Margin savings, research and Fed’s Powell on Libor and clearing

Goldman swaps assets drop $140bn after margin change
Move follows guidance from US regulators; no word from Goldman on capital impact

Front-office backlash: the EU gets tough on research unbundling
Three national EU regulators say front-office content can still be Mifid II research

The future of risk in 10 interviews: volatility, liquidity and tech
We profile Fed’s Powell, JP Morgan CRO, Bridgewater co-CEO and others

COMMENTARY: The road behind and the way ahead

This week and next week, we are marking the 30th anniversary of Risk by publishing 10 interviews with leading regulators, traders and risk managers. Four have been published so far: Prudential’s Nick Silitch discusses the blindspots in Basel III; UBS’s George Athanasopoulos looks ahead to the prospects of hedging by machine; Bridgewater’s Eileen Murray praises the firm’s ‘radical transparency’ policy; and Jerome Powell, now in line to be the next US Fed chair, talks about Libor reform, repo and clearing. (The full list of interviews, including those due to go out next week, is here.)

Given the range of speakers, the ground covered is correspondingly wide. But there are some common themes. Dealing with the last pieces of debris from the 2008 crisis is still an important job: bringing in a successor to the irrevocably discredited Libor benchmark rate, handling the problem of replacing the advanced measurement approach to operational risk capital, and implementing the Mifid II financial market reforms are all concerns for our interviewees.

They look forward as well – fintech is high on the agenda, with advances in artificial intelligence and machine learning offering prospects for improved hedging and more comprehensive risk management. And some also highlight future dangers: the continued neglect of operational risk despite its proven ability to bring down entire institutions; the question of whether the industry is prepared for a sudden end to its long summer of low volatility and high liquidity; the systemic risks posed by well-intentioned reforms; and the unknowable political risks involved in the fast-growing Chinese financial sector and the UK’s impending exit from the European Union.

STAT OF THE WEEK

Bank Austria, part of the UniCredit group, was ordered to pay €790 million ($919 million) in retroactive fees charged for transferring staff to the state pension scheme – the largest operational risk loss in October 2017. On October 12, the Austrian Constitutional Court ruled an increase in the fee should apply retroactively.

QUOTE OF THE WEEK

“The Secured Overnight Financing Rate [the planned Libor replacement benchmark] is going to be published in 2018. The sooner we have that number, the sooner things can happen, and nothing can happen until that exists. We can’t have any markets, we can’t work out what things are going to look like and we can’t develop anything” – William De Leon, Pimco