General comment

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The Good Cleanup Guide

Apologies for the break in updates, I’ve been busy moving from Singapore back to London.

Anyway with year-end approaching fast the need to have a clean balance sheet is rising in controllers’ agendas and the reality that some areas have not had effective controls needs addressing.  I once spent a complete year on cleanups and learned a lot about how to tackle them as they are projects unlike the normal systems and business development.  They are a little like the now notorious Fatburgs that are blocking London’s sewers.  Like the Fatburgs their causes are simple, management didn’t want to ensure that what they sent downstream could be handled and sent it anyway.

  • Trading products for which downstream systems cannot support.
  • Giving operational and accounting responsibility to under resourced departments.
  • Failing to ensure staff have adequate knowledge and training in their duties.
  • Failing to upgrade downstream resources for changes in industry practices (like margin reform).

For those being tasked with a cleanup, here’s a guide to the best way to go about it.  The Good Cleanup Guide

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A Guide to Fed Watching

US Dollar interest rates dominate domestic and international finance.  The overnight Fed Funds rate generally follows a target set by the Fed Open Markets Committee chaired by Janet Yellen.  From the outside this committee can seem rather obscure and difficult to read, which has lead to a pocket industry of economists and analysts reading the tea leaves of officials’ statements and the economic statistics published.  My explanation of the process and things to watch out for is here.  I think the most important element is spotting when a voting member of the committee makes a comment which shows a change in stance on rate setting, i.e. if a more conservative (hawk) member views cutting rates favourably or a more liberal (dove) thinks that rates need to rise.  These terms are relative, in reality the US economy is not guided by Chávestas.

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The Strengths and Weaknesses of ORFs

ORFs (Operational Risk Frameworks) are now part most big banks’ management of their operational risk.  But they’re not the panacea for all a firm’s operational risk, mostly because they are far too subjective and also struggle to predict the magnitude of a potential loss, for much of the same reasons that operational loss models have lost credibility in the last few years.  But having said all that, they’re better than having not structured framework to assess the operation of process and controls.  Here’s a paper on the topic.

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The Challenges of Operational Risk

Operational Risk like much of banking has just come through a tough time where despite serious improvements in the structure of its risk management the Basel Committee is recommending the removal of internal model approval (mostly due I think to their failure to estimate the enormous losses of the last few years as conduct related fines have hit the industry).  Here’s a short article comparing Operational risk to Market and Credit risk to show the gaps and challenges facing it.

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Banking Interviewers’ Guide

I think most of us at some time or other end up rushing to an interview, not having reviewed the candidate’s CV properly and with no real idea of what appropriate questions to ask.  Well I can only advise, do read the CV before the interview but in terms of the questions here’s a little app for those on Android phones to help you out on the questions.  If you’ve got some good questions of your own you’d like to donate please email me.

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Welcome

Welcome to Greg Stevens’ site dedicated to explaining how to control OTC derivatives and the new financial regulations which aim to also reduce their risk to the global economy.