In various company discussion forums, we have been following the re-emergence of non-bank financial institutions (NBFI) and its various iterations from the money management and business development company (BDC) worlds. The NBFI space seems to be a growth area and a revenue center for lenders and rating agencies. Usually boom exposures lead to bust ratings.
Credit risk managers have the daunting task of dealing with various systemic risk issues and the international regulatory bodies that have mandated various requirements. Concerns range from cybersecurity, “subsidiarization”, stress tests, system liquidity, and risk culture development given the environmental constraints.
Risk conferences have concentrated on risk culture as a key method of mitigating out-of-control risky behavior. Topics have centered on 1) the use of data warehouses to track bad bank/broker operator behavior; 2) the establishment of better corporate cultures focused on risk management; and 3) cyber-security threats and how to detect, control and defend against.
BLK’s co-presenters discussed the following topics in depth including: 1) the inefficient and dysfunctional state of the current corporate bond market structure, 2) a “call to arms” with the buy-side becoming price-makers, not just price-takers, 3) step-by-step recipe instructions to create a more standardized and efficient corporate bond trading system, and 4) other knock-on effects, followed by Q&A.
For the last several months, we have attended various senior credit officer panels where a host of the same concerns keep popping up including: 1) regulatory relations including the enormous task of working with the regulators from several domestic and international jurisdictions that at times give conflicting views/guidelines/requirements.
FMU is an acronym for Financial Market Utilities designated under the Dodd-Frank Act. Many programs that we have attended seek to understand FMU/CCP risk management & appetite setting, their regulatory requirements and recovery and resolution initiatives.
Your dreams were your ticket out,
To that same old place that you laughed about …