Risk magazine - Apr 2019
In this issue: range accruals return; the Fed’s new repo facility; Isda’s common domain model; top 10 op risks survey; and much more
Articles in this issue
Remembering the range accrual bloodbath
Flatter US yield curve spurs demand for a product with a painful history
Mizuho reveals $270m CVA loss
Further losses may be reported as bank refines its methodology, sources say
Enria takes aim at eurozone banks’ sovereign exposures
New ECB supervision chair floats Pillar 2 concentration charge, criticises use of IFRS 9
ASX to offer blockchain free to lure early adopters
Teaser intro would be for three years, while users would still be charged for Swift and AMQP connections
Isda proposes fix for ‘manufactured defaults’
Failure-to-pay must be linked to a deterioration in creditworthiness to trigger CDS payouts
Differing European approaches may hamper Ibor transition
While sterling shifts to Sonia, efforts to save Euribor create euro multi-rate uncertainty
Singapore looks to synthetic Libor for new benchmark calculation
The way Singapore’s swap rate is calculated must change if Libor disappears after 2021
Dealers consider ditching FRAs prior to Libor’s death
Forward rate agreements won’t work with backward-looking rates; banks explore single period swaps instead
CCP risk panels aren’t listening, banks say
Simmering resentment surfaces as two banks insist committees be more responsive to clearing members
FCA steps up anti-money laundering spot checks
UK watchdog changes fincrime head amid speculation AML spot visits increasing because of critical FATF review
Banks split over sending traders to default auctions
After Nasdaq auction failed, some see need for traders in process; others can’t afford to lose them
US version of SA-CCR could hurt settled-to-market swaps
Capital requirements on a client’s hedged options portfolio could increase by 1,100%
People moves: Basel names new leaders, forex exits at BNP Paribas, and more
Latest job changes across the industry
Making machine learning work for AML
Banks’ anti-money laundering teams are starting to utilise machine learning to combat financial criminals. Risk hosted a webinar in association with NICE Actimize to explore whether these bots can be trusted
Risky notes replace easy money for exotics desks
Dealers insist ‘it’s different’ as flat US curve revives bonds that sank the Street in 2008
Fed repo facility may fix SOFR’s image problem
‘Overnight standing repo facility’ could stop year-end rate spikes, and extend Fed’s reach
EU-Singapore trade deal awakens sovereign restructuring fears
Many worry that EU government bonds are now in play for international arbitration
Portfolio traders turn to tech – A new generation of strategies
Chris Bruner, head of US credit product at Tradeweb, explores the products that can help managers express portfolio views and how they can maximise the benefits they can reap by evaluating and understanding the price, risk and relative value of each…
Top 10 operational risks for 2019
The biggest op risks for 2019, as chosen by industry practitioners
Patchy response to Isda’s back office of the future
Some banks are quiet, while clearing houses seem split on uptake of Isda data standardisation project
Shallow liquidity threatens Saron momentum
Swaps on Swiss Libor successor gain traction, but lack of cash products poses liquidity hurdle
Once bitten, twice shy: UK traders wary of inflation reform
Proposals to fix RPI methodology flaws are back on the agenda, but traders have been caught out before
Autocall concentration weighs on dealers
Hedging headaches force issuers to seek new structured product blockbusters
EU swap users still hope for single-sided reporting, one day
Lawmakers fail to deliver Emir reprieve but tease at potential future changes
Q&A: Japan regulator aims to be glue for fragmented rules
“Unintended and unnecessary” splits in regulation damage financial markets, says FSA’s Ryozo Himino
Brexit threatens to trip up derivatives reporting
Split will increase firms’ workload and costs, and result in less-accurate regulatory reports
Banks concoct fixed income alternative premia 2.0
Fixed income was a rare winner in a terrible 2018 for alternative risk premia. More complex iterations are on the way
Q&A: Blockchain in commodities – a solution in search of a problem?
Competitors must work together if technology is to harness its potential, say three industry leaders
Op risk past is prologue for UK banks
UK banks will not be allowed to forget past misdeeds
Legal charges topped £6 billion at UK banks in 2018
Majority of costs relate to legacy issues, including PPI and RMBS mis-selling
At EU banks, bad business practices led op risk losses
Misconduct trumped external fraud and process management failures
Op risk capital to jump 45% for European banks under Basel III
Some banks could see capital increases of more than 60%
US banks slashed G-Sib scores in Q4 2018
Big cuts to derivatives and trading securities push systemic risk scores lower
Revised Basel output floor to bind 41% of European banks
Cap on modelled capital will also constrain 6% of Americas banks and 34% of banks from the rest of the world
CME had top margin breach of $138 million in 2018
Margin shortfall triggered by "extreme volatility" in natural gas markets
Op risk data: losses focus attention on bank resilience
Also: StanChart’s control fail fines, plus three losses in Russia. Data by ORX News
Credit data: UK banks hold firm as Brexit looms
The credit status of UK banks remains unchanged, but other industries have seen significant deterioration
Swaps data: cleared volumes and CCP market share
Data shows CME and Eurex growing faster than LCH Swapclear
Will the Nasdaq default spur CVA for CCPs?
Quant proposes model to calculate bank credit risk exposure to CCP
Central counterparty CVA
Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership
Tying allocation to selection
Hamza Bahaji introduces a new approach to core-satellite investing, the compound portfolio insurance
Robo traders not so different from us, says Man AHL risk chief
Watching over machine learning algorithms is similar to monitoring human portfolio managers
