Beware the Ides of March
Reputational risk meltdowns, rogue traders, market abuse, prostitutes - March has been a record month for operational risk loss events.
It all kicked off with revelations in the US press that New York State governor Eliot Sptizer - a man who has single-handedly done more than anyone to populate the Losses & Lawsuits pages each month - had regularly paid prostitutes from the high-class Emperors Club thousands of dollars. A probe into Spitzer began last autumn when a bank's anti-money laundering monitoring framework picked up the wire transfers from Spitzer's account to shell companies set up by the Emperors Club.
Then, in mid-March, Bear Stearns paid the ultimate price for a reputational risk incident. The collapse of the investment bank - after increasing subprime woes caused a stampede of withdrawals by hedge funds - nearly caused a financial markets meltdown. The bank had to be rescued by JP Morgan Chase, in a weekend deal with the US Federal Reserve. The same market dynamics nearly brought Lehman Brothers to its knees as well, according to several news sources, but firms stepped back from the brink and stopped trading down the stock price.
Instead, the negative momentum moved across the pond to HBOS - quoted on the London Stock Exchange - which saw its stock price fall some 17% in a day. It was the victim of malicious rumours and aggressive short-selling, and the UK Financial Services Authority was forced to step in and make an unprecedented statement supporting the bank. Days later, when the smoke cleared, the share price of the bank surged back to pre-crisis levels.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Capital neutrality key to completing Basel III, says Quarles
Former Republican Fed vice-chair thinks Hill or Bowman could help revive stalled prudential rules
Review of 2024: as markets took a breather, firms switched focus
In the absence of major crises and rules deadlines, financial firms revamped strategy, services and practices
Dora flood pitches banks against vendors
Firms ask vendors for late addendums sometimes unrelated to resiliency, requiring renegotiation
Swiss report fingers Finma on Credit Suisse capital ratio
Parliament says bank would have breached minimum requirements in 2022 without regulatory filter
‘It’s not EU’: Do government bond spreads spell eurozone break-up?
Divergence between EGB yields is in the EU’s make-up; only a shared risk architecture can reunite them
CFTC weighs third-party risk rules for CCPs
Clearing houses could be required to formally identify and monitor critical vendors
Why there is no fence in effective regulatory relationships
A chief risk officer and former bank supervisor says regulators and regulated are on the same side
Snap! Derivatives reports decouple after Emir Refit shake-up
Counterparties find new rules have led to worse data quality, threatening regulators’ oversight of systemic risk