Risk magazine - Jun 2018
In this month’s issue: how stock-bond correlations are turning traders’ worlds upside down; a downward surge for corporate swaps; dealers weigh up what to do with swaps portfolios in a Brexit world; a possible return of the ‘big bank’; and much more
Articles in this issue
Modelling correlation: from zig-zag to zig-zig
Research is starting to show the stock-bond link in a new light
Esma clampdown puts pressure on Mifid data services
Guidance insists data be free and machine-readable, attacking current practices
Euro swaps market faces loss of key basis hedge
New Eonia/Euribor swaps will be barred from 2020 if Eonia fails to comply with EU benchmark rules
Euribor can stay if reforms succeed – ECB’s Holthausen
Regulator also sees no clear favourite in array of Ibor fallback approaches
Compression firms vie to ease Libor switch
Quantile and TriOptima launching services to tear up Libor swaps and replace with new rates
Swaps users to get three choices for synthetic Libor
Consultation due next month as industry tries to avoid big losses on benchmark’s death
Isda faces member backlash on margin lobbying
Working groups were not consulted over Isda-funded paper that could threaten industry’s Simm
Planned sale prompts hard look at post-trade firms
Plans to sell MarkitServ fuel warnings about middleware vendors’ future
Foreign banks in US wary after funding costs rise
Following jump in Libor/OIS spread, many US entities continue borrowing from parents
No safety net for no-deal Brexit, warns BdE’s Alonso
UK banks should not rely on temporary rule waivers being granted in the event of a disorderly Brexit
People moves: Societe Generale makes senior changes, Mattatia moves to BNP Paribas, and more
Latest job changes across the industry
Buy-side modellers seek ‘Holy Grail’ of investing
When stocks and bonds fell in tandem this year, it sparked a debate about whether a lasting regime shift could be predicted
Swap spreads halve as dealers fight for corporate market share
US bank push, rate movements and evolving market practice driving spreads to “suicidal” levels
Actionable data breach insights from op risk modelling
Thomas Lee, chief executive at VivoSecurity, and Martin Liljeblad, operational risk manager at MUFG Americas, examine how a data breach cost model can replace an advanced measurement approach in a structured scenario
Brexit: banks consider four ways to move swaps en masse
Statutory business transfers in frame as bilateral novation may take too long
Lenders reveal struggles over IFRS 9 roll-out
Size of task caught some banks unawares, leading to botched home-grown systems or data problems
Citi CRO: stress tests now vital part of bank strategy
Bank has leveraged CCAR to build culture of constant internal stress testing, says Brad Hu
ECB’s Angeloni: bullish on Brexit, wary on regulatory reform
Relocations from UK will boost EU capital markets; but CRR needs to remove national barriers
Replacing too big to fail with too small to survive
Subordinated debt requirement will hit smaller banks hardest
Funding in the dark: EU banks wait on bail-in bond rules
Issuance strategies clouded by uncertainty over MREL subordination and pre-positioning
Banks explore new data techniques to tackle money laundering
Artificial intelligence in tandem with human analysis seen as effective for know-your-customer
Asia-Pacific banks grapple with conduct risk rules
Australia, Hong Kong regimes lead in developing conduct risk guidelines; Singapore lags behind
Op risk standard will hike capital by 11% – latest data
Rises in capital under SMA will vary depending on regulator treatment, writes op risk expert
Duelling repack platforms find common ground
Standard documentation initiative mulls shared SPV model as founders seek to join rival
NDF nightmare: banks seek fix for benchmark ‘mess’
European firms face bar from using three Asian fixings from 2020, raising concerns about legacy trades
Trade data initiatives aim to unify regulatory reporting
Standardised data would improve systemic risk monitoring and save firms billions, say data engineers
Risk-return dominance of US ‘big five’ a myth, data shows
US stock markets less exposed to a ‘Gafam factor’ than assumed, says La Française Investment Solutions
Chinese oil future could be first of many in Asia
Traders optimistic over long-term prospects for INE RMB crude future
Model risk in the transition to risk-free rates
Transition is an opportunity to reduce multi-rate complexities, say Bakkar and Brigo
XVA swings boost US bank trading revenues
DVA change pares down dealers' derivative liabilities
G-Sib swap portfolios reveal transatlantic divide
EU banks record 16% fall in non-cleared swaps, while US dealers see 9% growth
Goldman, JP Morgan get riskier in Q1
Each bank could face an extra 50 basis points of capital add-on without remedial action
EU banks’ CVA capital to triple if exemptions axed
Seven banks would incur 200bp-plus hit to capital if long-standing waivers were repealed, says EBA
Liquidity resources vary across CCPs
Eurex, Ice Clear Credit, LCH SA most dependent on cash deposited at central banks
Five US banks below Collins floor
Morgan Stanley, JP Morgan, Citigroup, State Street and Wells Fargo had higher standardised RWAs than modelled RWAs
European investment fund growth slows
Bond fund growth rate falls from 10.6% to 8.2% quarter-on-quarter
Monthly op risk losses: banks count the cost of IT failures
Also: top five loss breakdown led by Wells Fargo’s $1bn fine. Data by ORX News
Credit data: ‘dirty diesel’ woes weigh on autoparts firms
Auto supplier default risks have jumped, as environmental concerns hit prospects for diesel vehicles, says David Carruthers of Credit Benchmark
Swaps data: anatomy of a wild week in dollar swaps
Chaotic Italian politics jolted rates markets – including US dollar interest rate swaps, writes Amir Khwaja of Clarus FT
How machine learning could aid interest rate modelling
Standard Chartered quant proposes machine-learning technique to better capture rate dynamics
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis
Mark Yallop on conflicts in fixed income
Banks and their clients need protocol on information sharing, says FMSB chair
