Report: Fed's lack of guidance on enforcement actions is risky | Former UK army official: Bank managers need stress test | Banks spot fintech openings to grow Africa, Middle East customer base
May 16, 2019
SmartBrief on Risk and Compliance
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Report: Fed's lack of guidance on enforcement actions is risky
The Federal Reserve's policy of relying exclusively on the judgment and experience of bank examiners to decide when to initiate enforcement actions is risky because "institutional knowledge can disappear in times of turnover," such as after the financial crisis, according to a Government Accountability Office report.
MLex (subscription required) (5/16) 
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Former UK army official: Bank managers need stress test
Banks should stress-test managers, in addition to operations and exposure, to ensure cohesive management is in place in the event of a crisis, says Peter Wall, former chief of the general staff of the British army.
Risk (subscription required) (5/15) 
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Banks spot fintech openings to grow Africa, Middle East customer base
Financial institutions in Africa and the Middle East see falling technology costs and fintech developments as an opportunity to roll out services to those traditionally excluded from banking services.
Financial Times (subscription required) (4/24) 
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Regulators: Leveraged-loan market should be closely watched
Corporate borrowing levels in the leveraged-loan market are a credit risk that requires closer scrutiny, US regulators told a Senate committee. Companies are taking on higher levels of debt relative to their earnings, with few covenants to protect lenders and increasingly relaxed repayment terms, Comptroller of the Currency Joseph Otting said.
Reuters/Loan Pricing Corp. (5/15),  Bloomberg (tiered subscription model) (5/15) 
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Best Practices for Stopping Risk In Its Tracks
Official business communications take place across a myriad of channels including social media, IM, & collaboration platforms like Slack & Teams. This guide goes over some of the best practices you should keep in mind as you're preparing a strategy for some of the newest compliance challenges.
Bloomberg Insights
ETFs may prove a liability to markets in times of stress
During times of market stress, exchange-traded funds encounter an elevated risk of a liquidity crunch, experts say. "These ETF-specific risks, when coupled with an exogenous system-wide shock, could in turn amplify systemic risk, a credit negative for market participants," according to Moody's Investors Service.
Bloomberg Professional Services (5/15) 
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AI, machine learning proliferate in finance
Machine learning and artificial intelligence have become buzzwords in finance, and all major banks are working to leverage these technologies. "The wondrous thing about machine learning is it tends to be very useful for things humans aren't that good at and not that useful for things humans are great at. That poses an opportunity to upscale the human labor force," said Carson Kahn of Volley.
Bloomberg Professional Services (5/15) 
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Insurers see opportunity in China's GBA initiative
The Greater Bay Area initiative seeks to create an economic hub by harmonizing cities along China's Pearl River Delta with Macau and Hong Kong. This area is home to more than 61 million people, and the market opportunity is immense for insurers.
Bloomberg Professional Services (5/15) 
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Trading Trends
Chinese sale of US Treasurys highest in 2½ years in March
China sold $20.45 billion in US Treasurys in March, the biggest monthly total since October 2016, according to the US Treasury Department. China is still the biggest US creditor, despite the reduction.
Reuters (5/16) 
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Study: Move to low-sulfur marine fuel to disrupt markets
A switch to low-sulfur marine fuel in January will disrupt oil and refined-product markets by one to five years, according to a Boston Consulting Group study. Prices for low-sulfur crude oil from shale fields and refiners that can process high-sulfur crude will benefit, the study finds.
Reuters (5/16) 
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Trade turmoil, faltering growth trigger bond rally
Investors concerned about a slowdown in global growth and additional tariffs on Chinese goods have fueled a bond-market rally. The yield on the 10-year US Treasury fell to 2.375%, for a brief period touching an intraday low of 2.361%, the smallest yield since December 2017.
MarketWatch (5/15) 
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Operational Efficiencies
ICE given green light for futures speed bump
The Commodity Futures Trading Commission has ruled that Intercontinental Exchange can launch a three-millisecond speed bump for gold and silver daily futures. Some CFTC members and trade bodies including FIA's Principle Traders Group have criticized the move. ICE has not said when it will introduce the speed bump.
Reuters (5/15),  Profit & Loss magazine online (free content) (5/16),  Financial Times (subscription required) (5/15),  The Wall Street Journal (tiered subscription model) (5/15) 
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IEX supports SEC decision on data fees
IEX Group has filed an amicus brief supporting the Securities and Exchange Commission's decision that data fees charged by the New York Stock Exchange and Nasdaq were unjustified.
Financial Times (subscription required) (5/14) 
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Shanghai-London Stock Connect reportedly faces indefinite delay
A project to connect the Shanghai Stock Exchange and the London Stock Exchange faces further delay after losing momentum in China because of Brexit concerns and the trade dispute with the US, sources say. Postponement of the Shanghai-London Stock Connect reportedly could be indefinite.
Reuters (5/15) 
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UBS aims for AI-driven advice to clients
UBS hopes to harness artificial intelligence to help make Netflix-style recommendations to its investment clients, says the firm's Chris Purves. The bank has trained 350 back-office staff in automation software for functions such as clearing and settlement, and it has asked its entire investment-banking team to come up with ideas to digitize the business with a view to cutting costs.
Financial News (UK) (subscription required) (5/16) 
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Regulatory Review
CFTC's Berkovitz backs proposed position limits
Commodity Futures Trading Commission member Dan Berkovitz says he supports a proposal for position limits to reduce speculation. The proposal is expected to be considered before the end of next month.
Risk (subscription required) (5/15) 
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FCA won't force conduct regime on small firms right away
The UK Financial Conduct Authority will not force small companies to immediately meet the Senior Managers and Certification Regime for defining responsibility for key functions when it is expanded in December, an FCA official says.
Risk (subscription required) (5/15) 
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Delay of EU Benchmarks Regulation applauded in Asia
The European Commission's postponement of enforcement of the EU Benchmarks Regulation for two years is good news for Asian financial markets, foreign exchange expert John Ball says. "A large number of benchmark administrators in Asia weren't ready," he says.
Practice Insight (5/16) 
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Research & Analysis
Survey: Investors prepare to ride out stock market downturn
Major investors are taking positions aimed at riding out a sharp decline in equities over the next 90 days, a Bank of America Merrill Lynch survey finds.
Financial Times (subscription required) (5/14) 
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