a market-leading franchise

Energy Risk commodity rankings 2017: A return to risk management
Committed dealers reap the benefits of increased interest in hedging and investing

Insurers forced to choose between imperfect inflation hedges
Inflation is predicted to rise but hedges against it are getting harder to put in place

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