15 December 2017
Stanley Epstein
Stanley Epstein

Stanley Epstein

Stanley Epstein - Citadel Advantage Ltd

44Posts 182,998Views 52Comments

Securitisation and Operational Risk

11 January 2014  |  2511 views  |  0

Rewind to 2008. The there was one word that got everyone's hair to stand on end, at that time, it was "securitisation". Now almost six years later securitization is making a comeback. And in some circles the stigma attached to the word "securitisation" has hardly faded.

Securitization as such was never the problem. The real issue was the lack of proper risk management – at both the credit risk and the operational risk levels.

The credit risk side is pretty easy to understand. The operational risk aspect is a bit more obscure.

Under the Basel Accords operational risk requirements, bank management have long been charged (and this goes back way before the 2008 crisis) with the responsibility to identify, assess, understand and manage all the risks inherent in all financial products, activities, processes and systems.

The first time around the banks chose to ignore this requirement. There is nothing glamorous in managing your operational risks. It's an activity that banks have long eschewed simply because there is a cost attached to it. And costs detract from profits. Operational Risk Managers are the most unpopular members of the management team – they are always out to spoil everyone's profit making fun.

When you are operating in a highly competitive market there is just no time to do things properly with new financial products, like getting a sign-off from Ops Risk Management. The product/business side of a bank just doesn't want to be reigned-in by an overzealous risk manager. Bank boards tend to share this view too.

On the regulator's side the original problem was ignorance, though by now this has been largely corrected. Regulators say that they have overcome their earlier problems and will be able to cope this time.

Will it be better this time round? I have my doubts. 

TagsRisk & regulationInnovation

Comments: (0)

Comment on this story (membership required)

Latest posts from Stanley

Getting digital banking right

22 August 2016  |  7040 views  |  0 comments | recomends Recommends 2 TagsMobile & onlineGroupInnovation in Financial Services

Is the fintech industry killing mobile payments?

16 August 2016  |  8165 views  |  2 comments | recomends Recommends 2 TagsMobile & onlineInnovationGroupInnovation in Financial Services

Reflections on the fintech revolution

14 August 2015  |  6318 views  |  0 comments | recomends Recommends 0 TagsInnovationGroupInnovation in Financial Services

Why I am worried about the future of mobile payments

02 March 2015  |  4157 views  |  3 comments | recomends Recommends 0 TagsMobile & onlinePaymentsGroupInnovation in Financial Services

Understanding Digital Banking

12 January 2015  |  14595 views  |  0 comments | recomends Recommends 1 TagsMobile & onlineInnovationGroupInnovation in Financial Services

Stanley's profile

job title Director
location Modiin
member since 2008
Summary profile See full profile »
Stanley is a Director and co-founder of Citadel Advantage Ltd., an international consultancy to the financial services industry that provides specialist services and training in the areas of operation...

Stanley's expertise

Member since 2006
44 posts52 comments
What Stanley reads

Who's commenting on Stanley's posts