Not Stickies

The following article is from our latest FIG in Focus newsletter.

In detailed guidelines designed to set out bail-in requirements for Eurozone banks, the Single Resolution Body (SRB) has recommended that large international banking groups adopt a so-called “Single point of entry” resolution strategy, similar to guidelines already in existence for UK banks since 2018.

A single point of entry resolution strategy typically relies upon the issue of resolution eligible liabilities at the group level,

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The following article is from our latest FIG in Focus newsletter.

In February 2019, Danske branch was ordered to close its Estonian operations by the end of the year as a result of the money-laundering crisis which has gripped the Danish bank.

The branch in question was acquired as a result of Danske’s merger with Finnish Sampobank in 2007. After the merger it continued to use a separate IT system from Danske’s main platform and many of its transactional documents were written only in Estonian and Russian.

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Practice, practice, practice

This article by one of our partners, Anne-Marie Barcia, was originally published on LinkedIn.

 

Can problem solving skills be taught?

Recently, an article in the Financial Times caught my attention: “What employers want from MBAs”. Having surveyed 72 employers in 8 countries, the findings are enlightening: The “Ability to solve complex problems” was cited as one of the top 5 most important skills – and one of the top 5 most difficult skills to recruit.

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CFA Institute Members can now earn continuing education (CE) credits when participating in our online and in-house training programmes.

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The drop in price for Novo Banco (formerly Banco Espirito Santo) bonds to distressed levels reflects both bail-in and regulatory risk.

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The new EU Banking Recovery and Resolution Directive (BRRD) which has to come into force January 1st 2016 is supposed to draw a line under taxpayer bailouts.

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Commentators in the US and Europe sound regular warning bells about liquidity risk if investors in bond funds try to redeem in troubled markets.

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European banks are criticised for holding back economic growth by being unwilling to lend, due in part to capital pressures. However, the real truth is that banks should be given (moderate) credit for being willing to increase risk and grow their books in the face of continued high levels of corporate defaults.

The European Banking Authority in a recent EBA report on Transparency highlighted that banks had been able to increase their common equity tier 1 (CET1) ratio by 1.7% due to increases in capital despite an increase in risk weighted assets.

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Basel IV in all but name

The Basel Committee recently released the Quantitative Impact Study for the Fundamental Review of the Trading Book (FRTB) which should go live in 2019. As the chart below shows banks (from a sample of 44) could see market risk capital charges nearly double (mean increase of 174%) but the large investment banks could see charges increase 5 or even 8 times if they don’t adapt their portfolio.
The bank showing an 8 fold increase is not named but Deutsche seems an obvious contender.

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Liquidity risk was the top risk keeping risk managers awake at night in 2008 but has since fallen down the list of priorities. Maybe banks have improved the stability of their funding driven by impending Basel III liquidity rules but maybe unknown unknowns lie ahead.

The chart below, based on data from Bankscope, highlights that median loan to deposit ratios for Eurozone banks remain high.

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