Thursday 3rd September 2015
NEWS TICKER, THURSDAY, September 3rd: The Straits Times Index (STI) ended 28.3 points or 0.98% higher to 2906.43, taking the year-to-date performance to -13.63%. The top active stocks today were SingTel, which gained 0.82%, DBS, which gained 0.80%, UOB, which gained 1.40%, OCBC Bank, which gained1.13% and CapitaLand, with a 0.36%advance. The FTSE ST Mid Cap Index gained 0.55%, while the FTSE ST Small Cap Index rose 0.24% - Madrid City Hall announced it would dedicate €10m out of its 2016 budget to a "welcome plan for refugees" to include housing, integration, psychological support and legal aid, City Hall spokeswoman Rita Maestre (Ahora Madrid) said during a press conference on Thursday. Maestre said a budget had been decided upon but that specific numbers had not: "We want to welcome all those who are fleeing from war", adding that given their situation "a permanent housing solution" would be needed in the city. The Mayor of the Spanish capital, Manuela Carmena, said on Wednesday that a decision would be taken at the city government meeting today: "The city of the hug must, of course, be ready to welcome refugees" - The European Bank for Reconstruction and Development (EBRD) is joining international efforts to clean up Tunisia’s Lake Bizerte with a €20m loan and technical assistance to support the expansion and rehabilitation of the sewerage network of the Bizerte region and the rehabilitation of three wastewater treatment plants located near the lake. The EBRD’s investment is part of an integrated environmental programme aimed at de-polluting Lake Bizerte and reducing sources of pollution through investments in wastewater, solid waste and industrial effluents. This programme is labelled by the Union for the Mediterranean and is part of the Horizon 2020 Initiative, which aims to de-pollute the Mediterranean by the year 2020. The European Investment Bank is providing a €40 million sovereign loan to the programme while the European Union Neighbourhood Investment Facility is contributing a €15m grant for both capital expenditure and technical cooperation - Analysis of illicit financial flows (IFFs) by Global Financial Integrity (GFI) shows that over the period 2003-2012 the global volume of IFFs grew by more than 9% annually (. In 2012 (the most recent year for which data are available), illicit flows were estimated at close to $1trn. In response to this unfettered surge in illicit capital leaving developing nations, the UN has endorsed target 16.4 in the Sustainable Development Goals (SDGs), which commits the global community to “significantly reduce” IFFs by 2030. This UN action “represents an historic moment in development policy given that it is the first time the international community has recognized the illicit flows problem and pledged to address it,” says GFI President Raymond Baker - US Secretary of Commerce Penny Pritzker named Eduardo Leite, Chairman of the Executive Committee of Baker & McKenzie LLP, as the new chair of the US section of the US-Brazil CEO Forum. “Mr. Leite has served on the U.S. section of the CEO Forum for several years, and I am pleased that he has agreed to serve as Chairman,” said Secretary Pritzker. The new US section chair was named after the former chair, Ms. Patricia Woertz, Chairman of the Board of Directors of Archer Daniels Midland Company, submitted her resignation from the role. However, Woertz will remain a member of the U.S.-Brazil CEO Forum, and Leite will complete the current three-year term, which ends on August 13th 2016 - MarketAxess Holdings Inc. (Nasdaq:MKTX), the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, today announced total monthly trading volume for August 2015 of $75.5 billion, consisting of $43.7 billion in U.S. high-grade volume, $26.7bn in other credit volume, and $5.1 billion in liquid products volume. MarketAxess is providing both the reported and adjusted estimated US high-grade TRACE volumes on its website. The Company believes that the adjusted estimated volumes provide a more accurate comparison to prior period reporting.

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Lessons from an Industry Titan: Jamie Dimon’s Testimony

Friday, 15 June 2012 Written by 
Lessons from an Industry Titan: Jamie Dimon’s Testimony This week, J.P. Morgan Chase’s CEO, the highly regarded Jamie Dimon, testified before the US Senate banking committee regarding the failures of its Chief Investment Office (CIO), the group responsible for certain well-publicized losses. We thought his testimony provided more than a few lessons on governance matters and the state of the world generally. Here they are: http://www.ftseglobalmarkets.com/

This week, J.P. Morgan Chase’s CEO, the highly regarded Jamie Dimon, testified before the US Senate banking committee regarding the failures of its Chief Investment Office (CIO), the group responsible for certain well-publicized losses. We thought his testimony provided more than a few lessons on governance matters and the state of the world generally. Here they are:

"[W]e are still reviewing the facts...”

Lesson: Never speak out publicly in a definitive way until you fully know the facts.  You will not fully know the facts for months.



"...I will explain everything I can to the extent possible."

Lesson: Even for Dimon, transparency matters.

"CIO's strategy...was poorly conceived and vetted.  The strategy was not carefully analyzed or subjected to rigorous stress testing.... CIO's traders did not have the requisite understanding of the risks they took.”

Lesson: Didn’t we learn this lesson in 2008? Back then we learned that some strategies had assumptions that seemed poorly founded in retrospect. This was particularly true about the behavior of the mortgage markets and their derivatives.  Guess the lesson is that most people never learn this lesson. Before a system or strategy is implemented, and periodically thereafter, management (including the board) should ask the probing questions. Make no assumptions on this score.

"Personnel in key control roles in CIO were in transition and risk control functions were generally ineffective in challenging the judgment of CIO's trading personnel.”

Lesson: The press reported that the CIO’s then-current chief risk officer began to internally express his concerns about London office trading strategies last year. This past January, he was replaced as the head of risk by a former trader who, at least according to the press reports, had no prior risk management experience. This lesson relates to human nature: it's very hard to appreciate someone who has a different point of view. Watch out – he may be right.

"Risk Committee structures and processes in CIO were not as formal or robust as they should have been.”

Lesson: Assessments have to be substantive, robust, and “real”, and be tested and documented regularly as assumptions and/or reality changes. Structure, process and formality may not protect you from all losses, but they can provide a protective shield that will hopefully mitigate them. Be sure to build your protective shield. 

 

Deborah Prutzman

Deborah Prutzman is the founder and CEO of The Regulatory Fundamentals Group (RFG), a New York-based firm that designs and implements business and risk solutions for alternative asset managers and institutional investors. RFG's senior-led team employs a robust suite of tools, including practical alerts on new and potential industry developments and its powerful RFG Pathfinder® knowledge management platform which simplifies the challenges of operating in a regulated environment.  To learn more about The Regulatory Fundamentals Group call (212) 537-4058, email a representative at Information@RegFG.com or visit RegFG.com

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