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Is Strategic Risk an Operational Risk?

Banking regulators recognize ‘Strategic Risk’ as a real risk, but shy away from defining it and setting standards to manage it.

Where does Strategic Risk fit in the risk universe? And why are regulators so frightened of it?

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Let’s Talk About Macro Culture

Let’s start with a question. ‘Does a trader from a Swiss bank on a trading floor in Tokyo have more in common with a trader in the same market in a different bank in London or New York than (say) a teller in a branch in their bank in Switzerland?’

And another question. ‘Does an engineer working for BP have more in common with an engineer from another company working on the same project than (say) an accountant from BP in London?’.

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JPMorgan – Yet another Conflict of Interest Problem

So much for shiny, new Codes of Conduct.

Tidying up before the end of the financial year, JPMorgan Chase and the Securities and Exchange Commission (SEC) and the Futures Trading Commission (CFTC), agreed a fine of $307 million on the company and unusually an admission of wrongdoing [1].
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Barclays – Another Code of Conduct failure!

Another day, another banking scandal!

Just this week, the New York State Department of Financial Services (NYDFS) hit Barclays bank with a huge fine of US$ 150 million, as a result of the bank admitting it had “engaged in certain misconduct regarding the trading of benchmark foreign exchange (“FX”) rates from at least 2008 through 2012 in violation of the New York Banking Law and other laws” [1].

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It’s Grimm for Volkswagen

Schadenfreude is an emotion that many non-Germans are indulging in at the news that Volkswagen is not the squeaky clean corporation that everyone believed it was.
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A festering SORE

On September 11th, twelve ‘Too Big To Fail’ (TBTF) banks reached an in principle settlement in a class action lawsuit to resolve investor claims that the banks conspired to fix prices and limit competition in the market for credit default swaps (CDS).

The historic settlement is estimated to cost some $1.865 billion which, as the claimants’ lawyers said [1], was “one of the largest antitrust class-action settlements” in the financial area.
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How many Traders does it take to change a LIBOR?

Almost 10 years after the manipulation of the LIBOR benchmark was first detected to have happened (although there is ample evidence that misconduct had been going on for years prior to that) the first LIBOR trader, Tom Hayes, appeared in court this week [1].

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Too Big to Care – BNY Mellon?

In April 2015, two UK subsidiaries of the Bank of New York/Mellon (BNY Mellon) were fined some £126 million for failing to “consider properly the interests of their clients”. BNY Mellon is the largest custodian bank in the world and one of the world’s Systemically Important Banks (SIB).
But has BNY Mellon become Too Big to Care?

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HSBC – Board-Level People Risk

Both the Chairman and CEO of the banking behemoth HSBC have recently appeared before the Treasury Committee of the UK Parliament in connection with the Swiss Tax Scandal [1]. The bank’s Board had previously issued an apology for the scandal to its shareholders and the public in general [2].

The argument made by the HSBC Board is basically “We didn’t know, how could we? We are a huge organization. It would not happen today”.

Ignorance is bliss.

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Does the S&P Settlement change EVERYTHING?

The S& P saga rumbles on. Having been hammered by the US Securities and Exchange Commission (SEC) in January [1], S&P has received a knock-out blow, and a $1.375 billion fine, from the US Department of Justice and 20 State governments [2]. And in what might the first of many private actions, S&P also reached a separate $125 million settlement with the huge pension fund California Public Employees’ Retirement System (CALPERS) [3].

What has received little publicity, however, are the implications of the S&P settlement with regard to Corporate Governance, in general, and Codes of Conduct in particular.
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