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Financial crises over the past decade, along with product innovation, have made liquidity risk more important than ever. The euro area crisis is keeping liquidity in the headlines, with the struggles of some European banks to maintain short-term funding prompting central bank liquidity injections. “It’s a key risk factor”, was the view of Alistair Lowe, chief investment officer for active equities at State [...]
Jacques Longerstaey was part of the team that invented valueat-risk at JPMorgan in the 1990s, a venture that was spun off to become Riskmetrics Group. Longerstaey went on to work at Goldman Sachs Asset Management, Putnam Investments and most recently State Street Global Advisors, where he was chief risk officer until October. He tells Bloomberg’s Nicholas Dunbar about [...]
Intesa Sanpaolo SpA’s derivative contracts with the Italian government almost quadrupled in value during the first half of 2012, leading European banks’ growing swap exposure to the euro region’s second-most-indebted nation. The increase comes at a time when U.S. banks have been reducing derivative positions with Italy, according to filings. Intesa had contracts with Italy worth 3.9 billion euros ($5 billion) [...]
Pension funds that use swaps to hedge inflation-linked payments may be forced to post more collateral should the U.K. adopt proposals to lower a benchmark inflation measure. A reduction in the Retail Price Index would reduce the value of the swaps and increase the collateral required by bank counterparties. “This is a step change that will have an unintended effect on schemes that are fullyhedged”, according to Jeremy Stone, chairman of the trustees [...]
The 10 biggest U.S. money market funds boosted holdings of Japanese bank securities to $79 billion at the end of August, more than any other country, as they shift money to Asia and away from Europe. Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc., Japan’s three biggest banks, attracted $3.5 billion from the funds, continuing [...]
Reinsurance companies that back their liabilities with long-term bonds may suffer from a rise in interest rates, according to a report from Swiss Re AG. Reinsurers such as Scor SE that invest in short-term bonds are better placed to invest in higher-yielding assets that would boost returns should rates increase, analysts say. Reinsurers face competitive pressure [...]
The five largest Swiss insurers may benefit from a $700 million capital boost after Swiss regulator Finma announced a more lenient solvency calculation for insurers on Sept. 3. The change will allow insurers to use the swap rate and not government bond yields as the reference for discount rates. Investor demand for Swiss assets drove government bond yields lower, causing a decline in Swiss insurer solvency. Read more>>
Swiss Life Holding AG sold 7.8 billion Swiss francs ($8.1 billion) of euro-area government bonds and bought U.S., Canadian and U.K. bonds on concerns that the single currency might break up, making euro-Swiss franc exchange rate hedges “inefficient” according to a second-quarter presentation. While the bulk of Swiss Life’s 95 billion Swiss franc insurance liabilities are denominated in the insurer’s domestic currency, the country’s 92.6 billion Swiss franc bond market is too small [...]
By Nicholas Dunbar Regulators may look to increase the capital that banks have to hold against operational risk, after months of algorithmic trading glitches, regulatory probes into money laundering, market manipulation and admissions of weak risk governance, analysts said. “It wouldn’t be a surprise if regulators increased operational risk capital charges in the light of [...]
