Financial Regulatory Forum

By Rachel Wolcott

LONDON/NEW YORK, April 5 (Thomson Reuters Accelus) – Regulators’ rising interest in risk management combined with a long trail of big fines for compliance failures has some consultants and industry leaders wondering whether it is time for the two disciplines to come closer together if not merge completely.

More than ever there are areas of overlap between risk and compliance. Risk management is now hardwired into more rules and regulations since the beginning of the financial crisis. In the UK, for example, the Financial Services Authority (FSA) hasincreased its fines for risk management failures . The U.S.’s Securities and Exchange Commission (SEC) has also indicated that it intends to take risk management as well as other governance and compliance issues even more seriously than in the past. (more…)

By Dave Ingram and Max Rudolph
The opinions expressed are their own.

The financial thriller, “Margin Call,” which opened in movie theaters on Friday, tells the story of a firm in the mold of a Bear Stearns or Lehman Brothers at the height of the financial crisis. The firm in the film is akin to real-life firms that seemingly discover too late their reliance on a culture built on growth at any cost and tainted models at the expense of risk management.

Movies are great teachers, helping everyone better understand complex situations that can be confusing even to experts. “Margin Call” does just this, by putting a spotlight on the crucial role that proactive and skeptical risk management (or lack thereof) plays, particularly in financial services. Although the Occupy Wall Street movement is still in its infancy, it demonstrates how ordinary people feel the impact of the financial industry’s actions – and mistakes. Likewise, the movie demonstrates how great an impact one firm’s actions can have on the entire financial industry, underscoring the importance of risk management in such an interconnected system.

Based on our experience as actuaries, focusing on identifying and mitigating risks, we’ve outlined what we believe are the most important lessons of both the film and financial crisis. Hopefully those who see this movie, and those who lived through the crisis, will heed them.

By Martin Coyle and Alex Robson

LONDON/NEW YORK, Sept. 16 (Thomson Reuters Accelus) – The $2 billion rogue trading incident at UBS demonstrates that determined individuals will always be able to circumvent internal systems and controls despite the recent regulatory scrutiny on this area, industry officials said. The case also highlighted the need for banks to think about their reward structures, they added.

UBS yesterday confirmed that 31-year-old London-based trader Kweku Adoboli had lost the bank around $2 billion in unauthorised deals. The director of exchange-traded funds (ETFs) and “Delta 1″ was arrested on suspicion of fraud at his desk by City of London Police at 3:30am. (more…)

LONDON, Dec 21 (Reuters) – European Union bank supervisors unveiled draft guidelines on Monday to apply lessons from a trading scandal that forced Societe Generale to book billions of euros in losses.

The Committee of European Banking Supervisors (CEBS), made up of national banking regulators from the 27 EU states, said it would consult on its guidelines that are due to take effect by the end of 2010.

They flesh out how high level risk management and remuneration principles should be applied to control risks in trading activities to make fraud harder to hide.