For this podcast, Tobias Becker, head of risk capital optimization at Quantile Technologies, points out the relevance of Lehman Day in the ongoing battle against systemic risk.
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For Tobias Becker, head of risk capital optimization at Quantile Technologies, Lehman Day remains as a significant reminder of why the battle against systemic risk is ongoing.
“September 15, 2008 is when Lehman Brothers … filed for bankruptcy and really almost created a snowball effect,” Becker explains in this latest edition of the FTF Exchange podcast series.
That day and the Great Recession that followed mark the start of the global “drive to tackle systemic risk,” says Becker.
As many may recall, that event came “very close to bringing down the global financial system,” Becker notes. “It came as a shock to politicians, to people all around the world, just how integrated and interdependent the financial system is. So, when you take one major institution out of the puzzle, the whole thing almost collapses. That was really the turning point in bank regulation and the way the public, including the politicians, sees the financial industry.”
This new, more urgent push to reduce systemic risk also drives the London-based Quantile, which offers portfolio optimization support such as compression and risk rebalancing services. The company serves banks, hedge funds and other financial institutions engaged in over-the-counter derivative transactions. In fact, for the 2021 FTF Awards, voters chose the company as the “Best OTC Derivatives Margining Solution.”
The podcast conversation also covers
- A comparison of old school trade compression and reduction of notionals against risk reduction via a models-based approach;
- The problems with internal models, the Current Exposure Method (CEM) and the Standardized Method (SM);
- Key aspects of the Standardized Approach for Counterparty Credit Risk (SA-CCR);
- Concerns about SA-CCR such as its lack of governance, utilities, and a hub where counterparties can share data, risk calculations;
- And the new responsibilities for securities operations staff members that stem from SA-CCR and other forms of regulatory compliance.
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