Risk
Basel’s ‘99.9% standard’ for op risk is unreliable, says ORX chief
Giulio Mignola says Basel II's 'one-in-a-thousand-years' threshold for tail risk is fundamentally flawed
Belgian supervisor warns against Basel III over-simplification
National Bank of Belgium’s Rudi Bonte calls for the Basel Committee to take a ‘moderate’ stance on the trade-off between simplicity and complexity in its risk and capital rules
IMF paper explores link between low interest rates and bank risk-taking
Working paper finds banks take more risks in low short-term interest rate environment; more so if they are well capitalised
Basel securitisation reform creates 'perverse incentives’, says senior Japanese banker
Inconsistent rules are damaging financial intermediation, according to Takashi Oyama of Norinchukin Bank
HKMA's Chan identifies inherent flaws in risk models
HKMA chief questions the use of financial models in risk management; argues the inability of models to account for irrationality is a major defect
Danish paper uses three centuries of data to show tail risks underestimated
Research says severe stress cannot be properly understood with short time horizons; suggests results could be used to design tougher stress tests
Bundesbank research proposes improved structure for counterparty credit risk
Discussion paper finds ‘quadri-partite’ structure gives best results for managing counterparty credit risk
Polish paper examines banks’ risks when state safety net grows
Study finds that banks in central Europe take higher levels of risks under a larger deposit insurance scheme; less so in times of financial crisis
FSB to assess efforts to end ‘mechanistic reliance’ on credit ratings
Peer reviews aim to hasten a move away from rating agencies, with countries expected to eliminate references to credit ratings from laws and encourage better internal credit risk assessments
Chilean paper finds room to reduce risk by diversifying investment in Brics
Statistical analysis finds little co-integration of stock market vectors in Latin America and the Bric countries; says this gives investors a good opportunity to diversify, which would reduce risk
Nalm 2013: Sound central bank risk practices could choke off liquidity
Central banks are more activist in reserves management, with some looking to private sector for inspiration. But there are dangers with such a approach, say panellists at Central Banking conference
Bundesbank paper raises concerns over accuracy of systemic risk measures
Researchers find market-based systemic risk measures may give a façade of safety even as banks enter ‘major tail risks’
ECB’s LTROs contribute to 12% drop in repo transactions
Icma report warns ‘abundant’ liquidity provided by ECB’s long-term refinancing operations is undermining the repo market in Europe; notes signs of increased risk appetite
IMF paper advocates hybrid discretion and rules-based macro-prudential policy
Researchers say discretionary systems can be gamed but rules struggle to properly account for risk; combination of ‘strong baseline’ and time-varying component gives best results
Booknotes: The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims
Tamar Frankel offers us a colourful and broad picture of con artists who have initiated their own ‘Ponzi schemes’.
Central banks need to define clear role for operational risk
Despite crossing management and business lines, operational risk must be defined within the wider risk management framework at central banks. By Rudy Wytenburg.
Byres hints at Basel Committee rethink on risk-weight modelling
Secretary-general weighs challenges of balancing complexity and simplicity of capital requirements; outlines possible changes to banks’ risk modelling choices
BIS paper urges policy-makers to consider co-ordinated bond strategy
Research finds effective response to a bond market crisis has become more difficult due to heavily laden central bank balance sheets, raising the need to better co-ordinate a crisis framework
Basel report proposes curbs on bank modelling choices
Basel Committee report finds ‘considerable variation’ in risk-weighted assets for bank trading books; says policy-makers should consider limiting modelling options and improving disclosure
Bundesbank paper quantifies ‘considerable’ risk spillovers
Researchers design new methodology for measuring systemic risk and contagion effects, finding spillovers are significant but vary from region to region
IMF research finds inflation targeting can dampen risk premiums
Working paper suggests inflation targeting reduces a country’s risk premium, although this effect is stronger for emerging markets and where inflation targeting is successful in stabilising prices
IMF paper urges greater macroprudential standards for CCP risk buffers
Study published by IMF seeks to eliminate regulatory arbitrage between banks and CCPs' prudential standards
Bundesbank paper analyses drivers of default risk
Study published by the Deutsche Bundesbank finds systematic factors are responsible for up to a quarter of the differences in the default risk of individual banks' credit portfolios
Striving for a strategic role for risk management
Risk management needs to be split from control functions to provide boards with a holistic view of qualitative and quantitative risks