Posts for Tag : Culture

Conduct Risk: Compensation

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

It’s the time of year when the compensation for Financial professionals is brought sharply into focus. Regulators are driving for compensation to be linked to long term profitability and conduct, recognising that hard pay out structures and incentive schemes may encourage short termism. However significant gap risk persists. Sell side staff increasingly find that their compensation is pushed further down the line, with lengthy vesting periods, and the threat of claw backs to pay should staff be found guilty of wrongdoing (malus).

Conduct Risk: Colloquial Trading Practices

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

Our customers constantly ask us where the next area of focus for Regulators will come from. Our predictions are that regardless of the product or market, poor conduct will be at its heart. The Fair and Effective Markets Review devotes a large part of its scope to the subject of Conduct Risk. Conduct Risk emerges from a number of powerful drivers which are challenging to define, recognise and control. A key challenge Control Functions face is how to manage Conduct Risk effectively without constraining Front Office innovation and creativity.

Courtsiders at Tennis – why not the financial markets?

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

Equity research under pressure #research #bankculture

William Vincent, Senior Consultant, william.vincent@skadilimited.com

UBS has been caught up in a political row in Australia after it produced a research report on the privatisation of a New South Wales electricity utility, a deal in which it is acting for the seller. What happened is that UBS put a report entitled “Bad for the budget, good for the State”, then changed the title to, simply, “Good for the State”. The opposition Labor (sic) party is claiming that this was the result of direct interference from the ruling Liberals.

Issuance Issues #bankculture #issuance

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

The Big Boy Defence #bankculture

Nicolas Corry

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

Press reports of the deal Standard and Poors have reached with Federal and State Agencies shines a light on the challenge faced within the Financial Industry to bring about cultural change. Paul Barrett writing for Bloomberg describes one of the defences S&P’s lawyers used early in the case, making the blunt observation: “The company said that its claims to objectivity and independence were “mere puffery,” the sort of marketing blarney that sophisticated investors don’t believe.”

Skadi Limited releases trader funding alert #traderfundingrisk

Nicolas Corry

Nicolas Corry, Managing Director, nicolas.corry@skadilimited.com

On Monday, the Russian Central Bank took bold action, raising interest rates by the most in 16 years. Elsewhere around the Emerging Markets risk premia rose, with a knock on effect to volatility. Interest Rate rises of this kind were witnessed in 1997 and 1998 when Central Banks’ sole objectives were stabilising currencies. What gives us grave concern is that Trader Funding Risk remains, in our eyes, a risk for many banks.

Ammunition for the regulation industry

William Vincent, Senior Consultant, william.vincent@skadilimited.com

The December BIS Quarterly review contains an interesting piece which analyses the performance since 2007 of the three main classes of banks – retail funded, wholesale funded and trading led.

 

Its broad conclusions are:

 

The burden on bank management gets ever heavier

William Vincent, Senior Consultant, william.vincent@skadilimited.com

Mark Carney’s words in Singapore are enough to send a chill down the back of any senior manager in any bank. He said that the succession of scandals:

“mean it is simply untenable now to argue that the problem is one of a few bad apples. The issue is with the barrels in which they are stored”.

HSBC’s risk aversion warning highlights challenge facing Auditors

William Vincent, Senior Consultant, william.vincent@skadilimited.com

Bank Chairmen tend to be diplomatic people, so recent comments made by Douglas Flint, HSBC’s Chairman, are truly remarkable.