Risk Management Watch: Banks Overhauling Risk Teams
UBS AG is reorganizing it risk management and trading business following $37 billion in writedowns stemming from the subprime crisis, according to Dow Jones Financial News. The report states that the Swiss Bank has created a new role of Group Risk Chief Operating Officer and hired a new Chief Risk Officer (CRO) for the investment bank. UBS has also created a global head of proprietary trading covering both equities and fixed income, and reshuffled its fixed income division. The changes are part of a wider reassessment of risk management at UBS in the wake of a scathing 50-page report into how the group managed to lose tens of billions of dollars in less than a year. The paper places much of the blame for the bank’s string of losses on ineffective risk management.
Executive recruiting firm, A.E. Feldman, reports that risk management jobs continue to open up as banks realize the strategic importance of risk management. Financial institutions are expanding and reorganizing their risk teams in an effort restore confidence. Top banks are on the hunt for experienced risk professionals who have been tested by previous market cycles. Looking ahead, A.E. Feldman adds that senior communications and marketing professionals will also become hot commodities as firms reposition and rebrand themselves.
UBS has acknowledged in a published report that the pursuit of revenue caused it to assume more risk than it should have. The bank has admitted that its culture had been focused on boosting revenue, while sacrificing effective risk management.
Now, the investment bank has appointed Thomas Daula (from Morgan Stanley) as Chief Risk Officer for, a role which now also includes that of Chief Credit Officer, reports Dow Jones. Daula, the third CRO at the investment bank in three years, will also sit on the group managing board. Meanwhile, UBS’ former Chief Credit Officer, Philip Lofts, has taken on a new enlarged role of Group Risk Chief Operating Officer.
Within the company’s risk-control function, UBS says it will also combine the monitoring and controlling responsibilities of the group’s market risk and credit risk functions into a single unit, called Group Portfolio & Concentration Risk Control.
Dow Jones quotes Joe Scoby, Chief Risk Officer of UBS AG as saying, “These changes are designed to establish a best-in-class risk control team with an overall view of risks.”
Crédit Agricole is yet another bank planning a dramatic overhaul of its corporate and investment banking business after a second consecutive quarterly loss, according to Dow Jones. The report states that the largest retail banking group in France has earmarked extra capital to improve its risk management and controls after its corporate investment banking arm suffered higher than expected writedowns.
Bernanke: Banks Must Beef Up Risk Management
Fed Chairman, Ben Bernanke, has warned banks to improve their ability to foresee risk, according to the AP. Bernanke says recent turmoil has exposed weaknesses in financial firms’ so-called risk-management practices. As a result, he says commercial banks and other financial institutions need to boost their ability to detect and protect themselves against risks like the credit and mortgage crises. The AP quotes Bernanke as saying, “Improvements in banks’ risk management will provide a more-stable financial system by making firms more resilient to shocks.” Bernanke also notes, “We have focused on the institutions in most need of improvement, but we will continue to remind the stronger institutions of the need to remain vigilant, particularly in light of the ongoing fragility of market conditions.”
