JPMorgan vs. Fukushima

30 August 2013Articles, Banksbanking, Basel rules, comprehensive risk measure, incremental risk charge, JP Morgan, operational risk, regulatory VaRNick Dunbar

After JP Morgan’s London Whale fiasco, the new trading book risk measures introduced by Basel after the financial crisis began to be supplanted by operational risk capital.

Basel, Bayes and Anglo’s Arse-Picking

5 July 2013Articles, BanksAnglo Irish Bank, banking, Basel rules, eurozoneNick Dunbar

The leaked tapes of conversations between two senior Anglo-Irish Bank officials in September 2008 highlights the problem that bankers can't be trusted. Discussing the size of bailout they should request from Irish taxpayers, the Anglo-Irish bankers were recorded saying that the €7 billion figure was "picked out of my arse" (the actual amount needed would…

Regulatory Tussle over Bail-Ins, Depositors Highlights Complexity of Bank Debt

4 June 2013Articles, Banksbank debt, bank resolution, banking, Basel rulesNick Dunbar

Before the financial crisis began in 2007, banks created and invested in trillions of dollars of complex securities such as collateralized debt obligations. Many of these investments subsequently defaulted or lost the top ratings given to them by ratings companies. With investors suspicious of anything valued or rated using hard-to-fathom models, markets in CDOs and…

A week in banking: what have we learned?

2 July 2012Articles, Banksbanking, Barclays, derivatives, interest rate benchmarks, JP Morgan, RBS, regulationNick Dunbar

In the last week, we saw major developments in two big scandals - Libor rigging and swap mis-selling in the UK - and the end of the second quarter which is likely to draw a line under a third big scandal - the 'London Whale' losses at JP Morgan. I have some thoughts about these…

From the UK to Italy, an interest rate derivatives headache

19 March 2012Economics, Insurancebanking, behavioural economics, derivatives, interest rate risk, Italy, Morgan StanleyNick Dunbar

My story (with Elisa Martinuzzi) about Italy admitting it paid Morgan Stanley billions to unwind derivatives, and the UK newspaper coverage reporting on the alleged mis-selling of derivatives by banks like Barclays to small British companies, have something in common. Small British companies and Italy share an environment where both of them are finding it…

The FSA, RBS and the ‘pack of lies’

23 December 2011Articles, Banksbanking, Basel rules, RBS, regulationNick Dunbar

On page 277 of The Devil's Derivatives, there is a short account of how the U.K. Financial Services Authority supervised the Royal Bank of Scotland in the spring of 2008. It's only a small part of the book, but it caused me a disproportionate amount of trouble, including a legal threat from the FSA that…

The Volcker Rule and Barclays’ UK Bear Hug

15 November 2011Banksbanking, Barclays, public policy, regulationNick Dunbar

On Nov. 3rd, I attended the inaugural BBC Today Business Lecture, given by Bob Diamond, the chief executive of Barclays. The man who told the UK Treasury Select Committee that it was time to stop apologising for the financial crisis had been given an image makeover. Taking an ingratiating tone towards his audience of BBC…

Are investment banks like nuclear power plants?

16 September 2011Articles, Banksbanking, operational risk, Societe Generale, trading, UBSNick Dunbar

We don't know the full details of how Kweku Adoboli lost $2 billion at UBS, but as I watch an industry in decline, an analogy springs to mind. Yesterday I had a long conversation with one of the former managers in the chain of command above Jerome Kerviel at Societe Generale. After losing his job…

Breaking up banks by stealth

20 July 2010Articlesbanking, public policy, regulationNick Dunbar

When the UK coalition government declared that an independent commission would advise on the thorny question of whether to break up Britain's banks, one might expect nothing to be done until the report is completed late in 2011. However, the constraints of market and regulatory timetables mean that policy decisions need to be taken now.…