CIBC’s VAR hits highest since 2008 amid interest rate risk surge

Client and market-making activities responsible for 44% increase

Securitisation clears way for UK insurers to buy ground rents

Asset manager says booming sector will make up for falling demand from pensions

US Fed reveals its five use cases for generative AI

Internal sandbox used to assess viability and risks; coding and content generation on the agenda

US banks seek to open vendors’ black box on green data

Inaugural Fed climate scenario analysis flags lack of transparency around third-party models

Model teams fear budget cuts as FRTB wipeout looms

Senior modellers think supervisory intervention is needed to prevent funding drought

Liquidity risk hits five-year high at LCH

Higher settlement obligations at Paris-based RepoClear blamed for €9bn spike

Capital rules explain leverage craving in US bank risk transfers

Tougher requirements have led to conservative structuring and lower coupons

Euribor fills panel gaps with Finland and Greece

OP Corporate Bank and NBG take contributors to 21 as administrator switches off “expert judgement”

Non-deliverable CNY swaps defy doubters

Swap Connect’s launch has helped rather than hindered the instrument, say dealers

Shocks to the system: how Basel IRRBB update affects new EU test

Disclosures suggest more banks will be classified as outliers on net interest income assessment

Loss of diversification benefits ‘will drive higher FRTB charges’

Independent study backs industry’s claims of significant rise in market risk capital requirements

New CDS index delayed by regulatory capital concerns

Dealer worries about impact of self-referencing trades derail CDX Financials launch at last minute

Drilling for default: dry run gives CCPs a Lehman-like lesson

Member default simulation finds standardisation and porting could help in a crisis, and moots unscheduled repeat drill

Breaking with Behnam: inside the dysfunction at the CFTC

Policy and personality clashes have left the chairman isolated and slowed rulemaking activity to a crawl

Citi tops second edition of Risk’s Dealer Rankings

Dealer Rankings 2024: Data shows five big US dealers still lead, but with Europeans closing in

FX futures momentum challenges primary venues’ pricing role

Panellists suggest spot FX primary markets’ importance in models has “diminished”

T+1 shift sparks dividend chaos in HK structured products

Products staying on T+2 leave providers scrambling to deal with ex-dividend dates caught inbetween

OCC introduces new intraday risk charge covering zero-day options

Revised measures “a nightmare” to implement, says one broker-dealer

Basel triggers new tussle on anti-Archegos rules

Critics argue new guidelines on counterparty credit risk are either unworkable, or don’t go far enough to tackle concentration and wrong-way risk

FRTB start dates must align globally, says EC

Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on

Basel III endgame: why moving fast might prove better for banks

Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching

Basel war on window-dressing may smooth liquidity, at a price

Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity

HSBC, StanChart SVAR charges hit multi-year highs

Stressed trading-loss measure makes up 43% of banks’ modelled market risk charges

MassMutual adds to mammoth interest rate swaps book

Counterparty Radar: Firm was responsible for 28% of US life insurers’ notional volume in Q4 2023

Napier Park to increase investment in bank risk transfers

Hedge fund sees secular trend in lenders offloading credit risk, and plans to be part of it

Clear warning on escape hatch for optimisation trades

CCPs fear Emir clearing mandate carve-out for portfolio rebalancing could be abused

Execs can game sentiment engines, but can they fool LLMs?

Quants are firing up large language models to cut through corporate blather

How Man Group’s private credit arm keeps risk in check

Mid-market lending no place for weak covenants, flexible addbacks or payments in kind, says Varagon CEO

End of BTFP curtails Comerica’s contingent funding pool

Decision not to take avail of facility’s paper-loss amnesty showcases US regional banks’ conundrum

False start: 13 EU banks miscalculate new GAR coverage metric

Unclear instructions, late guidance and poor font choices among reasons behind diverging interpretations from EBA’s template

Nervous UK pension schemes want liquidity fixes – it’ll cost them

Asset managers are crafting new ways for schemes to raise cash in a crisis

Op risk hits all-time highs at three Nordic banks

Regular updates drive record rises at Handelsbanken, Nordea and SEB

FCA presses UK non-banks to put their affairs in order

Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements

BNY Mellon dips below Collins floor after surge in standardised RWAs

All nine US banks using internal models now bound by regulator-set approach

Liquidnet sees electronic future for grey bond trading

TP Icap’s grey market bond trading unit has more than doubled transactions in the first quarter of 2024

HSBC, Intesa incorporate 2022–23 downturn into SVAR models

Turbulent past two years implied to be worse than GFC in stressed simulations

FICC takes flak over Treasury clearing proposal

Latest plans would still allow members to bundle clearing and execution – and would fail to boost clearing capacity, critics say

How ‘re-correlation’ risk could cause a pod-shop unwind

Some think an underappreciated vulnerability might one day lead to a 2008-type crisis

Citi halves swaptions book with US retail funds

Counterparty Radar: Mutual funds and ETFs cut exposures by 22% in Q4

Ice Europe’s liquidity risk at record high in Q4

Estimated largest payment obligation in euros more than double previous quarter’s figure

CDS review seeks to tackle conflicts ‘elephant’

Isda AGM: Linklaters unveils key recommendations for CDS committee overhaul

Industry calls for major rethink of Basel III rules

Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say

Japanese megabanks shun internal models as FRTB bites

Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025

CFTC chair backs easing of G-Sib surcharge in Basel endgame

Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%

Options market still searching for cause of the Vix plunge

BIS paper blames yield-enhancing structured products, but market participants are unconvinced

Green knights? Banks step into struggling carbon credit markets

Clearer global standards and a new exchange may attract dealer entry, but supply and demand challenges remain

LCH issued highest cash call in more than five years

Largest same-day payment obligation triples in Q4 2023

Filling gaps in market data with optimal transport

Julius Baer quant proposes novel way to generate accurate prices for illiquid maturities

Pension schemes prep facilities to ‘repo’ fund units

Schroders, State Street and Cardano plan new way to shore up pension portfolios against repeat of 2022 gilt crisis

The American way: a stress-test substitute for Basel’s IRRBB?

Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure

As dispersion hikes in price, equity traders slice and dice

Banks tout alternative versions of relative value vol strategy, including reverse dispersion

Doubts dog equity dispersion as market grows up to five-fold

Some say $500 million vega notional – or more – in popular equity derivatives trades could be dampening volatility

Japanese banks’ leverage ratios keep rising as BoJ relief becomes permanent

Norinchukin reaps largest benefit on eve of Covid-19-era exemption being made permanent

The signs of tacit collusion in the dividend play trade

Game theory and real-world data point to a different understanding of how arbitrage in markets works

Regulatory crackdown puts Korea autocalls in deep freeze

Mis-selling fears see distributors pull back, leading to 40% fall in issuance in a month

Top 10 operational risks for 2024

The biggest op risks for the year ahead, as chosen by senior industry practitioners

‘No frowning’ on banks for discount window borrowing – Fed official

Risk Live: more banks have completed paperwork to access Fed lending facility than a year ago

RMB vol returns as hedge funds take barrier trade profits

Unwinds of exotic positions saw vol jump 72% after surprise PBoC move last week

Brazil readies long-dated FX hedging scheme for green projects

Development bank IDB will lend its credit rating to unlock cheaper USD/BRL hedges out to 25 years

Foreign buyers jolt e-trading in Japan government bonds

Platforms report rise in small-ticket volumes, but bigger trades remain on voice

Esma faces tough task in implementing Emir 3.0

EU regulator must contend with tight timeframes and increasing workload without additional resources

US FCMs’ residual interest buffers hit record low in December

A decade on from CFTC rules on residual interest target, firms’ segregated cash has not kept pace with client funds

Too soon to say good riddance to banks’ public enemy number one

As LockBit plans its comeback, experts say banks need a clear ransomware negotiating playbook

The race to build hyper-personalised investing

Direct indexing is taking off, but how far can it scale?

Energy credit optimisers vie to become the headline act

Competing initiatives may dilute ‘network effect’ as race to fill void left by TP Icap intensifies

EU watchdogs to launch prop trader capital review in April

Prop traders say bank-style IFR rules are driving them out, but doubt EBA will suggest changes

Canada’s top dealers boost derivatives clearing as FRTB kicks in

BMO, RBC and TD Bank cleared record C$45.1 trillion in notionals in Q1

Traders eye negative CDS-bond basis

Changed market dynamic can be profitable for those firms able to capture it

NAIC softens its rating overhaul. Insurers still don’t like it

Insurers worry that the regulatory body could override credit ratings without sufficient explanation

JP Morgan leads US banks’ FX trading revenues

Only two dealers saw revenue growth through 2023 as Goldman Sachs reports 75% drop

Singapore Exchange to return to short-term rates market

SGX president Syn hails new Sora and Tona futures as the “missing chunk of the rates complex”

Infrequent MtM reduces neither value-at-risk nor backtesting exceptions

Frequency of repricing impacts volatility and correlation measures

The quants who kicked the hornets’ nest – to champion causality

A small but influential cadre says the multi-trillion-dollar factor investing industry is based on flawed science

US FCMs far apart on target residual interest levels

Dealers diverge widely in how much capital they deem necessary to cover customer fund shortfalls

CFTC hears ‘call to action’ from swaps end-users on Basel III

Commissioner Pham mulls engaging with prudential regulators over capital hit on clearing

Snail race: the slow growth of securities lending CCPs

There’s underlying appetite to clear, but a structure to suit all participants is proving elusive

Euro area funds’ debt securities surged 13% in 2023

Investments vis-a-vis euro area issuers rebound after 2022 slump, driven by bond funds

Zero-day hedging takes root in new asset classes

Option users move beyond equity indexes in search of cheaper, sharper hedging tools

Canadian banks’ market RWAs spike on FRTB switch

CIBC, TD Bank and Scotia saw end-January charges jump amid overall ditching of internal models at Canada’s big five

Deposit insurance could transform outlook for China TLAC

Issuance needs drop dramatically if regulators allow maximum inclusion of deposit insurance fund

Euribor to ditch ‘expert judgement’ in May

Plan to infer euro funding costs from term version of €STR wins industry backing

Credit Suisse USA rounds 2023 with fifth VAR breach

Wall Street unit’s capital multiplier ratchets back up to 3.4x

Clobbered: how ‘toxic’ flows reshaped US Treasury trading

Volumes have dropped by more than a third at BrokerTec. The reasons are complex, the outlook uncertain

Canada’s FRTB pioneers get snowed on fund-linked trades

As Basel capital reforms go live, risk managers eye early adopters’ progress and push to improve capital treatment of fund-linked products

Five US banks hit record leverage exposures

Ballooning balance sheets leave Goldman, Morgan Stanley with razor-thin SLR buffers

How China’s equities intervention caused a quant fund quake

Popular leveraged market-neutral trade crumbled after government stepped in to support major indexes in February

Higher revenue pushes HSBC’s op risk up 14%

Increased net interest income over 2023 major driver behind six-year high figure

Emir 3.0 threatens lag for Simm revisions

New EU rules could stall changes aimed at improving risk sensitivity of industry margin models

ECB raised Pillar 2 charges for just three CRE-heavy banks in latest SREP

Pfandbriefbank and Luminor saw largest increases across 106 banks subject to 2023 assessment

Choppy inflation may be the worst inflation

Investors can build strategies to suit fast-rising prices, or slow-rising prices. What trips them up is the inflation foxtrot: slow, slow, quick, quick, slow

Esma pledges faster approvals for CCP margin model changes

Löber says regulatory sign-off on small model changes should take just three weeks under Emir 3.0

Large EU prop traders dump once-loved capital method

Industry lobbied for requirement based on margin haircuts, but it has provided little relief

Fed unveils hyper-Archegos test to reveal bank blow-up risks

CCAR for 2024 includes analysis of simultaneous defaults of five largest hedge fund clients

Goldman, JPM gain ground in FCM race for swaps

Duo boosted share of required customer funds at the expense of Citi and Morgan Stanley in 2023

Hedge funds find plenty to dislike in SEC’s dealer-rule rewrite

‘Nobody knows’ for certain which investing strategies might lead to firms being forced to register as dealers

Royal London to enter UK buyout market

Firm joins Utmost Group in planning to tap market this year

A change of TIIE: the knotty issue of Mexico’s benchmark switch

Outlier fallback methods and narrow window to build F-TIIE derivatives liquidity make for ambitious transition plan

Why cyber hack leaves EquiLend down but not out

Users turned to alternative securities lending platforms, but that may not mean lost market share

Hot topic: SEC climate disclosure rule divides industry

Proposal likely to flounder on First Amendment concerns, lawyers believe

Rabobank cuts back on ECL overlays

Improved backtesting performance reduces add-ons to allowances to lowest in five years

No Canadian banks using internal models as FRTB kicks in

One bank still plans to adopt IMA after delays prevented it going live in January

Dealers inch closer to clearing of FX forwards

LCH’s ForexClear aims to ease capital charges and margin constraints on banks, but will it kickstart clearing?

Shinhan, Kookmin set aside record reserves amid real estate worries

Kookmin provisions account for 38% of income; 23% for Shinhan

EU clearing houses want global standard on procyclicality

CCPs fear Europe will adopt its own prescriptive rules despite ongoing international consultation

ING’s op risk jumps 10% on model updates

Other European AMA users report moderate hikes

Digging deeper into deep hedging

Dynamic techniques and gen-AI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain

BoE puts American spin on fix for FRTB’s govvies dilemma

Four jurisdictions find four different ways to resolve Basel market risk capital quirk

UBS predicts RWA cuts hampered by Basel III, model updates

Planned wind-down of unwanted Credit Suisse assets to be offset by $25 billion in add-ons

US climate guidance stokes debate over defining material risks

Banks welcome flexibility, but it could lead to big divergence on climate risk management

Dealers braced for Taiwan swaps clearing mandate

Expected FSC directive on TWD interest rate swaps could spur growth in FX clearing, say bank execs

Citrix Bleed hacks flag IT asset inventory shortfalls

To know what needs urgent patching, global banks first need to know what software they have

Europe’s new AI Act threatens supervisory ‘chaos’ for banks

Policy-maker says new role for European Commission could collide with ECB model risk regulation

Latest FDIC special assessment tougher than 2009 version

Most US banks face higher toll under new methodology

Bond funds made losing derivatives bets as rates climbed

Some managers’ use of interest rate derivatives looks like ill-timed speculation, study finds

Geopolitics is harsh terrain for FMIs

Idiosyncratic nature of disputes and flare-ups leaves exchange and infrastructure operators blending metrics with guesswork

CFTC trade reporting update turns into another rewrite

Expansion of Unique Product Identifier accompanied by 30 new, US-specific data fields

Shock EU expansion of clearing mandate may hook more funds

Last-minute change to Emir 3.0 would include cleared contracts in threshold calculation

Can risk parity ride out the storm of correlated asset chaos?

High interest rates, spiking inflation and correlation breakdowns are testing risk parity strategies

FMIs get busy, as supervisors circle

Via new roles and controls, exchanges and clearers hope to “get ahead” of regulatory wave

On cyber, FMIs seek to avoid being weapons of mass disruption

Controls focus on basic cyber hygiene, but communicating the risk remains a challenge

Mizuho’s life insurance swaptions notional climbs 575% in a year

Counterparty Radar: Prudential, Global Atlantic add substantially to positions in Q3 as market’s notional total grows to $184bn

US Bancorp adds on $8bn in long-term debt

Interest expense from LTD rises to $569 million in Q4

Basel III endgame expected to push PNC’s RWAs up 3%

Forecast from US regional much tamer than increases expected by advanced-approach banks

China snowball knock-ins fuel futures sell-off 

Market participants say issuer re-hedging has helped drive Chinese equity indexes lower

Citi and JP Morgan vie to extend collateral optimisation to CCPs

High rates and increasing collateral requirements have ignited race for greater efficiency

Clearing members cheer plan for more transparency on CCP margin

European Parliament wants to amend Emir 3.0 draft to put extra obligations on clearing houses

Council of the EU resists centralised clearing house supervision

Esma wants more powers, but member states will only agree to provide it with more information

IM surges at LCH following CDS users’ shift from ICEU

Figures for Q3 show 16% jump at Paris-based CDSClear

LDI firms update margin stress tests post-gilt crisis

For some managers, stress-testing models failed to reflect the convexity effects of the crisis on initial margin

Soured CRE loans pile up at BofA, Wells Fargo and PNC

Proportion of non-performing loans surges past the pandemic’s worst stretches

How HSBC got better at pricing share buy-backs

Monte Carlo approach generates faster, more reliable pricing for complex deals

Cleared US repos hit record high as MMFs wean off Fed

Deflating tri-party volumes coincide with FICC DVP trades’ climb to $2tn

Why ‘Derivatives’ became ‘Markets’

The derivatives markets have changed drastically over the past decade. So has Risk.net’s coverage

Op risk data: US piqued by Pictet tax breach

Also: US Bank’s Covid failings; South Korea’s short-selling clampdown. Data by ORX News

Bloating CCP default funds. New margin models. Are the two linked?

Dealers grumble that greater guaranty fund payments could undermine the ‘defaulter pays’ principle of clearing

Regulators’ FRTB estimates based on faulty premise – industry study

US market risk capital requirements could more than double if banks abandon IMA

Corporates eye FX options as hedging costs shrink

With hedge ratios tipped to rise, dealers say treasurers are increasingly open to optionality

Creditors struggle to stop stressed firms borrowing more

Dropdowns, uptiers and double dips grow in number, and lenders can't prevent them

Holes in the netting: the limits of CME-Ficc cross-margin deal

Big margin savings for some, but more needed to ease pressure of UST clearing mandate

Clearing members sour further on cash for IM collateral

Sovereign bonds remain preferred choice at top CCPs in Q3

Polish benchmark transition hits new snag

Compounded index suspended over data errors as Wibor extension reopens successor debate

SA-CCR charges double at OCBC in Q3

Singaporean bank’s counterparty credit risk up 28% to multi-year high

BMO Capital Markets gaining ground in US Treasuries

Canadian bank goes head-to-head with large US bulge brackets in D2C market

Growing regulatory focus fuels climate risk staffing fight

Widespread poaching as banks find repurposing existing quants may not provide the right expertise

LCH-JSCC basis turns negative on BoJ policy shift

Changes in hedge fund positioning at LCH seen as driver of inversion on 20-year swaps

Citi swaption volumes surge as BlackRock relationship flourishes

Counterparty Radar: Market leader Pimco cuts nearly one-third of book in Q3

US MMF repos with dealers hit record amid RRP pullback

Non-Fed trades up 13% in November as facility’s usage declines rapidly

Concentration risk ticks up at large CCPs

Top five clearing members accounted for almost half IM and open positions in Q3

The cost of mis-specifying price impact

Expected returns can be significantly affected by the wrong use of impact models

Former NY Fed chief calls for overhaul of discount window

Dudley’s proposed changes include prepositioning collateral, cutting costs of secondary credit facility

US climate guidance stokes debate over defining material risks

Banks welcome flexibility, but it could lead to big divergence on climate risk management

Climate refugees, zero-day options and the wrong long

A look at the investment risks that just missed our annual list

Geopolitics is harsh terrain for FMIs

Idiosyncratic nature of disputes and flare-ups leaves exchange and infrastructure operators blending metrics with guesswork

AmEx expansion puts it on track for tougher prudential standards

Lender is within spitting distance of category III designation, which would attract stricter capital and liquidity requirements

Pimco’s interest rate swaps book shrinks 21% in Q3

Counterparty Radar: BlackRock and Capital Group also trim positions to drive down swaps usage by US mutual funds

Citi, JP Morgan bail-in buffers ebb above minimums

Duo’s long-term debt headroom closest to regulatory requirements among top US banks

FMIs get busy, as supervisors circle

Via new roles and controls, exchanges and clearers hope to “get ahead” of regulatory wave

A new method for the pricing of share buy-back programmes

The features of buy-back programmes

The top 10 investment risks for 2024

New fears include mounting government debt, the rise of AI, a credit crunch and regulatory overkill

On cyber, FMIs seek to avoid being weapons of mass disruption

Controls focus on basic cyber hygiene, but communicating the risk remains a challenge

LMAX taps real money clients with Cürex deal

Acquisition aims to offer liquidity providers diverse flows from asset managers

Unlocking Potential: Ascenteum’s Training Services for Professional Excellence

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Information security: too important to leave to the experts?

Holding a trove of sensitive data, FMIs seek greater safety through shared oversight and smarter reporting

Goldman, Barclays, MUFG reap largest G-Sib score cuts

Compressions driven by reductions in complexity and cross-border activity

Climate capital outlook unclear as EBA rejects green risk weights

European regulator suggests climate change must be factored into existing risk categories

Op risk data: Monster real estate loan fraud bites Vietnam’s SCB

Also: Binance brought to book, Rabobank reprimanded over bond cartel. Data by ORX News

The unknown risk on the flip side of the basis trade

US mutual funds have amassed record notionals in Treasury futures that in some cases exceed their AUM

Regulators pushing CCPs and exchanges on op risk

Op Risk Benchmarking: In latest batch of data, FMIs report growing scrutiny, plus watchdog asks for stress tests, monitoring and more

Repo price spike concentrated in FICC DVP market

Soaring demand for cleared repo blamed for largest SOFR spike in four years

AllianceBernstein: fine-tuning shrinks gen AI ‘hallucinations’

Asset manager says its tweaks have improved accuracy of LLM models

Loss of ruble volatility waiver costs UniCredit €2.2bn in RWAs

Lender forced to capitalise FX risk from Russian operations after ECB withdraws key exemption

Industry confused by EU’s ‘bingo card’ clearing rules

Uncertainty over definition of representative trades in Emir active account requirement Market participants warn the complex requirements..

Repo clearing could spur CDM adoption – Barclays

UK bank’s tech group believes repo market is primed for new data standards Mandatory clearing of US Treasury repo could be a catalyst for the adoption..

Blow-out on ‘dim sum’ bonds fuels boom in offshore rates options

Swaptions on USD/CNH swaps enjoy boost as investors adopt ‘all-you-can-eat’ approach to callables

HSBC leads global uptick in OTC derivatives clearing

Systemic banks cleared record €250 trillion in notionals in 2022 HSBC grew its cleared swaps book by 11 percentage points in 2022..

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Clearing members combing rule books after LME lawsuit win

Industry debates whether other CCPs and exchanges would cancel trades if faced with similar crisis

China G-Sib scores tell story of lenders’ decade-long rise

Chinese banks capture far larger share of systemic risk than in 2013

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SEC criticised for belt-and-braces ban on volume-based pricing

Legal experts question need for rules to prevent firms disguising agency trades as proprietary

PFZW’s payout to pensioners jolts euro swap curve

Dutch retirement fund’s announcement of unexpectedly large indexation takes market by surprise

Investment house of the year: Schroders

Risk Awards 2024: Nimble collateral management helped clients sail through UK gilts crisis unscathed

Bank QIS teams take zero-day options plunge

JP Morgan sees better risk/reward profile for 0DTE-based trend strategies

UBS, three Chinese banks face higher capital surcharges

Credit Suisse and UniCredit dropped from G-Sib list in latest systemic risk assessment

HQLAs slide to multi-year lows at largest US regionals

Drops make US Bancorp, PNC and Truist ever more dependent on reduced LCR

Margin failings raise concern over Treasury basis trade

Opaque models at clearing houses cast doubt on calculations for concentration add-on

RISK QUANTUM SMFG loads up on foreign bonds

A 34% quarterly rise swells non-domestic portfolio to record size

Three’s a crowd? Eurex and Ice battle CME for €STR trading

Chasing exchanges represent 75% of trading volume, 28% of open interest in first weeks of push

Can machine learning help predict recessions? Not really

Artificial intelligence models stumble on noisy data and lack of interpretability

VAR breaches trip up Citi, CS USA and two others in Q3

Comerica’s VAR multiplier ratchets up while Huntington’s remains at record high

At US banks, paper losses on HTM securities hit new high

Bank of America leads way as mortgage-backed securities drive aggregate rise in Q3

US life insurers piled into index options in Q2

Counterparty Radar: Lincoln Financial, Global Atlantic lead expansion; Goldman claims top dealer spot

How corporates are tooling up for FX risk

Unstable markets have forced corporate treasurers to adopt whizzier methods for managing currency exposures

Bank of America refills AFS book with T-Bills

Bank makes head start on peers in reshaping battered fair-value investments

FRTB managers face hard facts about risk factors

There are ways to reduce the capital charges caused by NMRFs, but they come at a price

Huatai launches its first Hong Kong CBBC

Two more securities houses set to follow Chinese firm into Hong Kong’s listed structured products market

KBC takes €8.2bn RWA add-on post ECB model review

Regulatory intervention and share buyback contribute to sink bank’s core ratio to lowest point since 2016

SEC official defends delayed dealer registration rule

Regulator says market should be treated like equities, but PTFs warn it will harm market liquidity

PTFs piled into US Treasuries during SVB collapse

Treasury official says non-bank interdealer market share rose 10 percentage points in March as dealers retreated

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Commerzbank’s rate-shock loss sensitivity rises 33%

Bank’s liabilities modelled to reprice faster than assets in a 200bp parallel hike scenario

New UK clearing rules: same as the old rules?

Clearing experts doubt UK regulation can diverge significantly from Emir and global standards

How US insurers went to war over CLOs

Mutuals and private equity-backed rivals clash over determination of capital charges

BoE warns against use of stablecoins in banking

Tokenised payment systems pose compliance and systemic risks, regulator says

SEC to delay US Treasury clearing mandate, dealer rule

A final vote on proposed US Treasury market reforms is now expected in early 2024

Leveraged wrong-way risk

A model to assess the exposure to leveraged and collateralised counterparties is presented

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BlackRock, Pimco slash mutual fund swaptions books

Counterparty Radar: US retail funds retreat from trade as Morgan Stanley becomes top dealer in Q2

Buy-siders bemoan ‘dark arts’ of corporate bond CSA discounting

Litany of pricing variables fuel wide differences in how dealers calculate discount rates for collateral agreements.

EU and UK to rework flawed identifiers for swaps transparency

European Commission and FCA both plan to consult on Mifir replacement for unpopular Isins

All-to-all no panacea for Treasury liquidity

Traders fear push for equity-style market could be detrimental to off-the-run securities

BofA’s VAR reels back to pre-pandemic level

Dealer leads large US banks on curtailing market risk

Neural joint S&P 500/VIX smile calibration

A one-factor stochastic local volatility model can solve the joint calibration problem

Off target: SEC dealer rule will hurt those it aims to protect

It was one of the most significant shocks to the US Treasury markets in decades – the early days of the Covid pandemic.

Generative AI is changing debate on explainability, says Deutsche

Innovation head says observability can aid regulatory acceptance

Buy side frets over cost of compulsory repo clearing

As US regulators prepare to mandate clearing, cost of compliance remains a mystery to many

UK to permanently recognise US CCPs

Regulators also launching review on long-term status of UK pension fund clearing exemption

As exposures mount, energy firms take up credit optimisation

Energy turmoil spurs demand for new counterparty rebalancing services in gas and power markets

New UK fraud rules intensify global focus on third-party risk

Firms will have responsibility to ensure “associated” persons are taking steps to prevent fraud

Be careful what you’re paid for

Pinning down the illiquidity premium in private credit is no easy task

SEC contradicts itself on exchange pricing, say firms

Cboe warns ban on volume-based rebates will not improve pricing for investors

Opra outages cause consternation in options markets

UBS warned clients they were looking at “bad data” on options screens

Industry fears backdoor thresholds in active accounts debate

Confidential papers suggest a compromise, but requirements seen as too ambiguous

CME’s Span 2 margin model generates systems headaches

Market participants welcome smarter margin requirements, but not the computational workload

Filling the gaps in Basel’s interest rate risk measures

Reverse stress-testing or VAR may work better than existing outlier tests, but are hard to manage

Roll up for the BoE’s counterparty mystery tour

Letter warns of cross-currency repo risks, but they didn’t feature in Archegos or LDI blow-ups

PE funds exit boots Wells Fargo’s capital ratio

Two billion dollars of investment sales in Q3 added 14bp to CET1

US funds add to single-name CDS positions

Counterparty Radar: Corporate positions exceed SSA contracts for first time on record in Q2

Execution & process errors: banks try to get beyond blunderdome

Op Risk Benchmarking: Mistakes mean more data for reporting, models and scenarios. But do banks learn from them?

JP Morgan pulls plug on deep learning model for FX algos

US bank turns to less complex models that are easier to explain to clients

UK pensions mull discount rate switch after LDI crisis

Large schemes rethink liability calculations as illiquid allocations balloon following ‘mini-budget’

US banks ditch IR futures as appetite for swaps booms

Notional for futures craters 19% in Q2, hitting lowest in at least seven years

Riskless assets hit three-year low at top US banks

JP Morgan drives shift, shedding more than $65 billion in risk-free exposures

US insurers take different paths to hedge FX

Counterparty Radar: Maturity and size of FX forwards trades vary significantly between firms

Emmi consults on axing ‘expert judgement’ for Euribor

Level 2.3 inputs extrapolated from term version of €STR will replace internal bank estimates

Pimco adds $103bn in fresh receive-fix interest rate swaps

Counterparty Radar: Bond powerhouse moves to lock in high rates in Q2 with one-year swap

ECC default fund changes set to cut clearing member contributions

Stress loss over margin designed to ease procyclical behaviour seen during 2022 energy shock

Morgan Stanley’s default fund contributions jump $1.9bn in Q2

Aggregate increase across US clearing banks pushes requirements to highest point since 2021

Isda proposes new central hub for critical notices

Trade body seeks industry feedback on one-stop shop for default notices and other critical comms; sceptics say the service is “not a universal solution”

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RBC’s credit derivatives book grows fourfold on market-making push

Notionals of credit protection sold and purchased have ballooned 236% and 382% respectively since October 2022

PGIM nearly eliminates credit options book

Counterparty Radar: Pimco also exits space in Q2 as US funds show record low positions in the instrument

US takes scissors to repos. In Europe, it’s not cut and dried

Stateside banks fear disadvantage over haircut rules that EU sees as not ready to implement

BTFP becomes top source of Fed funding

Emergency lending program accounts for over 54% of loans extended to US dealers by the central bank

StanChart sees big uptick in FX options positions

Counterparty Radar: UK bank benefits from MSIM trades as market for US mutual funds expands in Q2

Flow Traders bullish about threat from big banks

Talking Heads 2023: Non-bank market-maker remains confident of its edge in small-ticket corporate credit

Traders pin Sonia derivative woes on UK’s local difficulties

Market participants say BoE forecasts and mini-budget help explain RFR products’ lack of liquidity

BNPP back in dealer top three for FX forwards with mutuals

Deutsche Bank, HSBC hit by cuts at Vanguard and Pimco in Q2

ECB mulls intervention on uneven banking book reporting

Inconsistency among EU banks on whether deposits and loans are in scope for credit spread risk

Margin calls surge as much as sixtyfold at Nasdaq

Model update drives record-high liquidity risk

SGX’s new FX platform sees increased NDF trading from US firms

Sef exemption opens door to increased US buy-side interest

Deutsche’s IRC peaks at record high during H1

€905m charge for trading book default and migration is largest among global dealers

How Bloomberg got liquidity seekers to trust its machine learning models

Recent liquidity squeezes have proved the worth of advanced models, argues the tech giant. Now the task is to explain their inner workings to machine learning sceptics

Worst-case double default would have caused breach at CME

Stress loss based on hypothetical scenario was $390m higher than prefunded resources

Iosco warns of leveraged loan ‘vulnerabilities’

As recovery rates plummet, report calls for clearer covenants and more transparency on addbacks

How Chenavari is adapting to an uncertain macro regime

Talking Heads 2023: Fund chief Loic Fery eyes rebalancing between public and private credit strategies

Do all roads lead to multi-scenario Fed stress tests?

This year’s CCAR faced criticism for underweighting the risk of higher-for-longer inflation

US life insurers take axe to FX forwards positions in Q2

Counterparty Radar: $47.5bn in G10 positions reported, a 12.9% decline from Q1

Does it matter if Tom Hayes is acquitted?

It matters to him, but changes to UK rules are meant to avoid an exact repeat of the Libor case

How operational risk managers won a battle and lost a war

Applying op risk capital to US regional banks is positive, but the SMA may not be fit for purpose

US regionals load up on cheap receive-fix term SOFR swaps

Major dealers are welcoming basis-risk-offset trades with “open arms”, say hedge advisers

Rate of cleared OTC derivatives rises at European banks

Swedbank leads dealers in secular trend towards clearing space

US-regulated IHCs retrench from VAR limits

US-regulated IHCs retrench from VAR limits

US mutual funds piled into call-selling strategies in Q1

Counterparty Radar: BlackRock, Franklin Templeton and T Rowe Price among the managers who added to single-stock positions

CFTC plan to relax MMF margin restriction sparks debate

Industry welcomes proposal to lift ban on repo-using funds as eligible IM, but some warn MMFs bring risks

Industry divided on whether Europe should delay FRTB

Most bankers prefer to keep to earlier start date, even though it puts continent out of sync with US

Rising costs prompt US borrowers to embrace compounded SOFR

Sophisticated firms with term SOFR loans increasingly willing to run basis risk to cut hedging costs

Lincoln, Global Atlantic push JPM to index options top spot

Counterparty Radar: Among life insurers, options notional grew 7% in Q1

Fed throws curveball with agency clearing surcharge proposal

Revived plan could see capital for G-Sibs’ client clearing jump 40 times, says industry body

AOCI reinclusion would push 10 US banks below capital requirements

KeyCorp, Truist and UBS Americas the worst affected by removal of paper-loss waiver

Iosco takes aim at pre-hedging with new probe

Global standard-setter intends to release results of review in third quarter of 2024

FX disruption template paused due to Isda definition clash

GFMA’s close-out framework put on hold as Isda reviews 1998 FX derivatives rule book

SEC rewrite of criteria for investor ‘group’ alarms buy-siders

Hedge funds fear it will freeze out activists and have chilling effect on everyday discussions

Nine US banks could be caught by Fed’s revised market risk rule

Expansion of trading risk charges to banks above $100bn in assets would also affect firms with minimal trading activity

Like your CSA dirty? It’ll cost more

Buy-side firms have to pay up if they want to post corporate bonds to their dealers, but prices vary

Commerz’s market RWAs up 9% on EBA technical update

Updated list of closely correlated currencies removes lower fund requirements from 197 pairs

Fed’s plan to end ‘window dressing’ stirs repo debate

Change to G-Sib surcharge could smooth year-end volatility, but some fear liquidity will worsen

Banks fear G-Sib tweak will increase capital volatility

Fed proposal would raise capital surcharge in 10bp increments

The strange effect of US clampdown on FRTB models

Ban on internal models for trading book default risk could provide some banks with unexpected capital relief

Pimco powers BNP Paribas to top of repo rankings

Counterparty Radar: French dealer grew its repurchase book by 65% in first quarter

US banks rue missed opportunity to reform G-Sib surcharge

As method 2 drifts away from Basel, critics fear comparability and competitiveness will suffer

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Fed urged to focus on resolvability in Basel III endgame

Industry roundtable suggests resolution planning should take priority over higher G-Sib charge

Conception To Capital Markets: Primary Vs Secondary

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Credit Suisse CDS blip spotlights obligations list overhaul

Isda began work on updating reference instruments before banking crisis erupted

An NAIC plan to second-guess bond ratings is ‘nonsensical’, insurers say

Proposal to create “quasi rating agency” at regulatory body sparks backlash from industry and US Congress

A CLO ‘grab’ for short-dated loans is buoying prices

Demand increases as record CLO numbers wind down reinvestments

Citi cyber chief says AI providing new weapons in hacking wars

Barron-DiCamillo also urges regulators to work with industry best practice, not against it

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Dealers commence tackling US Libor swaptions transition

Complexity of legacy book and CCP deadlines sees banks turn to new Capitalab service

EU’s late CDS transparency push triggers trader fears

Leaked proposal to shoehorn public disclosure of CDS into Mifir placates Esma, but alarms traders

Plumb job: can Basel III unblock US credit risk transfer?

Deals from G-Sibs have slowed in recent years due to regulatory confusion over capital relief

Partial relief for synthetic securitisation in final EU rules

Internal model banks will see punitive multiplier reduced, but standardised banks miss out

Refinitiv beefs up term €STR with cleared LCH swaps

Use of OIS transaction prices reflects data-sufficiency worries and euro-market desire for T+1 publication

Iosco deals hammer blow to BSBY, Ameribor

Non-compliance ruling does not equate to a ban, but may strangle use by regulated firms

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The chatbot and the quant: GPT shakes finance education

With smarter large language models, quant grads risk turning into AI-assisted slackers, writes Gordon Lee

Lessons on bank resolution, from Silicon Valley to Zurich

After the chaos of SVB and Credit Suisse, is First Republic a model for future bank rescues?

ECB zeroes in on wrong-way risk as a key lesson of Archegos

Counterparty risk experts agree with focus on “long-neglected” topic after family office default

Scope of CDS anti-fraud rule raises concerns

Funds holding bond and swaps positions at risk under new SEC rule, warn lawyers

Ice Credit makes biggest IM call since early pandemic

Aggregate peak calls were 17% higher in Q1 than previous quarter across 25 clearing houses

BNP Paribas, SocGen brace for more hits from TLTRO hedge unwinds

Duo expect combined €600m in losses after already booking €500m in first quarter

Euro Axi rate proposed as Euribor fallback

New study lays groundwork for euro version of across-the-curve credit spread index

CCPs shun central banks in liquidity buffers rejig

LCH, Ice US and CME lead the way towards commercial banks

Hedge funds boost new Tona futures market

Arbitrageurs said to be behind early trading as contracts tipped to prove useful for US buy-siders

MassMutual maintains lead in IR swaps market for life insurers

Counterparty Radar: Bank of America heads dealer rankings as sector’s notional drops 1%

EU banks balk at new market risk models backtest

EBA proposals introduce additional expected shortfall backtest for market capital risk models under FRTB

Fidelity FX forwards trades propel BofA to top dealer spot

Counterparty Radar: Bank of America leads dealer rankings in Q1 for the first time

Boaz versus BlackRock: the fight over closed-end funds

Saba founder says he never planned to be an activist investor. Now he’s battling BlackRock – again

Japan autocall curbs upend Nikkei vol

Lack of reinvestment alongside FSA review forces scramble to buy back hedges as products knock out

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​​​​​​​Banks look back in anger as FRTB revives 1990s risk test

Institutions bemoan need for parallel framework to measure portfolios’ sensitivities to market moves

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Hedge funds warn SEC dealer rule is ‘unenforceable’

Private funds say they are collateral damage of poorly drafted push to regulate PTFs

PTFs call for reform before Treasuries clearing mandate

Non-banks warn all-to-all trading relies on requiring dealers to accept ‘done away’ trades

Lawmakers join pushback over SEC dealer rule

Bipartisan letter to Treasury says proposal would damage market liquidity

One strike and they’re out: traders threaten liquidity stoppage

PTFs vow to withdraw from Treasuries market in protest at SEC registration plans

US banks load up on time deposits amid liquidity concerns

Charles Schwab leads charge with fourfold increase

MUFG’s settlement risk surges fourteenfold in Q1

Risk-weighted assets for Japanese lender’s unsettled transactions cross ¥300 billion mark

Basel’s IRRBB shock scenario update hit by US crisis

Recalibration of shocks had been touted for Q3, but wider rethink may now cause delay

After SVB downfall, EBA stress test seeks out unrealised losses

European regulator asks for data on the fair value and sensitivity of bonds and their hedges

Taking stock: putting a price on US bank regulation post-SVB

Tougher requirements could “blow a hole” of 200+bp in regulatory capital ratios – and cripple equity returns

Risk modellers navigate fearful new world of depositor behaviour

Silicon Valley Bank suffered fastest bank run in history, but how should others respond?

Regional banks face soaring term SOFR spreads

Bid/offers hit 10bp as dealers price counterparty risk into non-cleared Libor transition trades

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In a downturn, mitigation beats litigation every time

Economic shocks increase op risks for banks, but institutions can take steps to limit the danger

Synchrony and Discover lead US banks on rising net charge-offs

Executives expect trend to continue as credit normalisation proceeds apace

Liquidity modellers clash on assuming central bank support

Experts disagree on whether internal stress tests should include emergency facilities

The tweet and the trust collapse: how banks can fall on a dime

In March’s market contagion, experts see lessons in the rapid erosion of confidence

Doubts mount over BoE proposal to dilute bank liquidity rules

Before SVB collapse, UK suggested loosening NSFR reporting for smaller banks

Metropolitan Commercial Bank crypto exit leads to higher funding costs

Withdrawals by exchanges and other clients deflates non-interest-bearing deposits

Fed’s discount window comes in from the cold

BTFP offers zero haircuts on collateral, but long-term usage is not recommended

First Republic taps Fed facilities in effort to plug funding hole

Discount window and BTFP provide temporary relief as deposits slump $72bn in Q1

Athene dominates FX forwards market for US life insurers

Counterparty Radar: Morgan Stanley claims top dealer spot in $56 billion sector

Why tougher liquidity rules may not reduce the risk of bank runs

EU regulator and industry experts say LCR reform is the wrong response to Credit Suisse and SVB

Large US funds shrink exposure to top FX forward counterparties

Smaller managers increase top-dealer allocations as big beasts pull back

Legacy legal costs could stretch state support for UBS

Downside protection of Sfr9 billion must cover numerous outstanding claims against Credit Suisse

Banks look back in anger as FRTB revives 1990s risk test

Institutions bemoan need for parallel framework to measure portfolios’ sensitivities to market moves

CVA desks avoided re-hedging as Credit Suisse teetered

As credit spreads blew out, dealers opted not to adjust rates and FX risks

SVB opens floodgates on liquidity buffers debate

European regulator says HQLAs should be booked at fair value, but not everyone agrees