Zombie Banks Part 2. A Call for Change
Given the current high coolness quotient of anything “zombie,” a webinar about “zombie banks” is guaranteed to pique the interest of even the non-bankers out there. (Kudos to the non-financial types who made it through Part 1 and the discussion of interest rates.) But really, “zombie” is nothing more than a highly picturesque way to refer to something that is kept in motion or presumed viable long after it normally would have expired. “Zombie yogurt,” anyone?To recap Yalman Onaran’s definition in Part 1 of this posting, a zombie bank is a financial institution that continues to exist “even though the […]
Zombie Banks Part 1. Tough Love
George A. Romero, the moviemaker who popularized the witchcraft legend of the “walking undead,” would likely be astonished to hear the term applied to real financial institutions, but “Zombie banks” does capture the concept well. On June 5, 2012, Yalman Onaran, author of “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy,” and financial reporter at Bloomberg News, spoke at a panel convened by GARP (Global Association of Risk Professionals) to discuss the phenomenon of banks which exist to fulfill a regulatory purpose but are not in themselves economically viable. Onaran said the first response to […]
Reality vs Expectations: What Risk Managers Can Learn from the NFL
Arriving a little late at the CFA Society Toronto luncheon on June 4, 2012 at the National Club on Bay Street, I had a lucky choice of seat at the “hodge podge” table near the back. My two nearest neighbours at the table had driven from Simcoe to Toronto that morning (a minimum two-hour trip) for the express purpose of meeting the featured speaker, Roger Martin, Dean of Rotman School of Management. One said he had not only read and enjoyed Martin’s latest book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL, he had also […]
Sentiment Analysis and Risk Layering
“Sentiment analysis is ripe for development,” said Cliff Rossi and he was not speaking about the newest remake of Jane Eyre, but about new trends in financial risk management. Rossi, the Tyser Teaching Fellow at the business school of the University of Maryland, was addressing a GARP (Global Association of Risk Professionals) audience as the second of three panellists on “Modernizing Financial Risk Management: The Changing Technology Paradigm” on May 22, 2012. There are three main categories of enhancements Rossi would like to see in risk management technology. First on his wish list is a greater breadth of data over […]
“We Need to Fix the Plumbing”
Allan Grody is a man with a mission. The fall-out from the financial meltdown has shone a light on many things that need fixing within the financial system, and of these, Grody is focusing on one especially leaky, corroded pipe. Grody, president of Financial Intergroup, was addressing a GARP (Global Association of Risk Professionals) audience as the third of three panelists on “Modernizing Financial Risk Management: The Changing Technology Paradigm” on May 22, 2012. Early in his presentation, Grody showed a complex summation diagram. Titled “Need to Fix the Plumbing,” it was a kind of map, one that deserves a place […]
Real-Time Risk Analytics, SAS Style
“Analysts in capital markets get pummeled with vast quantities of information,” said Jeff Hasmann, “sometimes receiving as many as twenty newsfeeds per day. How are they to make sense of it all?” Hasmann was the first of three panelists speaking at the Global Association of Risk Professionals (GARP) webinar, “Modernizing Financial Risk Management: The Changing Technology Paradigm” on May 22, 2012. There is a push to modernize financial risk management from both above and below. Besides handling information overload, Hasmann noted there are several reasons to modernize: evolving regulations, improvements in efficiency to be gained, and needs for standardization. Hasmann, […]
Joost Driessen Discusses Liquidity Effects in Bonds
Put away the crossword and the sudoku: it’s the “credit spread puzzle” that’s occupying some leading financial minds. On May 3, 2012, Prof. Joost Driessen of Tilburg University spoke to a Global Association of Risk Professionals (GARP) webinar audience about recent work done by his research group to solve this puzzle. The term “credit spread puzzle” refers to the fact that credit spreads are much higher than can be justified by historical default losses. A typical example Driessen cited was a long-term AA bond that had an expected default loss of 0.06% yet whose average credit spread, calculated using real-life data, was 1.18%. More […]
Miriam Varadi Talks about Private Equity Firms in Canada
“A private equity firm breaks itself down into finders, minders, and grinders,” said Miriam Varadi at the April 26, 2012 seminar, “Private Equity: The Colour And The Controversy” held at the new Adelaide Street offices of the CFA Toronto Society. The “finders” look for quality buyout deals, the “minders” deal with the executives and sit on the board of the bought-out companies, and the “grinders” are, in her words, “essentially apprentice minders.” In 2006, Varadi found herself caught up in a dramatic scramble of the $52 billion buyout of Bell Canada Enterprise (BCE). BCE had been mismanaged for years which was […]
Uncontrolled Risk
Uncontrolled Risk: The Lessons of Lehman Brothers and How Systemic Risk Can Still Bring Down the World Financial System by Mark T. Williams 220 pp., not including 27 pp of Appendix, Notes, and Index (Reprinted from The Analyst, March 2011 issue.) On September 15, 2008, the 158-year-old investment bank, Lehman Brothers, filed for bankruptcy, thereby unleashing a horde of systemic risk effects that continue to bedevil the financial system. In this recently-published investigation into how the collapse of one iconic institution contaminated an entire sector, Mark T. Williams draws some sobering lessons. In the 1990s, author Mark T. Williams worked […]
No One Would Listen
Book Review of: No One Would Listen: A True Financial Thriller by Harry Markopolos 376 pp., including three Appendices, Note on Sources, and Index (Reprinted from The Analyst, December 2010 issue.) In December 2008, Bernard Madoff confessed to running the world’s largest Ponzi scheme. This real-life thriller by Harry Markopolos details his five unsuccessful attempts to get the SEC to put a stop to a$65-billion investment fraud. Harry Markopolos spoke to the Toronto CFA Society about his experiences in September 2010. Early in his Wall Street career as a portfolio manager, Markopolos heard about a fund with an extraordinarily consistent […]