Have risk managers really been doing their jobs properly? According to many they certainly have not. I came across this interesting item on the sum2llc Blog. It is certainly worth a read.
Click on the post title or the link below.
http://sum2llc.wordpress.com/2009/09/28/day-of-atonement-al-chet-for-risk-managers/
Monday, 5 October 2009
Sunday, 4 October 2009
The Bank of England and Payment System Oversight
Central banks’ involvement in the oversight of payment systems arises from their core role as the systems’ settlement bank, providing the ultimate settlement asset, central bank money. This gives central banks a very direct interest in any potential systemic risks inherent in such systems. More broadly, payment systems are crucial to the functioning of the UK banking system and thus the wider financial system and economy, and it is therefore important that they operate in a way that contains risks to the system as a whole to an acceptable level. If payment systems are operated only in the narrow self-interest of their member participants, they may tend to underinvest in the mitigation of those risks. This can be countered by ensuring a broader risk perspective through central bank oversight.
This was recognized in the framework set out in the Memorandum of Understanding (MoU) with HM Treasury and the Financial Services Authority (FSA) in 1997.(1) The Banking Act 2009(2) puts the Bank of England’s oversight of payment systems onto a statutory footing.
On a recently published paper the Bank of England provides a brief overview of the relevant provisions of the Act and describes how the Bank intends to reflect these provisions in its approach to oversight. It also invites comments in relation to the draft Principles the Bank is intending to apply to recognized payment systems once the new framework is in place.
The full Bank of England paper may be downloaded at;
http://www.bankofengland.co.uk/publications/other/financialstability/oips/oips090928.pdf
This was recognized in the framework set out in the Memorandum of Understanding (MoU) with HM Treasury and the Financial Services Authority (FSA) in 1997.(1) The Banking Act 2009(2) puts the Bank of England’s oversight of payment systems onto a statutory footing.
On a recently published paper the Bank of England provides a brief overview of the relevant provisions of the Act and describes how the Bank intends to reflect these provisions in its approach to oversight. It also invites comments in relation to the draft Principles the Bank is intending to apply to recognized payment systems once the new framework is in place.
The full Bank of England paper may be downloaded at;
http://www.bankofengland.co.uk/publications/other/financialstability/oips/oips090928.pdf
Saturday, 3 October 2009
Fraud and its Control – Get you Knowledge up to Speed
Fraud has been on many people’s minds this past year or so. Bernard Madoff in the US and Satyam in India are just two cases that come easily to mind. Are you able to recognize fraud in your organization? Do you understand the drivers of this specific form of Operational Risk?
“How to loose $360 million” is a case study taken from our extensive library of Operational Risk events. Shortly we will be offering a brand new training course aimed at understanding, recognizing and combating fraud. Watch blog and our Website (www.citadeladvantage.com ) for details.
In the meantime, for a taste of some of the material covered please view our short presentation.
“How to loose $360 million” is a case study taken from our extensive library of Operational Risk events. Shortly we will be offering a brand new training course aimed at understanding, recognizing and combating fraud. Watch blog and our Website (www.citadeladvantage.com ) for details.
In the meantime, for a taste of some of the material covered please view our short presentation.
The Bank Model Is Dead
Chris Skinner did an intersting presentation at a conference this week. In essence he says that the traditional model of banking is dead, replaced by a new one. The dead model is the one where 80% of costs of retailing are in bank branches. Branch based banking is dead. Branches however are still very much alive. What is needed is a new focus. See his presentation here.
The Bank Model Is Dead
View more documents from Chris Skinner.
Wednesday, 16 September 2009
Is SWIFT Succumbing to the “Dinosaur” Syndrome?
By Stanley Epstein - Principal Associate at Citadel Advantage
The news item regarding impending staff a cut being ‘inevitable’ as SWIFT contends with declining volumes” (FINEXTRA News, 14 September 2009) triggered some wider thoughts that I would like to share.
SWIFT’s need to restructure and to contain operating costs is not in my view simply a result of the financial crisis and the downturn in message volumes. There is also a substantial element of the “dinosaur” syndrome in these events.
If SWIFT wants to succeed in the efficiencies that it seeks there are three basic issues that it needs to urgently address.
1. Speed up innovation – SWIFT is too slow to innovate. There are some great changes in the SWIFT pipeline but the problem is that they take forever to develop and implement. A competitive banking industry has rightfully not got the patience for this.
2. Get away from the technical focus - SWIFT messaging and its processing is a technical issue, but the market that it serves is driven by business requirements. From my own experience the business area is oft-times totally neglected. The business champions in the industry often do not really understand what SWIFT can do for them. Similarly the “translation” and melding of the technical and the business aspects is left to the banks to do. The banks are no good at this. If SWIFT wants banks to uses their solutions they need to actively show the banks how this can be done.
3. Temper the bureaucracy - SWIFT is run by (1) too many bureaucrats (who really don’t have an appreciation for the role that SWIFT ought to be playing) and (2) too many interbank bodies (who’s agenda’s are often shaped by the business interests of the financial institutions involved).
I am a great believer in and supporter of SWIFT – I have been since its birth way back in the 1970s – so please don’t take my thoughts amiss.
The news item regarding impending staff a cut being ‘inevitable’ as SWIFT contends with declining volumes” (FINEXTRA News, 14 September 2009) triggered some wider thoughts that I would like to share.
SWIFT’s need to restructure and to contain operating costs is not in my view simply a result of the financial crisis and the downturn in message volumes. There is also a substantial element of the “dinosaur” syndrome in these events.
If SWIFT wants to succeed in the efficiencies that it seeks there are three basic issues that it needs to urgently address.
1. Speed up innovation – SWIFT is too slow to innovate. There are some great changes in the SWIFT pipeline but the problem is that they take forever to develop and implement. A competitive banking industry has rightfully not got the patience for this.
2. Get away from the technical focus - SWIFT messaging and its processing is a technical issue, but the market that it serves is driven by business requirements. From my own experience the business area is oft-times totally neglected. The business champions in the industry often do not really understand what SWIFT can do for them. Similarly the “translation” and melding of the technical and the business aspects is left to the banks to do. The banks are no good at this. If SWIFT wants banks to uses their solutions they need to actively show the banks how this can be done.
3. Temper the bureaucracy - SWIFT is run by (1) too many bureaucrats (who really don’t have an appreciation for the role that SWIFT ought to be playing) and (2) too many interbank bodies (who’s agenda’s are often shaped by the business interests of the financial institutions involved).
I am a great believer in and supporter of SWIFT – I have been since its birth way back in the 1970s – so please don’t take my thoughts amiss.
Sunday, 13 September 2009
US Mobile Banking Report Cards - Some Banks Are Failing
Mobile banking in the US is not a bed of roses and some banks are not really making the grade there as Matt Hamblen writing in Computerworld reports.
Saturday, 12 September 2009
Are We Heading Into Chaos – Again?
By Stanley Epstein - Principal Associate, Citadel Advantage Ltd.
This is the time of year when the financial services industry, or at least the “techie” element heads off to some exotic venue for the annual SWIFT jamboree. SWIFT as we all know is the global financial messaging operator. And as part and parcel of what they do, they have also created the messaging standards on which the financial world to a very large degree depends.
Of course there are huge exceptions, especially in the United States where most banks are not members of SWIFT. But in the rest of the world any bank that is worth its salt is a part of this very important element of the financial system’s operating backbone.
So with this as a background, I am somewhat taken aback to read that the international financial messaging standard which has become so ubiquitous over the past three decades is under “attack” for want of a better word.
Banks are, by all accounts, moving to back to proprietary systems for many of their new messaging requirements. There are many reasons for doing this; existing messaging systems can’t meet specific unique requirements, development cycles for new messaging standards are too long, existing services are too expensive (given the surge in message numbers), platform migrations are too complicated or not yet budgeted for and so-on. Now, I don’t want to get into the pros and the cons of all these issues. Everyone has surely got their own very valid points of view on this. And this question of the whys and the wherefores surely has material for many, many debates.
What does concern me however, is the fact that perhaps we are now plunging headlong into an ever increasing period of infrastructural chaos because of these actions. Are banks short term goals clouding the bigger picture?
If the financial industry as a whole looses this one – and we head into a new period of multiple, competing and incompatible messaging standards – we face years of soaring operating costs and other miseries as we try to bridge these developing operating gaps in the future.
My own view is “please let’s think this through properly before we condemn the next two decades of banking to immense problems”.
What are YOUR thoughts?
This is the time of year when the financial services industry, or at least the “techie” element heads off to some exotic venue for the annual SWIFT jamboree. SWIFT as we all know is the global financial messaging operator. And as part and parcel of what they do, they have also created the messaging standards on which the financial world to a very large degree depends.
Of course there are huge exceptions, especially in the United States where most banks are not members of SWIFT. But in the rest of the world any bank that is worth its salt is a part of this very important element of the financial system’s operating backbone.
So with this as a background, I am somewhat taken aback to read that the international financial messaging standard which has become so ubiquitous over the past three decades is under “attack” for want of a better word.
Banks are, by all accounts, moving to back to proprietary systems for many of their new messaging requirements. There are many reasons for doing this; existing messaging systems can’t meet specific unique requirements, development cycles for new messaging standards are too long, existing services are too expensive (given the surge in message numbers), platform migrations are too complicated or not yet budgeted for and so-on. Now, I don’t want to get into the pros and the cons of all these issues. Everyone has surely got their own very valid points of view on this. And this question of the whys and the wherefores surely has material for many, many debates.
What does concern me however, is the fact that perhaps we are now plunging headlong into an ever increasing period of infrastructural chaos because of these actions. Are banks short term goals clouding the bigger picture?
If the financial industry as a whole looses this one – and we head into a new period of multiple, competing and incompatible messaging standards – we face years of soaring operating costs and other miseries as we try to bridge these developing operating gaps in the future.
My own view is “please let’s think this through properly before we condemn the next two decades of banking to immense problems”.
What are YOUR thoughts?
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