Manoj_Jain's blog

What are the unique risks that domestic PEPs may pose

The Wolfsberg Principles gives a rule of thumb of one year after giving up a political function but some other guides give a two year period and individual practice may vary from one financial institution to another.

Basel III - Impact on Indian Banks

Although, under Basel II, Indian Banks are adequately capitalized well above the minimum regulatory threshold of 9% Capital Adequacy Ratio, my study has highlighted the fact that in case Basel 3 changes get implemented in India, from the stipulated date in 2012, their would be substantial reduction in the Tier I Capital of Indian Banks with the % reduction in Tier I capital as high as 25% for IDBI,Central Bank, while a reduction range of 10-15% for SBI, PNB,Bank of India, Union Bank ICICI,Kotak,Yes Bank etc.

Typical Top 10 risks for Insurance Company

To provide an insurance perspective, here is the list of top risks that are usually identified at an insurance company after a detailed risk assessment session.

Regulatory Changes/Actions
Customer relations/Misselling
Key skills attrition
Investment Performance
New Products approval
BCP/Disaster/Crisis situations
Inadequate IT capability
Sales & Distribution limitations
Model risk

Canada’s Bank Regulator Targets “Operational Risk” in 2013

Quoted in the Wall Street Journal recently, "Canada’s top financial watchdog intends to press the big banks next year on how well prepared they are to deal with so-called “operational risk”–one of the most difficult risks to protect against."

We now know that operational risk is a major risk factor, a silent killer in its own way. It does not damage a limb, or an organ, it goes for the kill straight away.

Largest Financial Services Fines

So, who is the top on the list of Regulatory penalties and Fines. IT is none other than HSBC. It was fined US$ 1.9 Billion on Money Laundering lapses. ITs activity in Iran resulted it dear. I would not say that the fine was a surprise given that if HSBC chose to operate in Iran, it was very well aware of this lapse.

Next comes the Libor manipulation fine for UBS. Infact, Libor related fines will continue for sometime. we can expect this list to become Top 100 fines soon.

Overall, most of the fines relate to operational risk, Compliance issues and AML/KYC.

Social Media Risk and Reputation Risk - How one feeds into the other

Reputation and Reputation Risk

It is a well known fact that possibly one of the most valued asset for any organisation is its reputation. The brand that has the ability to generate future revenue business for the entity. Firms with larger reputation values find it easier to find customers and sell to these customers. So, we can freeze on one concept as part of this discussion. The concept that Reputation is the most important element of a company and loss of reputation is equivalent to loss of potential business and even the cause of bankruptcy.

Social Media

Flash Crash = Fat Cash

Flash Crash = Fat Cash

So, we all know Flash crash it. Ask anyone and the answer you are likely to get back is that it is something that goes wrong due to which stock price crash or increase significantly and reverse out at the same speed. Flash crash are usually due to erroneous trades or "Fat Finger errors" where trades that were not intended are released to the Stock exchange and executed.

But this discussion is not about why it happens, or what happens, but rather what are the consequences of it.
Three obvious consequences are as follows
1. Media enjoys it and publicises it a lot

Risk Managers in great demand - Growth to exceed 40% annually

The demand for risk managers is growing and likely to continue to grow for the next 5-10 years. More and more companies are focusing on risk management services.

"The demand for risk managers has picked up in the last 3-4 years. Banking and financial services sector, telecom are looking into investing seriously on risk managers, boosting the demand for such professionals by at least 30-40 per cent annually," Hill & Associates (India) Country Manager Shalini Chakravorty told reporters.

Money Laundering Regulations are simply Black and White

We have been reading about a lot of Money Laundering scrutiny recently. HSBC is in depp trouble and had to pay massive penalties. Now we have Standard Chartered Bank accused of non compliance with US OFAC regulations by supporting Iranian businesses conduct transactions out of SCB's NY office.

While these are serious situations, one thing is pretty clear. There is a distinction between the two instances.

Living Will for the Large Banks...They surely need given the recent suicidal developments

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Federal Reserve submit resolution plans annually to the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). Each plan must describe the company's strategy for rapid and orderly resolution under the Bankruptcy Code in the event of material financial distress or failure of the company.

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