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”

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
Good People Behaving Badly 0 Comments | By

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”

In June 2016, FASB unveiled a guidelines for the banks to capture the credit loss by taking into account the expected credit losses over the expected lifetime of the products, and not use the 40 year old “Incurred Loss Model. Background of the new Current Expected Credit Loss Model (“CECL”) In 2011, the FASB and … Continue reading “Overview of CECL and IFRS 9”

Remember those days when we saw Lehman employees walking out with their personal stuff in cardboard boxes, manhandling of AIG employees in New York, the demonstrations at Wall Street and Zuccotti Park (New York), and the $ 1 trillion bailout fund that the Congress initially refused to approve? Yes, to avoid similar situations, the BIS … Continue reading “What does FRTB really mean”

Why Systemic Financial Crises Are a Broad Failure of Risk Management Various posts in this blog have catalogued the practice of risk management in the financial services industry. To recap briefly, the Great Financial Crisis (GFC) of 2008 was a systemic failure that brought about large scale banking losses across the globe. Considered by many … Continue reading “Industry Needs to Learn”