2nd December 2016

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Featured White Papers

Stress This House: A Framework for the Standardised Stress Testing of CCPs

As the use of clearing houses has increased, clearing members have found that there is currently no way for market participants to compare the risk and default management procedures of CCPs on a consistent basis.

The first tentative steps to address this issue were taken on 11 March, 2015, when the Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) announced a review of stress testing by clearing houses. CCPs regularly stress test their default management processes; however, as yet there is no global standard for a stress testing framework.

This paper details LCH.Clearnet’s proposed stress testing framework that will inform and assist the review process being undertaken by CPMI-IOSCO. A standardised stress testing methodology will help improve transparency around CCP risk management. It will allow clearing members and regulators to compare different CCPs on a relative basis, to evaluate the strength and resiliency of clearing houses and to assess the extent to which a CCP’s pre-funded resources (default fund contributions and CCP skin in the game) would be consumed under a uniform set of stresses. In addition, it attempts to place CCPs on a level playing field regardless of confidence levels used to calculate margin, holding and methodology for sizing default funds, etc. Read LCH.Clearnet's full white paper

New study by BNY Mellon and Nobel Laureate Dr. Harry Markowitz puts spotlight on the growing importance of risk management for institutional investors

New study by BNY Mellon and Nobel Laureate Dr. Harry Markowitz puts spotlight on the growing importance of risk management for institutional investors

‘Down’ with alpha and ‘up’ with targeted returns, greater use of alternatives

Risk controls should be integrated at the enterprise level

Over 80% of institutional investors expect risk management to play an even greater role in the investment decision process in the future, according to a new study published by BNY Mellon, a global leader in investment management and investment services, in collaboration with Nobel Prize-winning economist Dr. Harry Markowitz. In addition, over the next five years 73% expect to spend more time on investment risk issues, while 68% expect to spend more time on operational risk issues. Only 25% of respondents, however, had a chief risk officer.

Entitled New Frontiers of Risk: Revisiting the 360O Manager, the new study looks at a broad array of risk-related topics and issues, including: market risk; investment risk measures; performance vs. liabilities; credit risk management; emerging markets and non-domestic investing; alternative investments; asset allocation; diversification vs. returns; liability-driven investing (LDI); operational risk management controls; operational risk insurance; liquidity risk; political risk; regulatory change; and best practices.

Read full white paper

Eastern European Outlook

A White Paper published by SEB Economic Research

Gradual recovery – major economies will diverge

This autumn nearly all countries in Eastern (including Central) Europe have begun an economic recovery after growth bottomed out during the second quarter of 2013, consistent with the pattern in Western Europe. Their recovery over the next two years will be modest. Latvia and Lithuania will continue to grow fastest in the region and in the European Union. The three largest economies will diverge: with relatively strong fundamentals, Poland will regain its starring role after an unexpectedly deep growth slump; Russia, increasingly in need of reforms, has downshifted to slower growth than it enjoyed before the global economic crisis; and a pressed Ukraine will devalue its way out of an acute crisis.

In most Eastern European countries, the economic upturn is initially being driven mainly by private consumption, but also by increased exports. Consumption is being strengthened by good real wage growth, much of it due to continued low inflation. Unemployment will gradually continue to fall in the Baltic countries, remain relatively unchanged in Poland and Ukraine and increase slightly in Russia. Exports will be fuelled by gradually higher external demand, especially from Germany.

Capital spending will take time to rebound, due to lingering uncertainty about the growth outlook − internationally and in the region − combined with slowly thawing credit conditions. Mainly in the central and southern parts of Eastern Europe, credit conditions have been abnormally tight so far, due to the euro zone crisis and the relatively large foreign ownership of banks. Read full white paper

Mandate Wins


Spain introduces major reforms to its post-trade infrastructure for securities

Spain is engaged in a far-reaching reform of its clearing, settlement and registry system. Through legislation which was enacted by the Spanish parliament on 5 October 2011, modifications were introduced to its Securities Market Law that align market practice in Spain with that employed in other leading European securities markets andwhich set the foundations in place for implementation of TARGET2-Securities (T2S) for the Spanish market from September 2017.

FSR Editorial Director Bob Currie speaks to Jesús Benito, CEO of Spanish CSD Iberclear, about Spain’s ongoing programme of reforms to its registry, clearing and settlement system while gaining a user perspective from Rafael Gonzalez-Aller, Head of Direct Clearing and Settlement Services, Citi and Amadeo Lazaro Fernandez, Head of Market Infrastructures, Grupo Santander. Read feature


Financial infrastructure groups push merger proposal as UK exit debate continues

Deutsche Börse AG (DBAG) and the London Stock Exchange Group (LSEG) have announced plans to establish what they call an “industry-defining” merger between the two companies. FSR reports. Read article

Industry comment: Stormy Seas

Paul Chapman reflects on the current state of the financial services employment landscape. Read article

Local Authority Pension Fund Asset Pooling

The creation of six British wealth funds of £25 billion plus in assets is a massive change to the UK’s local authority pension fund landscape. Matthew Craig comments on plans for local authority pension schemes to create scale and efficiency benefits through pooling assets. Read article

Investing in a Low Return World

Pension funds and other long-term investors are turning to a range of solutions in the face of very challenging market conditions. Matthew Craig reports on how they are managing this environment. Read article

Changes at the helm

Bob Currie speaks to Jeffrey Tessler, Chairman and Member of the Executive Board for the Clients, Products and Core Markets division at Deutsche Börse and, until the end of 2015, Chief Executive Officer of Clearstream. Read article

Preparing for UCITS V Implementation: an industry update

UCITS V is a further revision to the UCITS regime which aims to bring this into line with the AIFM Directive and to introduce a range of corresponding measures which had hitherto been regulated in less prescriptive terms. Bob Currie speaks to Gaëlle Kerboeuf, General Counsel, CACEIS, about the implications of these amendments. Read article

Tax Transparent funds: Making assets work harder for owners and managers

The introduction of a UK Tax Transparent Fund (TTF) vehicle in 2013 has generated significant interest from both asset owners and asset managers under pressure to improve investment performance, reduce costs and respond to regulatory change. Ed Turner, Head of Tax Product, and Andrew Melville, Senior Product Manager, HSBC Securities Services, explore why TTFs are being touted as a potential solution to these challenges. Read article

Re-assessing the direction of global collateral management: a review of market evolution

FSR conducts its periodic review of developments in securities finance markets and reflects on how participants are meeting their need for efficient mobilisation, allocation and segregation of collateral. Bob Currie reports. Read article

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