Risk magazine - Dec 2020
Articles in this issue
Fallback dodgers walking a difficult path
Firms avoiding signing the Isda protocol will face challenges, say industry figures
Dollar Libor reprieve sparks fallback uncertainty
Popular settings to end in June 2023; market seeks clarity over timing of fallback spread triggers
European banks want clarity on post-Covid capital rebuild
Supervisors urged to explain what will happen when pandemic relief on capital buffers expires
UBS gears up for another tilt at clearing
Swiss bank makes senior hires and upgrades tech platform ahead of Brexit and leverage offset
BoE warns banks: start preparing for a higher carbon price
Risk Live: stress tests should assume rising carbon price, regardless of government policy, says Breeden
US banks cede to SOFR lending as credit hopes fade
Critics of risk-free rate say dynamic spread will be too late for transition
Bloomberg joins race for SOFR credit add-on
Benchmark provider building bolt-on adjustment from short-term bank lending data
Congress readies surprise ‘tough legacy’ Libor fix
Federal legislation to ensure legacy Libor contracts can move to SOFR is in the works
Synthetic Libor powers give FCA ‘massive discretion’
Consultation on use of new benchmark clout may not limit safety-net rates to economic realities
Term Sonia rivals don the same clothes
IBA mimics Refinitiv by adding Tradeweb quote data; Refinitiv denies IBA has ‘synthetic Libor’ edge
Fed will start FRTB model approvals for US banks in 2021
Senior official says banks should now be deciding desk structure and readying backtests
People news: Yarian leaves HSBC, Goldman’s Lemkau joins MSD Partners, and more
Latest job changes across the industry
The buy side and Libor: it’s decision time
Investors weigh pros and cons of signing newly released Isda fallback protocol, as Libor demise looms
Joe Biden’s slow road to remaking US financial regulation
Moves on climate risk could come early; other changes may have to wait until end of 2021, or later
Never mind the buffers: Covid reveals deeper flaws in Basel III
Tweaking discretionary capital buffers won’t address all the prudential issues raised in 2020
Buffer stops? Why banks haven’t used Covid capital relief
Amid weak credit demand, banks haven’t availed themselves of capital buffers, but they still might
EU’s dividend ban overshadows reform effort
Banks may be reluctant to run down buffers even if regulators soften the MDA threshold for payouts
SA-CCR proves a bitter pill for US banks to swallow
Dealers concerned new regime will punish some business lines with rise in risk-weighted assets
Direct clearing could solve CCP concentration risk
Allowing more clients to self-clear can reduce CCPs’ reliance on a few firms, says ex-Chicago Fed adviser
Funding pain prompts calls to rehome FVA
Dealers push to move derivatives funding costs out of P&L following March’s outsize losses
Asia’s private wealth giants shift gears to market-neutral
With interest rates low, structured product investors bypass capital-protected products for market-neutral strategies
How low can you go: falling cost of FX fix sparks concern
Algorithms reducing fixing fees, but some dealers willing to go even lower – perhaps dangerously so
Botched copy: Esma delivers cut and paste pastiche of Trace
Mifid transparency mishmash misses key aspects of US system it emulates, say dealers
G-Sibs see little sign of relief on Fed’s systemic buffer
Central bank liquidity and Treasuries will push US firms into higher G-Sib buckets
ECB certificates: a ready-made euro safe asset
The CMU must be backed by a stock of safe assets. The ECB can supply them, writes Daniel Hardy
Asia edging towards integrated capital markets – SGX’s Loh
Asia Risk 25: full regional co-operation could still be 10 to 15 years away, says Singapore exchange head
Canada pension fund Hoopp goes cool on bonds
$70bn investor rethinks LDI strategy to take into account paltry yield from fixed income
The value rally that never was
Many value stocks stayed flat on November 9 vaccine news, says factor investing expert
Investors weigh merits of ESG hedging
Opinion divided over proposed tool for transferring risk of non-sustainable activities
EU banks and state-backed loans: bad news with a long fuse
EU banks face a time bomb as public guarantee schemes expire next year
€STR transition stymied by addiction to Eonia – ECB
Notional outstanding OIS referencing outgoing rate has increased year-to-date
Many US banks want to curb Fed balances
Of those wanting to shrink excess reserves, a large percentage cite fears over net interest margins
Margin calls on insurers, pension funds stoked MMF rout – ECB
Dutch firms accounted for huge share of VM payments in March
Systemic US banks shifted assets to buy-to-hold pens in Q3
JP Morgan almost doubled its held-to-maturity portfolio last quarter
Weak EU banks may lowball Covid loan losses – ECB
Low-profitability banks provision less than their more flush counterparts
EU Covid policies resurrect sovereign doom loop fears
Italian banks could see holdings of home country debt increase to 17% of their total assets
EU funds lack liquidity management tools – Esma
Most Ucits can only rely on temporary borrowing or gating to weather crises
US systemic banks’ op risk charges fell in Q3
Bank of America’s charge falls 26% following a model change
PNC to be king of US regional banks after BBVA tie-up
Merger unlikely to tip PNC into too-big-to-fail category
Credit Suisse, UBS slowed accrual of liquid assets in Q3
Credit Suisse’s LCR drops six percentage points quarter-on-quarter
A step closer to the perfect volatility model
Research on ‘rough volatility’ gives fresh insight into financial fluctuations, quant expert explains
A guiding light for corporates lost in the fog of XVAs
Chris Kenyon proposes a framework for optimising XVAs – from the client perspective
Degree of influence: volatility shakes markets and quant finance
Volatility and machine learning were among the top research areas for quants this year
Zooming in on equity factor crowding
A measure for crowding in trades is derived from supply and demand imbalances
KVA as a transfer of wealth
A capital valuation adjustment designed to preserve a firm’s value to shareholders is introduced
Client engineering of XVA
A client’s guide to reducing XVA in times of need
TradingHub: client data trove offers jump on market abuse
Surveillance firm already using aggregate info to tackle best execution questions