US Debt Ceiling - one saga finishes another begins

The US deficit or the growth of it has been a problem that has been kicking around for so long now, that it shouldn't come as any surprise to hear that the United States of America is bankrupt. Nevertheless, at the eleventh hour the entire world seems preoccupied watching the US senate debate whether it should raise the debt ceiling or not. We all know in the end that the ceiling will go up and everything will go back to normal, yes?

Caveat Emptor Basel III Conferences and ERM

Caveat Emptor : Basel III Conferences and Enterprise Risk, yes the two are being pushed together.

I find it quite disturbing that there is a whole swag of supposed Operational Risk experts out there from the United States to Australia who are flogging Operational Risk to death.

The USD is dead ...

Last week we discussed the state of the USD and the very real potential for a rethink of the world currency for settlement. This week our argument only becomes stronger as the United States has been put on review by the rating agencies. It may have taken the agencies a while to come to this conclusion (tongue in cheek) but it didn't take the market long to react. The outcome in the currency markets hasn't been favorable to say the least.

This article is a short review of where we are heading but no secrets, I would say that direction doesn't have a bright future as it stands.

EUR/USD Parallax Error

A new monetary system has been debated by many an economist for some time however, now that the big central banks are starting to think about alternatives, we have to question whether we are on the brink of redesigning the world of floating currencies beyond Bretton Woods failure? 

This article was stimulated by Mervyn King's speech from the Bank of England although momentum has been gathering around the topic of rethinking the role of the US dollar for a while. 

How real could this be?

The FSA drops the S

In a sanctimonious move the 'S' is to come out of the FSA and it is to be replaced with the 'C'.  Yes it is going to happen. 

What was once the Financial Services Authority of the United Kingdom is to become the Financial Conduct Authority.  Believe it or not there is nothing "prudential" about it, that responsibility lies with the minister.

Private Banking - Evolve or Dissolve

Private banking needs to evolve if it is to survive.  

In this article we are going to look at the changing market dynamics and the challenges for private banking in Asia.  Private banking has experienced huge growth across both the domestic and expatriate community but it has reached a tipping point where change is imminent. If private banking is to continue to prosper over the coming years ahead, it is going to need to take advantage of these trend shifts rather than push against them.

There are two recommended and outstanding presentation links at the end of this blog which are worth reviewing.

Scenario Analysis for Operational Risk

PRESENTATION [ Fast Download Here ]

There appears to be a resurgence of interest from risk managers to engage formally in scenario analysis. This interest appears to be driven in part, from banks operational risk departments; hoping that they can move their risk framework onto the Advanced Measurement Approach of Basel II.

While Basel-III's predecessor to Basel-II doesn't require any changes to a bank's operational risk framework, some institutions are still looking to improve their operational risk reporting systems and they are attempting to achieve this goal through the scenario analysis route.

In this article we will discuss this recent curiosity in scenario analysis and provide a complete presentation which can be downloaded that explains how to build a best practice scenario analysis program for operational risk.

UK Banks heading for another disaster

Unbelievable but unfortunately it appears that UK banks are heading for another disaster and so soon after the recent credit crisis took grip of the country.

It was reported by the FSA that UK banks have been hiding distressed retail assets on their books by forcing a restructure to the amount of 63% of their entire home loan portfolios. This is dire, perhaps one of the most serious pieces of news I have read for the last six months and it is right up there with the possible collapse of the US dollar. In this blog, we are going to take look at this claim and its potential implications for the British economy.

When it comes to perspective numbers lie

When it comes to perspective, numbers do lie or to be concise viewpoints change even though the real value does not.

What I am talking about are reverse splits and in particular Citigroup's recent reverse split of its common stock.

The Operational Risk Framework Checklist Roadmap

Is your companies operational risk framework up to the mark? 

If you ask a risk analyst about their impression of their companies operational risk systems, which one has to admit is a relatively unframed question, but either way, if you did; the typical responses seem to range between: We're totally sorted or it's kind of there, perhaps we are not really sure.

Then of course how do we really know whether a company is good at managing operational risk or not. The final test of course comes when a business experiences a severe problem that puts its operations under threat and its controls to the test.

In this article we are going to review a check list for an operational risk framework that should be considered by risk management in all businesses. The aim here is to move towards best practice. 

 

Managing oil prices is all about preserving margins

In volatile commodity markets, a firm's ability to profit comes down to one thing: The capability a business has to control the transference of market volatility to margin volatility.

In this article we are going to look at how rising oil prices seem to impact commodity consumers in alternate ways and why investors often misunderstand the impact rising commodity prices have on their investments.

FSB - Progress on Strengthening Financial Stability

Progress on implementing the G20 Seoul resolve for strengthening global financial stability has recently been reported as being on track.

In this blog article we are going to look at what is being done by whom and when specific deliverables are due. This is a massive mandate for the FSB and simply due to the complexity or reach within the program alone, it chances on either being globally impacting or partly missing the mark. 

Nassim Taleb & Richard Herring - The Black Swan Debate

Black swans or to be precise, living with them is an interesting discussion that Nassim Taleb and Richard Herring have captured and published on the internet.

There are some valid and fascinating points from this chit-chat that I believe are worthy of embellishment and that is what I have taken to do here in this post.

Economist Intelligence Unit - Risk Radar 2011

The Economist Intelligence Unit has recently published a survey on risk management preparedness for global businesses which reports some interesting findings.

Continue reading to see summary

RMA Speech - How Basel III impacts Counterparty Risk

PRESENTATION [ Fast Download Here ]

An RMA Singapore Chapter speech on the impacts of Basel III for Counterparty Risk has been made available on the Causal Capital blog page here for download, see the link above. The presentation can also be received by contacting the Risk Management Association.

Causal Capital has delivered two counterparty risk speaking events in Singapore this week. This is the second presentation in the set and it builds on the first document that was designed to review the key components of a best practice counterparty risk system.

 
Continue reading to see the key points that are covered in this presentation.

A component view of Counterparty Risk

Credit and counterparty risk is the risk theme for Singapore this coming week, with two major events running in the city that cover this unique risk discipline in "technicality".

US regulators release new rules for Credit Risk Retention

New proposed rules for Asset Backed Securities have been released by the US regulatory agencies for comment. 

These rules are aimed at addressing the way in which banks securitize their loan portfolios and are a response to one of the main causes for the credit crisis in 2008.

What lies ahead for banks and investors?

ISO 10674 standard for credit rating agencies

International Organization for Standardization has recently published a new ISO standard that targets rating agencies directly. ISO announced this release on the 30th of March 2011 and is classifying the program as the Credit Rating Agency Standard; which will be a unique set of requirements to assist with improving the way credit rating agencies operate and report ratings.

In this article we are briefly going to look at labelled ISO 10674, what this standard aims to achieve, why it has come into existence and how it could be a game changer for the credit rating agencies.

Basel III - Cracks Appear Part 2

In part 1 of the "Basel III cracks are appearing" post which can be accessed by clicking here, we discussed the general misunderstanding on how capital works in Basel III. In this article we are going to look at some of the disparate issues around the new Liquidity Coverage Ratio.

LCR & NSFR

The Liquidity Coverage Ratio or LCR and the Net Stable Funding Ratio or NSFR, work hand-in-hand with capital as a three pronged mechanism and the entire system, can be viewed as an "all encompassing" solution designed to reduce liquidity funding feedback loops. All that aside, there are some broad concerns with the way in which specific elements are being interpreted by national regulators across the globe.

These new aspects of Basel III need careful tweaking to avoid unintended market consequences.

  

Basel III - Cracks Appear Part 1

A few months ago, when I first reviewed the Basel III guidelines, I was relatively positive about the proposal. Sure it is difficult to achieve in places but more or less on the mark. The credit crisis needed a global regulatory response and as heavy handed as it is, Basel III appears on the surface to address the causal factors for the collapse of the markets in 2008.

There are a lot of fears over Basel III which have been voiced by quite a few risk analysts across the planet. These concerns mostly revolve around the following argument that a strict rule is a linear or straight line concept that may not fix the banking system but may dampen economic growth. Yet, if the regulation is not strict enough, it won't be effective.

This interpretation of the ideal behind Basel III is incorrect in my opinion and is driving the banking community to act in a regulatory discordant manner.

In this article we are going to review a couple of concerning eventualities that seemed to have occurred as a response to Basel III. We will look at these concerns from the perspective of the banks and the regulators.