Blog: Page 25

Executive Compensation: Insights for Investors

If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don’t have to manage them. – Jack Welch Catherine McCall and Damian Yu, both principals at Hugessen Consulting , provided a lively overview of issues in executive compensation to an afternoon audience at the CFA Society Toronto offices on August 20, 2012.  The duo first outlined the current governance and market environment of compensation, then gave helpful pointers for deciphering management information, and concluded with “hot topics” in the area. Executive compensation deserves the attention […]

Impact of Basel III on Capital Instruments. Part 2: Football vs. Soccer

On August 16, 2012, speaking at a webinar hosted by the Global Association of Risk Professionals (GARP), three panellists gave a perspective on the changes Basel III would wreak on capital instruments.  Click here for Part 1. The second speaker, April Frazer, Director of Client Solutions Group at Wells Fargo, gave an overview of the impact of the US Basel III proposal on market dynamics.  Due to regulatory limitations that she is subject to as a member of a financial institution, her talk is not reported on here. Steve Sahara, Global Head of DCM Solutions and Hybrid Capital, Crédit Agricole […]

Impact of Basel III on Capital Instruments. Part 1: Ramp-up in Capital

On August 16, 2012, three panellists gave a perspective on the changes Basel III would wreak on capital instruments.  It was a highly detailed talk, delivered at high speed, with many qualifications made to the main points, but the sponsoring organization GARP has done a tremendous service to its membership by gathering together these experts.  There are some excellent summary slides (link below).  This two-part posting showcases the top messages from the three experts, Dwight Smith, April Frazer, and Steve Sahara. In June 2012, three US regulatory bodies (the OCC, the Federal Reserve Board, and the FDIC) proposed three sets of […]

Tree Bagger & Tree Booster: MatLab for Data-Driven Fitting

Let’s say you want to create a predictive model without assuming an analytical form to the model.  How would you go about it? On August 14, 2012, Richard Willey, Technical Marketing Manager at MathWorks, demonstrated via webinar how input data could be fit using machine-learning approaches. The emphasis here is data-driven, as opposed to model-driven, fitting. “A limitation of regression techniques is that the user must specify a functional form,” said Willey, and the choice of that model is usually based on the domain model. Typically the data points are fit with high-order polynomials or Fourier series. Or, the user might run the data […]

Global Implications of the Eurozone Crisis

On August 7, 2012, Daniel Wagner, CEO of Country Risk Solutions, a US-based cross-border risk management consulting firm, addressed a Global Association of Risk Professionals (GARP) audience about the Eurozone crisis.  Wagner, author of Political Risk Insurance Guide, and Managing Country Risk, published in 2012, spoke on a range of related topics.  Wagner’s talk was far-ranging and comprehensive (78 slides in 45 minutes).  He spoke about the impact of debt; in particular, the effect of the Euro Zone crisis on the developing world. Wagner described the impact of rising debt and rising protectionism, and touched briefly on some trends that […]

US Implementation of Basel III. Part 2: The GPS for the Journey

On July 24, 2012, Peter Went, VP Banking Risk Management Programs at GARP, summarized the changing landscape of Basel III from a US perspective. First he outlined the deadlines and proposed changes; Part 1 of this posting covers these for the standardized approach. Financial institutions adhering to the advanced approach, Went said, must follow the Basel III counterparty credit risk rules. In some cases, correlations between asset values must be increased. A distinction will be made between securitization and resecuritization. [Ed. Note: To this, we say, “high time.” See, for example, Hull & White’s award-winning article in Financial Analysts Journal, […]

US Implementation of Basel III. Part 1: A Long and Winding Journey

The long and winding US route to Basel implementation has been more difficult and circuitous than the route for European banks.  Peter Went, VP Banking Risk Management Programs at GARP, delivered a webinar update on the Basel III leg of the journey on July 24, 2012. First, Went summarized the deadlines. Several sequential proposals have been issued by the US prudential agencies: the OCC, FRB, and the FDIC, with an expected implementation date beginning January 1, 2013, and a series of milestones thereafter. [Note: by mid-December 2012, the implementation dates for most of the Basel III proposals have been delayed […]

Risk-Based Capital Requirements under Basel III: Part 2. The More Capital, the More Stability

On July 17, 2012 Peter Went, VP Banking Risk Management Program at the Global Association of Risk Professionals (GARP), addressed a webinar audience on the significant changes to capital requirements under the new Basel III rules, as was reported in the Part 1 posting. According to the survey of the Basel Committee Basel III Monitoring Exercise, many banks have embarked on aggressive campaigns to raise capital. In addition to increasing existing capital requirements, Basel III proposes two new charges:  the capital conservation buffer, which may require banks to maintain an additional 2.5 percent, and the countercyclical buffer (shown in the […]

Risk-Based Capital Requirements under Basel III. Part 1: The Trillion-Dollar Tweak

The friendly and ever-so-precise tones of Peter Went, VP Banking Risk Management Program at the Global Association of Risk Professionals (GARP), have been moderating a cavalcade of panellists over the past couple years. When the chance arose to attend his solo webinar on July 17, 2012, we leapt at the opportunity. Went,  co-author of five books on financial risk management, spoke about risk-based capital requirements and how the Basel III Accord redefines and increases the quality and quantity of these requirements. His presentation was divided into three parts: capital under Basel III, US implementation of Basel III capital rules, and […]

Ethics and Risk Management: Part 3

A panel of four specialists convened to discuss various aspects of ethics in risk management in a GARP-sponsored webinar on June 21, 2012. (Click for Part 1 and Part 2 of this summary.) The fourth and final speaker was Roger Miles, Director, NudgeGlobal. He spoke on risk control lessons learned from the banking crisis. In the financial sector, he said, “UK-enforced self-regulation was a good idea in theory.” A bank can realize an ever-increasing profit from a new, complex product, but the regulator has limited resources, therefore, there is an essential asymmetry of information that cannot be overcome. However, in […]