Welcome to the second edition of our regular briefing on news and views in the FIG (financial institution group) world.

These are the stories and insights that have captured our attention in recent months.

You can download a pdf version of the newsletter here.

Risk – Danske Bank Estonian Scandal

The forced closure of Danske Bank’s troubled Estonian operation displays the maximum impact of operational risk. Read article

Regulatory –

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

Impaired loans continue to fall at 2018 year-end whilst IFRS 9 expected loss provisioning has a mixed effect.

Bank impaired loans in almost all jurisdictions continued to fall in 2018, which considering the clouds on the macro-economic and political horizon may represent a cyclical low. Developed economies in particular, performed especially strongly with USA and Eurozone rates falling by 0.4% and 0.5% respectively.

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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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