Risk magazine - Feb 2020
In this month’s issue: how Netflix model is influencing corporate bonds; BNP Paribas leads European clearers comeback; a special in-depth section on Libor; and much more
Articles in this issue
Full stream ahead for bonds
Price streaming offers cost savings and operational efficiencies, but it could fragment liquidity
Eurex members divided over liquidity risk charges
Banks say proposed charge too conservative, debate whether add-on should be charged directly to clients
Libor replacement jumble may hike hedging costs
Use of term rates and credit adjustments will create new basis risks that could be costly to hedge
JSCC caps member cash calls, revamps futures margin model
Clearing house set to end unlimited default fund top-ups for futures clearing
EU council dials back on margin haircuts for CCP resolution
Lawmakers close avenues for regulators to dip into non-defaulting members’ initial margin
Non-EU hedge funds stage surprise escape from SFTR
European Commission clarifies scope of reporting obligation that confused many in the industry
Watch out for Brexit cliff edge 2.0, experts warn
Measures to mitigate a sharp rupture for financial services could be less likely at end-2020
Isda plans February rerun of Libor pre-death trigger poll
Lack of consensus would add pre-cessation option to post-cessation protocol for bilateral swaps
People moves: De Roeck quits Standard, BofA adds risk exec, and more
Latest job changes across the industry
The corporate bond revolution will be streamed
Dealers are piping feeds of live, executable prices direct to select clients
BNP leads a comeback for Europe’s clearers
Brexit, leverage ratio tweaks and concentration fears could help European banks compete with US FCMs
Judgement day looms for dealers in swap shift to Sonia
Regulator pushes Q1 deadline for users to adopt risk-free rate as norm for interdealer trades
Secrets and Libor fallbacks
Lenders may be forced to reveal sensitive funding data when Libor disappears
Libor limbo: loan market fallback language upends lenders
Banks seek to replace painful fallback language in loan docs and avoid a cost-of-funds contingency
Signing the Libor fallback protocol: a cautionary tale
As Orwell’s Room 101 beckons for Libor publication, muRisQ Advisory’s Marc Henrard warns of a potential pitfall in the fallback protocol
On eve of Brexit, PPF’s chief risk officer isn’t too worried
Stephen Wilcox talks about getting pensions paid without the benefit of controlling ‘UK Plc’
Frustrated authorities resort to BCBS 239 ‘fire drills’
ECB and Finma lob impromptu data requests at banks, as BCBS 239 quietly permeates everyday supervision
Why the numbers don’t add up for post-Libor hedge accounting
Experts raise concerns over IASB’s Phase II plans to move on from Libor
Custody battle: competing tensions put IM prep in jeopardy
Conflicting custody interests and delayed docs call IM phase five readiness into question
Worth the cost? EU rethinks Mifid disclosure rules
Banks would gladly be rid of cost disclosures, but some clients want them improved, not scrapped
Show don’t tell: BoE’s climate stress test dilemma
Making the test easier to run could come at the expense of building risk management capacity
Fund managers look beyond Hong Kong as instability bites
Contingency planning for Hong Kong protests could turn into structural shift for asset management industry
Ex-Credit Suisse quants embrace machine learning
Founders of XAI Asset Management grapple with unsupervised learning and the problems of explainability
How Onyx came from nowhere to conquer oil swaps
In just four years, market-maker has become the largest provider of liquidity in energy derivatives
Grand designs? Time to rein in the Pillar 2 project
Pillar 2 capital add-ons are becoming increasingly elaborate
EU banks failing on op risk and governance – ECB
Central bank raises concerns on board management, risk controls and data aggregation
Growth of shadow banks slowed in 2018 – FSB
Funds susceptible to run risk make up 72% of narrowly-defined non-bank universe
Giant £174bn Sonia swaps trading day may be biggest ever
Mammoth swaps focus on upcoming announcements from the Bank of England’s Monetary Policy Committee
Top five clearing members dominate CCPs
Thirteen of 25 clearing services surveyed have 50% or more open positions in hands of top five members
Liquidity risks acute for popular retail funds – Esma
Eight per cent of real estate fund NAV may be withdrawn over a one-day period
JP Morgan takes $2.7bn capital hit from CECL
Credit card portfolios see allowances for loan losses spike the most
Op risk data: Regulator fines tumble by $5bn in 2019
Also: Julius Baer hit with $150m Cold War-era claim, Barclays pays $87m for bond rigging. Data by ORX News
Credit data: a sharp turning point in CCP credit risk
The credit risk of CCPs is worsening, even as margin requirements rise, writes David Carruthers
No silver bullet for AI explainability
No single approach to interpreting a neural network’s outputs is perfect, so it’s better to use them all
Interpretability of neural networks: a credit card default model example
Recently developed techniques aimed at answering interpretability issues in neural networks are tested and applied to a retail banking case
The market generator
A generative neural network is proposed to create synthetic datasets that mantain the statistical properties of the original dataset
Neuberger Berman gets its Sherlock on
Asset manager deploys quant-cum-sleuth to sniff out portfolio risk
