Systemic Risk in the press

La lutte à la barricade - Emile Horace Jean Vernet (1814) 

Mean Variance Framework
Feb 28, 2014
Minneapolis Federal Reserve Bank President Narayana Kocherlakota said Friday that supervision is the best way for the Fed to tackle
threats to financial stability, but said "residual risks" may remain for monetary policy to deal with.

Kocherlakota suggested "a framework to incorporate systemic risk mitigation into monetary policymaking" using a "mean variance framework." But he did not flesh out this suggestion, saying more theoretical work is needed.

Discussion of 2014 USMPF Monetary Policy Report, Narayana Kocherlakota

BNY Mellon IR Survey

Feb 10, 2014

Systemic market and #political-risk, followed by the uncertainty of new financial regulation, are the top issues named by companies as impacting global market confidence, according to the latest annual #investor-relations (IR) survey conducted by BNY Mellon, a global leader in investment management and investment services. 

Companies are taking a more formal approach to managing potential risk when communicating with the capital markets: over the last four years, companies with formal #crisis #communications-policies in place has risen from 31% in 2010 to 52% in 2013.

·      In terms of social media, 49% of firms have policies governing internal use of these channels, up from 42% in 2012.

·      72% of companies believe there is #tangible value in direct board and investor dialogue, as opposed to only 28% believing there should be no interaction

Improving #Stress-Tests and resilience to #cyber-risk

Feb 06, 2014

“We are focused on reducing the probability of failure of systemic financial firms, improving the resolvability of systemic financial firms, and monitoring and mitigating emerging systemic risks,” said Daniel #Tarullo, governor of the U.S. Federal Reserve.

The central bank’s stress tests of the largest banks will “evolve further over time” as challenges to the banking industry shift, Tarullo said in remarks prepared for testimony today to the Senate Banking Committee.

The Fed governor said the central bank will “fairly soon” issue a proposal on capital surcharges for the largest banks that pose risk to the financial system. Part of the goal of the added charge is to “offset any funding advantage” such firms may have because they are perceived to be too big to fail, he said.

He repeated his concerns about runs in so-called wholesale funding markets where banks and securities firms #leverage their holdings with short-term, #collateralized loans.

Unlike bank deposits, such funding arrangements can unwind rapidly in a crisis as creditors pull back. That in turn can lead to fire sales of assets as banks and brokers dump securities they can no longer finance.

Tarullo also said the Fed is working with banks to encourage #robust-defenses against attacks on their information systems.

“Cyber attacks on financial institutions and the data they house pose significant risks to the economy and to national security more broadly,” Tarullo said. “We believe there should be increased attention and coordination across the federal government to support the security of the nation’s financial infrastructure.”