Risk Management

What Happens If the Regulatory ‘Playing Field’ Is Not Level?

2:27 (Part 4 of 14)

Given that regulatory guidance is being developed by global regulators and policy makers to ensure the stability of global financial institutions but ultimately will be implemented at the national level, there are concerns about these standards being realized in a consistent way from one jurisdiction to another. “Banks grow globally and they die on a national basis,” says Ernst & Young’s Bill Schlich. “When they die is when … the rules that each different country imposes become very important.”

Also posted in Governance, Managing Regulations, Regulatory Arbitrage, Video 5: SIFIs Rules Are Recasting Global Banking |

How Will Additional Capital Controls Affect SIFIs?

3:15 (Part 5 of 14)

Increased capital requirements are lowering the return on equity for many global banks. However, stricter rules may help the “biggest of the big” financial institutions to be viewed as less risky or as “premier counterparties.”

Also posted in Governance, Managing Regulations, Regulatory Arbitrage, Video 5: SIFIs Rules Are Recasting Global Banking |

Risk-weighted Assets – What Happens When Enforcement Differs by Region?

4:35 (Part 6 of 14)

In addition to stricter capital requirements, SIFIs will have to manage risk-weighted assets. The dilemma for regulators is how much discretion to allow banks in assigning different levels of risk to their assets. There also is some tension between banks and different geographies, such as the U.S. and Europe, in terms of whether they are risk-weighting their assets in the same way.

Also posted in Governance, Managing Regulations, Regulatory Arbitrage, Video 5: SIFIs Rules Are Recasting Global Banking |

The Tension between ‘Too Big to Fail’ and Moral Hazard Continues

7:05 (Part 7 of 14)

On the one hand, SIFI designation can restrict banks with tighter rules. On the other hand, the designation could cause some investors and counterparties to view a SIFI as more likely to get bailed out if trouble arises. Regulators continue to struggle to find the right balance.

Also posted in Governance, Lessons Learned from the Financial Crisis, Managing Regulations, Regulatory Arbitrage, Video 5: SIFIs Rules Are Recasting Global Banking |

Will SIFI Designations Succeed?

4:52 (Part 8 of 14)

Many observers see the SIFI designation process as an improvement over how risks were governed in the past. Ideally, a fully functioning SIFI regime would provide a seamless regulatory process across borders. But variations in how different jurisdictions might handle an actual crisis mean that much uncertainty remains.

Also posted in Governance, Lessons Learned from the Financial Crisis, Managing Regulations, Regulatory Arbitrage, Video 5: SIFIs Rules Are Recasting Global Banking |

The Business Impact and Cost of Resolution and Recovery Plans

7:00 (Part 9 of 14)

Living Wills – or Recovery and Resolution Plans – are costly and time-consuming to prepare. But banks are gaining important benefits from the exercise, including a deeper understanding of their organizations, particularly when it comes to capital and liquidity issues.

Also posted in Governance, IT Investments, Lessons Learned from the Financial Crisis, Managing Regulations, Video 5: SIFIs Rules Are Recasting Global Banking |

A New Category of Banks Beyond SIFIs

3:19 (Part 10 of 14)

The largest of large banks – perhaps the top five global banks – could face onerous restrictions as regulators try to cap the size of universal institutions. Will creating this “last bucket” category dim the outlook for bank mergers and acquisitions?

Also posted in Governance, Lessons Learned from the Financial Crisis, Managing Regulations, Video 5: SIFIs Rules Are Recasting Global Banking |

The Outlook for Mergers and Acquisitions

3:13 (Part 11 of 14)

Are there too many financial institutions in the world competing for existing business? Some observers say yes. Yet, potential restrictions on mergers and acquisitions to prevent the creation of megabanks could make consolidation more difficult.

Also posted in Banking: Future Growth Models, Governance, Lessons Learned from the Financial Crisis, Managing Regulations, Video 5: SIFIs Rules Are Recasting Global Banking |

Recommendations for CEOs of Global Banks

5:27 (Part 13 of 14)

Key considerations for bank CEOs include understanding more deeply their customers and the services they need, identifying growth opportunities and using technology to strengthen their firms’ ability to adapt nimbly to changing conditions.

Also posted in Banking: Future Growth Models, Customer Focused Products, Emerging Markets, Governance, IT Investments, Lessons Learned from the Financial Crisis, Managing Regulations, Retail Banking, Video 5: SIFIs Rules Are Recasting Global Banking |

Identifying Future Risks

3:31 (Part 14 of 14)

As banks increasingly rely on automated systems to meet customer needs, security issues around information technology will become critical. The relationship between risk and executive compensation models also will be an area of greater focus.

Also posted in Governance, Innovation Revisited, IT Investments, Lessons Learned from the Financial Crisis, Managing Regulations, Transparency, Video 5: SIFIs Rules Are Recasting Global Banking |

Financial Innovation

2:53 (Part 6 of 10)

Financial innovation is seen as having worsened the financial crisis. But there are many other instances where it has brought huge benefits to consumers and developing economies. How can banks align financial innovation with customer needs and expectations?

Also posted in Customer Focused Products, Emerging Markets, Innovation Revisited, Retail Banking, Video 4: Banking Takes a New Look at Innovation |

Repositioning Risk Management

2:25 (Part 1 of 7)

How should banks reposition risk management within their governance structure to empower themselves and to satisfy regulators?

Also posted in Governance, Transparency, Video 3: Putting Together the Global Banking Puzzle |

Putting Together the Global Banking Puzzle

32:54 (Full video)

Given the widespread shake-up in banking regulations at all levels, global bankers face a jigsaw puzzle-like set of challenges, including a repositioning of risk management, a need for technology investments to satisfy regulators and customers, and new Tier I capital requirements. In this series of video clips, professionals from Wharton and Ernst & Young offer their views on these and related issues.

Also posted in Banking: Future Growth Models, Emerging Markets, Managing Regulations, Video 3: Putting Together the Global Banking Puzzle |

Are Markets Pricing Re-regulation into Equity Values?

3:22 (Part 1 of 8)

Should banks shore up balance sheets with common stock before Dodd-Frank and Basel III reduce their return on equity, or are markets pricing in this re-regulation?

Also posted in Managing Regulations, Transparency, Video 2: Regulatory and Growth Challenges Face Global Banks |

Openings within the Chinese Banking Market

2:46 (Part 7 of 8)

Watch for a growing business for financial markets from companies in China looking to fund from outside China.

Also posted in Banking: Future Growth Models, Emerging Markets, Video 2: Regulatory and Growth Challenges Face Global Banks |

Responding to the New Wave of Re-regulation

3:37 (Part 1 of 11)

As the finer details of bank regulation evolve, global banks should concentrate on understanding their core businesses, where they are making money and where profits are most likely to come from in the future.

Also posted in Banking: Future Growth Models, Lessons Learned from the Financial Crisis, Managing Regulations, Video 1: Banking: The Road Ahead |

Global Banks Face Increasing Complexity

3:08 (Part 4 of 11)

Is the increasing — often overlapping — re-regulation effort by various countries, regions and international bodies a recipe for regulatory fragmentation and confusion?

Also posted in Banking: Future Growth Models, Video 1: Banking: The Road Ahead |

How Level Is the Playing Field?

2:36 (Part 5 of 11)

It will take some time for the banking industry to sort out how all the new regulations will be implemented. Expect the regulatory playing field to be uneven for a time, perhaps offering opportunities for regulatory arbitrage.

Also posted in Banking: Future Growth Models, Lessons Learned from the Financial Crisis, Regulatory Arbitrage, Video 1: Banking: The Road Ahead |

Regulatory Impact on Return on Equity and Dividends

4:51 (Part 6 of 11)

Expect returns on equity to go down, the cost of capital to go up and margins to shrink. Banks will have to adapt. There is a lot of interest in migrating to businesses that require less capital and liquidity, and that are more fee based. But what does that mean for banking when it comes to credit creation and intermediation.

Also posted in Banking: Future Growth Models, Lessons Learned from the Financial Crisis, Regulatory Arbitrage, Video 1: Banking: The Road Ahead |

What Role Might CoCos Play?

5:58 (Part 10 of 11)

Contingent Convertible Bonds (CoCos) can offer needed flexibility for banks and investors alike. But some fundamental challenges will need to be worked out, including the right amount to issue, how many will convert to equity, and what will trigger a shift into equity.

Also posted in Banking: Future Growth Models, Lessons Learned from the Financial Crisis, Video 1: Banking: The Road Ahead |