The Journal

The Journal brings together our most up-to-date points of view on the challenges facing banks and capital markets today.

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The journal Stress testing: from stressful times to business as usual
Public debate of the Federal Reserve's stress test results - which called on 10 of the largest 19 US banks to raise $74.6 billion in additional capital - has tended to take the form of a lively back-and-forth about the appropriateness of the scenarios used, or has focused on the short-term implications for individual institutions. These issues are important.

But the tests also raise a number of other themes which have far wider relevance for the industry and which will shape the way that banks think about capital, run their businesses and manage their risks for many years to come.


The Journal Reward: The new paradigm
Financial services in the Asia-Pacific region may be less directly involved in the apparent excesses over financial services reward that have generated much media comment and political and regulator involvement in recent months. Nevertheless Asia-Pacific is not immune from the wholesale review and change that is taking place globally in the approach to reward.


The Journal Releasing cash and reducing cost without losing strategic agility
In good times, financial institutions talk about their employees as assets. In bad times, they are seen as a cost. Lately, newspapers around the world have been filled with stories of financial institutions cutting costs and/or jobs, counterbalanced by governments encouraging executives to think twice before laying off staff. Very few countries have been spared.


The Journal China's EBL: Can it help overseas financiers recover their debt
There is little doubt that the financial turmoil and economic slowdown in global markets since the second half of 2008 has taken its toll on many businesses, especially those operating in overseas markets such as the United States and Europe. For companies in China, dependent on trade with these markets, weakened global demand for consumer products is now resulting in factory closures and distressed situations. Against a backdrop of tightened credit, many overseas financiers who eagerly entered the Chinese market in recent years are now faced with the realities of divesting themselves of problematic interests in China.


The Journal Getting risk appetite right
As the crisis has rumbled on, more and more chief executives have been forced to explain losses that were many times higher than they or their shareholders had been lead to expect. In each case, the story boils down to the same, deceptively simple, failing: banks had taken more risk than they intended.



The Journal Liquidity risk management
It is not listed on any exchange. Nor is it a line item on any financial institution's balance sheet. Nonetheless, confidence is the financial system's - and every financial institution's - most valuable asset.



The Journal Carbon: The new financial frontier
It is often said that a business can only manage what it measures. Since 2000, the Carbon Disclosure Project (CDP) has, on behalf of institutional investors, challenged the world's largest companies to measure and report their carbon emissions, integrating the long-term value and cost of climate change into their assessment of the financial health and future prospects of their business.



The Journal Reward: A new paradigm
Shareholders, regulators, the media, even management teams themselves, say compensation systems in financial services are in need of reform. Current practices, it is observed, are not only too short-term oriented but also fail to adequately link rewards with risks. But even though executives believe change is essential, their range of available action is relatively limited: history shows that unless the industry moves as one, talent will move to where reform is least evident.



The Journal Valuation control in turbulent times
The current market conditions have shone a bright light on financial instrument valuations and raised some critical questions for excecutive management. Do they feel comfortable signing off on the overall valuation in the financial statements? Do they get the right information around complex valuations? Do they understand the significant judgemental assumptions and the valuation complexities involved? We discuss the key areas for financial institutions to focus on as part of their review of the appropriateness and effectiveness of their valuation control processes.



The Journal Basel II Pillar 3: Challenges for banks
In recent years, policy makers such as the International Accounting Standards Board (IASB) and the Basel Committee on Banking Supervision (Basel) have taken significant steps to improve market reporting with IFRS 7 and Pillar 3 of the revised Framework for International Convergence of Capital Measurement and Capital Standards (Basel II), respectively. In particular, Pillar 3's objective is to improve market discipline through effective public disclosure to complement requirements for Pillar 1 and Pillar 2.