A drove of virtual banks is preparing to launch across Asia – Singapore plans to award up to five new licences by the middle of next year. And established lenders want to exploit their potential as a test bed for their own risk management practices – from credit risk management to fraud monitoring capabilities.

While virtual banks are the norm in many Asia-Pacific (Apac) centres – such as mainland China, Japan, South Korea and Australia – Hong Kong and Taiwan have been hesitant to join the

Clearing house power-downs raise fears among members

Banks question CCP resilience to system outages, as debate swirls over non-default losses

JP Morgan turns to start-up to manage CME margin

Bank also weighing whether to bring its business at two other clearing houses on to Baton platform

EU to grant last-minute margin reprieve for equity options

European Commission to publish changes to Emir technical standards within days

COMMENTARY: Storm warning

Clearing houses have suffered big losses. Just ask Nasdaq. But so far they haven’t suffered a crippling cyber attack or an extended systems shutdown of the kind that would prevent them from functioning for days, weeks, months even.

Clearing users are worried that a damaging operational outage is just around the corner, and they want CCPs to beef up their capital reserves to cover such an eventuality. They say clearers such as LCH and Ice don’t hold enough capital to...

Data and software vendor IHS Markit is losing its global head of financial risk analytics, Andrew Aziz. A two-decade veteran of the risktech industry, Aziz is moving to wealth management analytics start-up d1g1t.

The Toronto-based start-up was founded in 2017 by three former executives of Algorithmics – the risk software vendor that was acquired by IBM in 2011, and where Aziz spent the majority of his career.

Aziz has been with IHS Markit for four years and is set to start his new role on

The lights have never gone off at clearing houses such as LCH and Ice, but from time to time they flicker.

Regulators have counted a few dozen operational outages at central counterparties over the past year – all of them brief systems interruptions that affected banks and other users in a limited and inexpensive way.

An extended shutdown would be more damaging, though. Clearing members are starting to ask whether CCPs are sufficiently capitalised to withstand both real and potential loss

If the data’s spotty, fleeting, reflective of nothing real or just not there, how does a quant fill the void? The expert elicitation approach to modelling could offer a way.

In contrast to plain vanilla expert judgement, expert elicitation extracts probabilistic belief statements, often from several authorities, on quantities or parameters. The approach brings a structured procedure to building models from sparse datasets, and adheres to the same scientific rules: transparency, accountability

Not all global systemically important banks (G-Sibs) are alike. For those in the European Union and Canada, it is the extent of their cross-border activities that earned them their too-big-to-fail label. In contrast, those in Switzerland were designated because of their complexity, those in the US because of their non-substitutability, and those in China and Japan because of their size.

The 2019 cohort of too-big-to-fail institutions received their designations from the Basel Committee using a

A new bank-led system for categorising operational risks, developed by industry consortium ORX, reflects the increased importance being accorded to risks outside traditional market and credit risk parameters since the publication of the Basel Committee on Banking Supervision’s taxonomy.

The new taxonomy is intended to create a common language for financial institutions to share information and a framework for understanding the causes and effects of operational loss events. It will also allow

Anyone reading the industry and even mainstream press might get the impression that banks and other financial services firms are being threatened, or at least transformed, by a continuing wave of fintech disruptors. The trace of this on the collective imagination is charted by Google Trends (see figure 1).

Over the past four or five years, it seems, there has been an inexorable rise in curiosity about fintechs. This is supported by evidence of investors’ ever-growing appetite for the

Having cut assets and intra-system ties with other firms in 2018, Deutsche Bank was downgraded as a systemic threat to the financial system today (November 22). This should lower its future leverage ratio requirement from 2022.

The bank’s G-Sib score – the metric used by the Basel Committee to assess potential too-big-to-fail banks – fell to 287 basis points from 353bp a year ago, according to Risk Quantum analysis of its systemic risk indicators.

This placed it below the 330bp threshold for a

A cornerstone of European Union climate finance strategy – an agreed set of environmental taxonomies – “is well on its way to being adopted by co-legislators”, said the European Commission’s (EC) Olivier Guersent earlier today (November 19), but added: “The only thing you know about any environmental taxonomy is that the day you adopt it, it is outdated.”

Efforts to reach sustainability taxonomies constituted “the most important” legislative action, said Guersent, director-general for the EC’s

Systemic US banks incurred more loss-making trading days in Q3 than Q2 2019, with Goldman Sachs and State Street the worst performers.

The eight US global systemically important banks together reported 245 losing days in the three months to end-September, around 31 each on average. This compares with 220 loss-making days the quarter prior and 222 in Q3 2018.

Bad clocks block forex best-ex

To get a good deal in fast-moving forex markets, buy-side firms need to know the time. Some don’t

Banks team up for ‘Ion replacement’ project

Consortium weighs building fixed income software in potential threat to Ion, the dominant vendor

SEC revisits security-based swaps proposal

Sefs expect new trading rules for single-name CDS to be published “pretty soon”

COMMENTARY: Time to upgrade

Technology is improving foreign exchange price prediction in leaps and bounds. But in other instances, forex legacy systems are in dire need of an overhaul.

This week, Credit Suisse revealed it is using deep learning for minute-to-minute price forecasting. Deep learning is a subset of machine learning that attempts to mimic the functioning of the human brain – artificial intelligence in cutting edge action.

Meanwhile, buy-side participants are being urged to scrutinise the accuracy of...

The US Federal Reserve is weighing whether to collect data on losses from cyber-related incidents from individual banks and share it on an anonymised basis, in a bid to help the industry improve risk management practices.

The move is part of a wider push by the regulator to tighten the way banks respond to cyber breaches. The Fed has already published a white paper on a classification system for cyber, which was the topic of a November 20 workshop hosted by the Federal Reserve Bank of Richmond.

Systemically important US lenders added a net $59.5 billion of off-balance-sheet exposures in the third quarter, with JP Morgan alone accounting for one-third of the aggregate increase.

The eight US global systemically important banks (G-Sibs) disclosed a combined $4.33 trillion gross notional for these types of exposures as of end-September, a 1.4% increase on Q2 and a year-on-year expansion of 3.1%. 

In notional terms, JP Morgan saw exposures climb the highest over the quarter, by $19.8

Flavor Flav, the hype man for hip-hop superstars Public Enemy, famously wore a large clock around his neck, so he knew what time it was.

He would not have been a success in modern foreign exchange markets, where participants increasingly need to care not just about hours, minutes and seconds, but also milliseconds and even microseconds. Unfortunately, in the form of clunky order-management systems (OMSs), observers claim some buy-side firms are still using the equivalent of Flav’s clock.

“We

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Financial firms must work harder to ensure the integrity of their whistleblowing and complaints procedures, according to Georges Elhedery, HSBC’s head of global markets. Firms could consider financial incentives for whistleblowing, he added.

Following a whistleblower complaint, he said, a firm should thank the individual or individuals in question for raising the alarm. “That’s a very clear message that we appreciate [their action],” he said, at a conference on corporate culture in London

The financial sector will get a chance to rake over a white paper by Federal Reserve researchers that attempts to define and measure cyber risk at an industry workshop in Charlotte, North Carolina, next week.

The meeting, slated for November 20, aims to bring uniformity to gauging cyber risk, a category that encompasses the threat of hackers from far-flung corners of the planet, thieving in-house employees, defects in software, as well as innocent screw-ups by staff. The meeting is sponsored by

Ice, the multinational exchange operator, has added insurance protection to its default waterfall schedule at three separate central counterparties (CCPs) under its corporate umbrella – Ice Clear Europe, Ice Clear US and Ice Clear Credit.

The firm decided to add another layer of protection after feedback from clearing members, according to chief risk officer Kevin McClear and Hester Serafini, Ice Clear US president and chief operating officer.

“It’s a form of skin in the game [SITG],” says

After years of complacency, financial firms are finally getting serious about measuring their exposure to climate change, and taking action to mitigate its effects.

This is no easy task.

Beyond the usual intricacies and pitfalls of modelling, climate change brings with it the erosion of long-held certainties: predictable weather patterns in developed markets; steady sea levels in heavily insured jurisdictions; stable governments capable of maintaining fiscal discipline while spending trillions on climate defences.

All of which makes the job of risk managers – those tasked with measuring, modelling and putting a dollar value on climate risks, and enacting a plan to mitigate the impact – rather difficult.

Insurers and re-insurers know this first hand. The industry just witnessed its costliest back-to-back years, with losses totalling $227 billion in 2017 and 2018, according to data compiled by Aon. Last year, insured catastrophe losses hit $90...

If you want to reduce the risk posed by third parties to your organisation, you hire another third party to police them.

This concept may not be intuitive, but cyber risk rating companies such as BitSight, RiskRecon and SecurityScorecard have made it central to their business proposition.

These companies are trying to offer an alternative to the staple methods of third-party risk management, where banks vet vendors using questionnaires, lengthy audits and site visits. Instead, the rating

The year is 1987. The worst storm in centuries is about to sideswipe the UK with hurricane-strength winds. Notoriously – folklorically – BBC meteorologist Michael Fish addresses a viewer’s concerns: “Earlier on today, apparently, a woman rang the BBC and said she heard there was a hurricane on the way. Well, if you’re watching: don’t worry, there isn’t.”

The storm cost the insurance industry an estimated £2 billion ($2.5 billion). Although Fish claimed his comment was taken out of context,