Hiring, regulatory uncertainty and crisis management

The week on Risk.net, September 2–8, 2016

QUANTS no longer a priority for risk recruiters

MIFID caution means problems for buy side

CRISIS MANAGEMENT at US Bank

 

COMMENTARY: Playing chicken

Short deadlines, uncertainty and unexpected last-minute changes characterised regulatory stories in Europe this week.

Major German banks, for example, are threatening a challenge to the unexpected ban on retail sales of credit-linked notes by the country's regulator, Bafin.

"Our clear position is that the planned product ban by Bafin is contrary to the law. As such, we have to advise our members to consider legal action if the act is not amended," said the German Derivatives Association.

Elsewhere, uncertainty surrounds the fate of the keystone packaged retail and insurance-based investment products (Priips) rules, after a committee of the European Parliament voted to turn down the technical standards at their heart. And as the implementation date for the second Markets in Financial Instruments Directive (Mifid II) creeps closer, banks are rethinking their initial stance on whether to embrace or avoid systematic internaliser status - hesitance that leaves buy-side firms in the dark about their own obligations.

Anything new here? Yes and no. Regulatory compliance is always combative, particularly when turning policy decisions into legislation and directives, legislation into regulatory handbooks, and regulations into praxis. But the scale of the post-crisis regulatory wave, which covered every part of the financial sector, makes the process particularly acrimonious this time – there's so much to lose from an adverse implementation. Also, in the case of SI decisions, different sectors are affecting each other and exacerbating the process – as of course are different jurisdictions.

Furthermore, regulators and industry are under time pressure, as the next round of deadlines marches closer. The next two years, sadly, are unlikely to see much of a change.

 

STAT OF THE WEEK

The current effective supply of collateral in Australia in 2016 is estimated to be around A$123 billion, comprising around A$99 billion of active supply that is reused on average 1.25 times.


QUOTE OF THE WEEK

"Machine-learning algorithms have become superhuman at tactical game-playing, but do not have the capability yet of true open-ended, long-term strategic planning. The problem is retaining long-term memories: computer scientists haven't figured it out yet" – Chi Lee, chief investment officer of Agenda Invest.


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