Risk magazine - Apr 2018
In this month’s issue: the battle of the back office has begun; Tullett Prebon’s mystery Clob; an in-depth look at loan-loss forecasting; a new way to tackle rogue traders; and much more

Articles in this issue
From prophets to ‘parasites’
How post-trade vendors went from problem-solvers to ‘rent-seekers’
Basel to scrap automatic fails for P&L test
“Amber zone” will protect near-miss desks, but regulators not convinced by NMRF complaints
Quants warn over flaws in machine learning predictions
Six quants debate whether the tool can adjust to paradigm shifts in financial markets
StanChart and Nasa join forces for quantum computing project
Bank is exploring quicker ways to solve portfolio optimisation
Swaps basis leaps as LDI funds prep for Libor’s death
Gap between 30-year Libor and Sonia swaps surges 36% in three weeks
European FRTB capital charges hang by a thread
EU Council mulls introducing only reporting requirements in CRR II, or a very low scalar
Fed’s Curti: SMA will smooth capital mismatches
OpRisk North America: non-US banks holding less capital under own-models approach was “a big problem”, says regulator
People moves: BAML loses two in exotics, BNPP’s global markets overhaul, and more
Latest job changes across the industry
The battle for the back office
Post-trade incumbents at risk as Isda and others search for standards
Tullett Prebon and the mystery Clob
How tpSef quietly kept voice broking alive in a regime designed for e-trading
Brexit: banks take the ‘no’ out of novations
Swaps clauses stop end-users blocking counterparty switch, making it easier to move trades to EU affiliates
A floored plan: Europe’s CCP recovery rules draw fire
CCPs and clearing members both unhappy with proposed allocation of non-default losses
ECL regimes a volatile brew of risk and accounting
Fed asks banks to propose a solution to address CECL-CCAR mismatch
Banks grapple with IFRS 9 and CECL loan loss forecasting
Ambiguity in rules sets up potential clash between banks and auditors over “reasonable and supportable” projections
CECL vs CCAR: banks fear loan-loss reserves mismatch
Lifetime loan loss estimates will look much worse under CCAR stress scenarios than accounting measure
Global fragmentation looms in FRTB data pooling stand-off
Smaller banks unwilling to hand over localised trade information to data utilities
US swap trading overhaul may reinforce market split, users warn
New rules on trade execution likely to halt any unifying shift of liquidity to order books
After Libor: Japan, Australia look to multi-rate future
Using new risk-free rates alongside Libor equivalents gains industry support
Not waiving but drowning: EU banks face capital traps
Council and some MEPs try to kill cross-border capital and liquidity waivers in CRR II
Holdco wars: Asia may retaliate against EU plan
European holding company requirements for foreign banks threaten tit-for-tat response
Another Brexit: UK heading for Solvency II risk margin fix
PRA to approve local cut to risk margin but implementation may be postponed until after March 2019
Shale, pipelines and hubs: turmoil ahead for US gas hedging
Regional market correlations in flux amid structural change
Curbing rogue behaviour
Regulators should try to combat rogue trading by measuring traders’ risk-taking differently, say quants
Monthly op risk losses: MetLife suffers $510m pension reversal
Also: UK credit card mis-selling; Italy crypto loss; LendingClub class action settlement. Data by ORX News
Swaps data: a Mifid-shaped hole
Data shows strong growth in US dollar rate swaps, but global picture is incomplete, says Amir Khwaja of Clarus FT
Credit data: UK retail sector’s woes continue
High street fails to get over Christmas slump; elsewhere, global PDs remain in flux, writes David Carruthers of Credit Benchmark
How not to control trading behaviour
Quants show popular risk measures fail to limit risk-seeking behaviour among traders
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
Scotiabank’s Daniel Moore on the evolution of the CRO
Data and technology will help risk managers improve risk-adjusted returns