Counterparty credit risk
No fair: buy side takes on pricing problem in FX forwards
Interest in TCA is growing as new data sources offer glimpse into murky swaps and forwards market
EU banks’ derivatives exposures jumped 36% in H1
Top banks added €235bn since December, amid switch to SA-CCR and a new leverage ratio template
US banks step up FX optimisation push as SA-CCR looms
With swaps and forwards hit hard by new capital measure, dealers turn to vendors and bilateral restructuring
Early SA-CCR adoption to lop 120bp off Morgan Stanley’s CET1 ratio
The planned switch is set to increase the bank’s RWAs by between $35bn and $45bn
Citi reorg the final note in failed swaps clearing model
Strategic shift from OTC clearing powerhouse to client support function marks the end of an era
After Archegos, a bigger role for XVA desks?
Credit Suisse has stalled on call to expand XVA remit; others think it would have helped, but disagree on how
Santander’s CVA charge jumps 94% in Q2
Among the other EU systemic banks, higher capital requirements also at SocGen, ING, Crédit Agricole and UniCredit
StanChart’s CVA charge up 19% in Q2
Higher capital requirements also at Barclays, Lloyds and NatWest, with HSBC the only outlier among top UK banks
EU banks aim to block new counterparty risk guidance
Requirement to include exposure spikes linked to swap payments within EEPE models prompts blowback
FX forwards and swaps
LCH’s Kah Yang Chong, head of FX Emea product, and James Shanahan, head of FX quantitative analytics, discuss whether clearing of FX forwards and swaps – so far limited by requirements under UMR – will provide the efficiencies market participants need
Internal model revamp adds €3.2bn to Commerz’s CCR RWAs in Q2
IMM update drove most of 37.8% increase in total CCR RWAs
Deutsche takes €17.7bn RWA add-on in final Trim hit
Leveraged loan portfolio among targets of ECB’s remedies
ING takes €5.2bn RWA hit from SA-CCR and last of Trim
Regulatory inflation negates RWA decrease from better loan-book quality
Derivatives pricing starts feeling the heat of climate change
Quants find physical and transition risks can lead to significant rise in CVA
After bruising EU model review, banks ask: ‘Why bother?’
Post-Trim changes erode capital savings from internal models while raising their running costs
UBS revises credit and counterparty risk estimate
Changes to the bank’s models and methodology expected to add $6bn in second half of the year
UK banks’ RWAs near record low – BoE
Lower credit and counterparty RWAs led the quarterly drop, latest figures show
Nomura understated VAR capital charges by 13% in H2 2020
VAR RWAs should have been ¥122 billion higher than originally stated at end-December
Deep XVAs and the promise of super-fast pricing
Intelligent robots can value complex derivatives in minutes rather than hours
Credit risk exposures shrink share of top UK banks’ RWAs
Barclays reported the biggest drop, both on a quarterly and yearly basis
Options to mitigate the challenges of index cessation fallbacks and conversion
This has so far been a defining year for index cessation, Isda’s fallbacks protocol and central counterparty conversions. TriOptima insists that now is the time for firms to get their interest rate swap portfolios in order before year-end
Nomura hires McKinsey to examine Archegos failings
Risk framework under external review as DOJ reportedly opens probe into fund’s collapse
The Texas freeze and future calamities – How to build business resiliency in the face of disruption
Adverse weather in February stressed the Texas power grid to the point of failure, leaving millions without power and resulting in many firms filing for bankruptcy. While this event had some unique circumstances, extreme events are becoming more frequent
Changing derivatives strategies to address the new normal
The events of 2020 have propelled liquidity and collateral management to the top of the priority list for many buy-side organisations. A recent survey by Risk.net and Eurex explores how derivatives strategies are changing in response