Commentary

Commentaries on external developments in risk management and financial services


IFRS 9 Expected Credit Loss and Risk Capital

The new IFRS 9 financial reporting standard IFRS 9 (and the closely related CECL) is a brand new financial reporting standard developed and approved by the International Accounting Standards Board (IASB). Strictly speaking IFRS 9 concerns only the accounting and reporting of financial instruments (e.g. bank loans and similar credit […]


A Risk Agnostic Approach to European Safe Bonds (ESBies) Tranching

What are European Safe Bonds? While the creation of the eurozone was a landmark of the European integration process, the financial crisis highlighted that the eurozone remains an incomplete design which can lead to unpredictable and adverse situations in the event of a (the) next major crisis. One of the […]


Four individuals that can look straight into your eyes

Here are four individuals that can look straight into your eyes * Torvalds developed the #linux operating system, the software engine now powering anything from the tiniest #raspberrypi to the scariest supercomputer. Humanity’s best guarantee that the digital era remains an equal playing field * Mullenweg developed the #wordpress blogging […]


If programming languages were human languages which one would be which?

If programming languages were human languages which one would be which? #python -> English. Simple and easy. Spoken everywhere, from lowly scripts, to web servers to #datascience. You’re never stranded if you know it #rlang -> German. Rigorous. Capable. Sometimes a bit convoluted. Not spoken much outside the Germanic world […]


Guiding principles for a viable open source operational risk model   New !

Guiding principles for a viable open source operational risk model (OSORM) Such a framework: Must avoid formulaic inclusion of meaningless risk event types (e.g., legal risk created by the firm’s own management decisions) or any risks where the nature and state of current knowledge does not support any meaningful quantification. […]


How to Stress Test Financial Weapons of Mass Destruction

How to Stress Test Financial Weapons of Mass Destruction In recent decades we have been collectively spared the haunting images and existential anxiety provoked by the sight of detonating nuclear weapons for testing purposes – not to mention the increased levels of radiation in the atmosphere and other side-effects. This […]


If banks were airlines

If banks were airlines Ever since the scary turbulence of the Great Financial Crisis it has been instructive and illuminating to compare the travails of the financial industry with the state of other industries, especially those more down to earth, also known as real world industries. The automotive industry was […]


Lehman, Brexit, De-Regulation and the future of EU fintech

Lehman, Brexit, De-Regulation and the future of EU fintech The decision by the citizens of the United Kingdom to vote against continuing membership of the European Union (#brexit) will have wide ranging repercussions on many facets of the European (and even global) economic system. As of early 2017, we see […]


Transparency, standards, collaboration key to regaining trust in financial services

Transparency, collaboration key to regaining trust in financial services In banking, confidence is the first order of business Maintaining the confidence of market participants, clients, shareholders, regulators and governments is uniquely important for the financial sector. Trust is, quite literally, the real currency. Yet it is a truism that confidence […]


We are hiring artificially intelligent bankers

Job Specification for an Artificially Intelligent Banker The Artificially Intelligent Banker is responsible for the overall management of the AI2H (AI to Human) lending department. The following requirements (job specifications) were determined by extensive data mining analysis and derived from the job description as crucial for success in the Artificially […]


Eternal Risk Management One-Liners

Eternal Risk Management One-Liners A single line is sometimes the only thing that separates you from disaster Do you know of any good one-liners that saved the day at one point? (Update May 2017) We moved the list to the Open Risk Manual for easier editing and contributions Send us […]


Fintech, embrace your inner regulator!

2017 is shaping to be the year of “#regtech“, aka new technology startups setting up digital shop to help the financial services sector cope with its heavy “regulatory burden”. But what is “regulation”? Why is it a burden and how does it relate to real risks and risk management? The […]


Top 10 Risk Manual Articles

Top 10 Risk Manual Articles The current list of Top 10 Risk Manual Articles, sorted by reader popularity covers a range of topics in risk management. External Fraud, (Operational Risk) Herfindahl-Hirschman Index, (Concentration Risk) Hannah-Kay Index, (Concentration Risk) Concentration Ratio, (Concentration Risk) Granularity Adjustment, (Concentration Risk) Business Execution, (Operational Risk) […]


The Atlas of Bad Risk Management

The Atlas of Bad Risk Management. The Atlas was discovered recently in archeological work studying pre-crisis civilizations. Despite the obvious wear and tear, all key risk failure areas have been preserved. We note the remarkable diversity of organizational forms and economic structures. Most interestingly, there is even an uncharted territory […]


Reducing variation in credit risk-weighted assets – The benign and vicious cycles of internal risk models

Reducing variation in credit risk-weighted assets – The benign and vicious cycles of internal risk models March 2016 wasn’t a good month for so called “internal risk models”, the quantitative tools constructed by banks for determining such vital numbers as how much buffer capital is needed to protect the savings […]