Global Risk News

Banking: Sector locks the stable door after the horse has bolted

admin — Mon, 21 Jun 2010 09:04:35 +0000

In the maelstrom of the financial upheaval, banks suffered a battering not just to their balance sheets but to reputations. The mix of accusations – of excessive risk-taking, inflated rewards and poor controls – added to government bail-out billions and hostile public opinion forced banks to take decisive action.

At Freddie Mac and Fannie Mae, the US mortgage enterprises that senators pronounced “too big to fail” and which together oversee more than half US mortgages, changes are under way. Source

Euro risk overstimated, ECB should do more

admin — Mon, 21 Jun 2010 09:03:53 +0000

The markets are exaggerating the euro zone’s risks, but the European Central Bank needs to do more to show its commitment to financial stability, Fitch’s head of sovereign ratings said on Saturday. “We think the concerns about fiscal solvency, with the exception of Greece, in Europe are overplayed,” David Riley told a panel on sovereign debt at the St Petersburg Economic Forum.

The other panelists also voiced their backing for the euro zone and its ability to weather the crisis. “I believe in Europe, and I believe in the euro,” said Alexei Kudrin, Finance Minister of Russia, which has around 40 percent of its $400 billion-plus gold reserves in euros. Source

FSA Scrapped, Bank Stress, UBS Accounts: Compliance

admin — Mon, 21 Jun 2010 09:03:12 +0000

U.K. Chancellor of the Exchequer George Osborne said he will abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997, which Osborne blamed for failing to prevent the financial crisis that plunged the nation into recession.

Legislation to replace the FSA will be in place by 2012, and the watchdog will be wound down and replaced by three bodies during the next two years, Osborne said. A Prudential Regulatory Authority will be created as a subsidiary of the central bank. Osborne will also set up a Financial Policy Committee at the bank and establish a consumer protection and markets agency. Source

NDIC slams universal banking, says inherent risks were not considered

admin — Mon, 21 Jun 2010 09:02:36 +0000

Nigeria Deposit Insurance Corporation (NDIC), at the weekend, slammed the universal banking system, saying that its introduction was not followed by serious thoughts of the risks inherent in the operations of financial supermarkets and the need to mitigate them appropriately.

The Acting Managing Director of the corporation, Mallam Umaru Ibrahim, said this in Ogun State, at the Risk-based Supervision Training Programme for NDIC Examiners at the weekend. He also noted that the system made the banks to become financial conglomerates, adding that the subsequent increase of bank capitalization caused a delusion of grandeur among the banks Source

Funds struggle for control in China

admin — Mon, 21 Jun 2010 09:01:45 +0000

While there has been no let-up in the steady stream of western investment companies queuing to launch in China, firms considering the move have been warned that doing business in the country is far from simple.
Companies operating there are being frustrated by an inability to control their local joint venture businesses, leading to strained relationships in some cases, Blair Pickerell, head of Morgan Stanley Investment Management in Asia, told a conference in Hong Kong in April, according to a Bloomberg report. Source

Future of Risk Management in Indian Banking Industry

admin — Mon, 21 Jun 2010 09:01:14 +0000

The Indian Economy is booming on the back of strong economic policies and a healthy regulatory regime. The effects of this are far-reaching and have the potential to ultimately achieve the high growth rates that the country is yearning for. The banking system lies at the nucleus of a country’s development robust reforms are needed in India’s case to fulfill that.
The BASEL II accord from the Bank of International Settlements attempts to put in place sound frameworks of measuring and quantifying the risks associated with banking operations. Source

Best risk management practices with bankers stressed

admin — Mon, 21 Jun 2010 09:00:37 +0000

IFC, a member of the World Bank Group, is helping members of Bangladesh’s financial sector better manage risks by sharing industry best practices on risk management and non-performing loans.

Sound management of risks and effective governance are critical to the success of banks. Source

Fund managers focus on collateral

admin — Mon, 21 Jun 2010 09:00:00 +0000

Until recently, the risk of a counterparty failure was close to the last thing on fund managers’ minds. Instead, the complex investment risks in managing derivatives exposures were a far higher priority. That is now changing, as managers focus on what and how much they take as collateral, and how they manage it.
Collateralisation, where counterparties hold pools of cash and other liquid assets against each other’s derivatives positions, was in the past only used for on-exchange derivatives. Source

Banks Have Billions at Stake as Rulemaking Heads to Agencies

admin — Mon, 21 Jun 2010 08:59:14 +0000

While Congress puts finishing touches on its financial-regulatory overhaul, Wall Street lobbyists are preparing for a new battle out of the public spotlight and inside nearly a dozen federal agencies.

If the bill passes in roughly the form being negotiated by House and Senate lawmakers, regulators will be directed to write hundreds of new rules, conduct dozens of studies, combine two banking agencies and bring industries such as mortgage brokers under federal oversight for the first time. Source

Most big banks not even paying lip service to risk-based pay

admin — Mon, 21 Jun 2010 08:58:38 +0000

Last October the Federal Reserve issued proposed guidance to banks on the structure of bank pay. The reason for the guidance was the need for banks to change pay so it would no longer encourage the excessive risk taking that led to the financial crisis.

In proposing the guidance, the Fed asked banks to immediately address the issues in current bank pay: “The Federal Reserve expects all banking organizations to evaluate their incentive compensation arrangements and related risk management, control, and corporate governance processes and immediately address deficiencies in these arrangements or processes that are inconsistent with safety and soundness,” the guidance read. Source