Financial Regulatory Forum

Beyond the numbers: do banks manage risk?

By Rachel Wolcott

LONDON, June 14 (Thomson Reuters Accelus) - It may seem like a subtle difference, but most of what banks call ‘risk management’ is often more akin to ‘risk measurement’. It is a myth that banks are in possession of fancy gadgetry that allows them to measure risk on a minute-by-minute basis from a specialised risk-control tower and react to it effectively, thus averting catastrophe. Instead, the financial crisis and trading losses, such as JPMorgan’s $2 billion blow-up in May, have shown that by the time banks measure and understand their risks, it is too late. Risk management is not about controlling risk, but about offsetting its impact after the fact.

Far from being a powerful high-tech unit within a firm that is charged with hedging risks on a macro basis — the way, for example, that JPMorgan’s chief investment office has been portrayed — risk management is more fragmented and limited. That is why many banks were badly hit when Lehman Brothers collapsed in 2008. It was just too difficult to get a picture of what their positions, exposures and risks were, let alone manage them. This is because, in many cases, banks’ risk management still has more to do with number crunching and measuring risk for compliance and regulatory purposes, such as regulatory capital requirements, credit value adjustment and counterparty risk. Managing risk, however, is something few firms do well, and they are certainly unable to do so in a holistic way. (more…)

Major global banks split on regulation battle

By Lisa Jucca and Martin Howell

DAVOS, Switzerland, Jan 29 (Reuters) – The world’s top financiers are at odds about how to fight back against a global push for tougher financial regulation, with commercial and investment banks struggling to reach common ground.

Top executives from Wall Street and Europe’s leading banks have been holding behind-the-scenes talks at the World Economic Forum in the Swiss ski resort of Davos, sources close to the negotiations said, but a deal has proved elusive.

Wall Street’s largest and some major European investment banks argued in favour of a tough common front against politicians who are calling for much tougher measures to regulate the industry in the wake of the financial crisis.

UK government rejects brokerage complaints over “bullying” by rescued banks

A video grab image shows Britain's City minister Paul Myners speaking at a Treasury Committee in London March 17, 2009.     REUTERS/Parbul TV Via Reuters TV  (BRITAIN BUSINESS POLITICS) LONDON, Nov 17 (Reuters) – Britain’s government has batted away complaints from three top brokerages about “bullying” and unfair competition by bailed-out lenders, telling them to make a virtue of their independence or seek help from the consumer watchdog.

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Major foreign investment banks in Britain agree to G20 pay rules

 A video grab image shows Britain's City minister Paul Myners speaking at a Treasury Committee in London March 17, 2009.     REUTERS/Parbul TV Via Reuters TV

By Matt Falloon and Steve Slater
LONDON, Oct 14 (Reuters) – Major foreign investment banks operating in London have agreed to obey G20 and Financial Services Authority rules on remuneration, starting with payments for performance this year, the Treasury said on Wednesday.

Morgan Stanley, Bank of America, UBS, Credit Suisse, Citigroup, Goldman Sachs and JP Morgan signed up to the commitment after a meeting with Treasury minister Paul Myners.

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In China, banks chafe at derivatives drive

By Eadie Chen and Jonathan Leff
BEIJING/SINGAPORE, July 27 (Reuters) – While Washington pursues a high-profile overhaul of its derivatives markets, a more modest but equally important crackdown is underway in China. (more…)

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