Risk magazine - Oct 2018
In this issue: what day one of a no-deal Brexit might look like; why the buy side is looking for a data science edge; how Lehman’s ghost still lingers; a revealing chat with CFTC’s Christopher Giancarlo; and much more
Articles in this issue
Let regulators manage no-deal risks
EU can stop swaps market falling over a Brexit cliff – and EU firms will be biggest losers if they don’t act
Spotlight on auction in €114m Nasdaq clearing blow-up
Four-member auction may have turned 39% margin breach into huge default fund loss
Nasdaq slow to share defaulter info with peer CCPs
“Why didn’t you tell us earlier?” other clearers want to know
JP exec calls for derivatives margin changes
Move follows 13 significant margin breaches in 2018, with one breaching by as much as 245%
Banks to ask EC for delay of benchmarks rule
New ECB rate may appear only months before rules bar use of Eonia and Euribor
Term versions of RFRs will work – FCA official
Schooling-Latter backs plan to build curve from swaps and futures; others have doubts
EU clients face axe from UK CCPs
But Esma’s Maijoor offers lifeline, calling for continued access for EU members
Banks cry foul over LCH compression policy changes
Allocation of compression slots favours TriOptima over competitors, critics say
Hackathon finds pre-trade gold in Isda’s post-trade project
Dealers’ derivatives trade processing costs could be cut by at least $3 billion per year
People moves: TSB chief exec quits, Eurex loses two execs, new cyber chief at Commerzbank, and more
Latest job changes across the industry
Day one of a no-deal Brexit: swaps and chaperones
Banks, trading platforms, repositories tee up EU entities – and dread the repapering crunch that would follow
Do or die – asset managers take up data science
Firms are scanning an ocean of text and images, as well as big number sets, to grab an edge
IFRS 9 versus IAS 39: Opportunities in changes to hedge accounting
With financial reporting in a state of flux amid the introduction of several new accounting standards, many corporates may feel overburdened by the need to ensure accounting compliance to take full advantage of IFRS 9 from the point of adoption. Robert…
Lehman’s ghost: how three CCPs anchor models to crash
The Lehman crash still haunts the margin models of LCH, CME and Eurex, albeit in different ways
Q&A: CFTC’s Giancarlo on the race to overhaul cross-border rules
New Sef rules imminent, but deference to foreign regulators may not be completed by 2020
Cyber security begins a shift to the risk department
Normally the province of IT, cyber defence is increasingly seen as a critical part of operational risk
Do two sizes fit all? Banks aim to standardise vendor risk
Banks created TruSight and KY3P to vet supplier risk with standard questionnaires. Is it enough?
Buy side could be biggest voice in key margin decisions
Asset managers encouraged to join Simm’s daily polling mechanism – despite some dealers’ concerns
Unfinished business: US Treasuries reform stalls
Efforts to improve clearing and settlement of US government debt – and oversight of who trades it – still incomplete
Moving the goalposts: EU fights over prop trader rules
French proposals could drive larger non-banks out of fixed income futures and options
Dealers sour on Mifid’s systematic internaliser label
SI decisions will take account of tougher pre-trade rules, client demand and Brexit
Brexit deal talk ‘too late’ for departing brokers
Contingency plans are past point of no return, say venues
Kyte follows broker herd to Europe as Brexit looms
OTF provider lines up contingency plan to transfer London business to Paris entity
Rival strategies split multi-factor fund investing
Goldman, Robeco challenge conventional ‘bottom-up’ portfolio design
Brexit uncertainty for UK and Irish power markets
Traders remain in the dark about the future of the UK’s participation in the Internal Energy Market
Climate risk rising up agenda for lenders
Reliable measures still some way off, banks admit
Cryptocurrencies: king’s ransom or fool’s gold?
Extreme volatility makes products an unreliable store of value – for now
Big European and US banks cut $280bn of complex assets
G-Sib methodologies incentivise shift to simpler assets
LCR gap between EU and US banks widens further in H1
State Street had the lowest LCR, at 108%, and UniCredit the head of the pack with an LCR of 179%
JP Morgan cuts op risk RWAs by $12.5 billion
Operational RWAs down to $387.6 billion from $400 billion in the second quarter
Cross-border loans to eurozone show signs of life
The increase seen in Q1 2018 interrupted a downward trend that began at the start of 2016
European banks junk op risk modelling
Barclays and BNP Paribas move to standardised approach in the second quarter
VAR switch may explain $500 million capital hike at Wells Fargo
Change in stress period drives 15% increase in market risk capital requirement
Op risk data: SEC issues first fine under cyber risk rule
SocGen provisions for sanctions violations; has the SMR prompted more bank CEO resignations? Data by ORX News
Credit data: doom loop depends on sovereign strength
Analysis of 59 countries shows bank and sovereign credit are most likely to be correlated in lower-rated countries
Swaps data: Sonia growth spreads down the curve
New figures show boom in sterling OIS swaps is not limited to short-dated trades
Fischer Black was right. Somewhat
CFM quants show timing and extent of mean reversion using a highly data-intensive study
The revised P&L attribution test and the suitability of new proposed thresholds
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
Black was right: price is within a factor 2 of value
CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today
SunTrust’s ‘swim lanes’ keep exposures in line
Bank has five bands of risk – a granular approach it says makes it easier to control exposures
