What is the Goal of FRTB: Remove regulatory Arbitrage between Trading book and Banking book Capture Tail risks and liquidity risks Remove jurisdictional arbitrage in Capital Bring comparability between Internal Model Approach (IMA) and Standardized Approach (SA) How will the banks with significant Trading operations be impacted: RWA will increase and the capital will increase … Continue reading “FRTB: Models, Processes, Systems and Technology impact on Banks”

Leverage ahoy : Systemic Risk is back
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John Maynard Keynes wrote that the wheels of capitalism are dependent, to a large extent, on “animal spirits” or the basic human trust that allows individual investors and lenders to assume and properly manage the risks associated with lending and investing. Systemic risk builds when this sense of trust evolves into complacency and dulls market skepticism, … Continue reading “Leverage ahoy : Systemic Risk is back”

In this increasing debate over AI, in how it is good for mankind, and on the other side, how it is going to take away our jobs, what is the right answer? I would take the analogy of the advent of cars, trains or airplanes, in the times when people used horse carriages, horses or … Continue reading “How AI is changing Risk Management and Compliance”

The Good Risk Manager’s Prayer
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I like to start many Risk presentations with the quintessential question “What sank the Titanic?” The answer of course is “Iceberg”. Or is it? Sailing from Southampton to New York, the 46,000-ton Royal Mail Steamer Titanic struck an iceberg in the North Atlantic at 11:40 p.m. on Sunday, April 14, 1912, on her maiden and final voyage. Within … Continue reading “The Good Risk Manager’s Prayer”

In October 2014, the Basel Committee published for consultation a revised Standardised Approach for operational risk that sought to address weaknesses in the then existing approaches. The Committee also embarked on a review of the costs and benefits of the framework’s Advanced Measurement Approaches (AMA) for operational risk. What followed was much of a muchness … Continue reading “Operational Risk Capital”

RCSA - Mirror, Mirror, on the Wall 0 Comments | By

Mirror, Mirror, on the Wall A key element of any toolkit in Enterprise/Operational Risk is Risk Control Self-Assessment, or RCSA. And it happens to be the highly suboptimal, much misunderstood, most bureaucratic, and least productive one of them all, in its setup, execution and results. At its core, RCSA is about looking in the mirror … Continue reading “RCSA”

KYX : much of a muchness for what should not be very much (1) Regulations and Regulators: Many Regulators play in the AML & KYC and the OFAC & FATCA arena. The Bank Secrecy Act or BSA(formally The Currency and Foreign Transactions Reporting Act of 1970) was originally assumed to apply only to Banks.BSA exclusion … Continue reading “KYX”

Over these last few years I have watched with growing bemusement, as a highly lucrative industry has been built around Governance, Risk, and Compliance (GRC), by many purveyors of press-here-and-push-there technologies. What is offered to a naïve and hungry audience is instant gratification with respect to risk & compliance frameworks and everything else you might … Continue reading “GRC”

Good People Behaving Badly
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I have firmly held, for as long back over my 35-year career that I can recall, that the biggest challenges, issues and events in Risk Management come down to People; fear, greed, and ego drive the behavior of traders, transactors, and managers often precisely in those situations where economic rationality and discipline are desired or … Continue reading “Good People Behaving Badly”

Trading book and Banking book
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Trading Book and Banking Book treatment in FRTB can be summarized in three lines as follows: Close the loop hole of Capital Arbitrage between the Trading book and the Banking book Calculate the Capital for the trading book and the banking book as if the banks are in Stressed Market Conditions Calculate Capital using the … Continue reading “Trading book and Banking book”