Mutual funds do come with lock-in features! Especially if you are investing in a capital-protected product, you are not entitled to early encashment for a certain time.
Redemptions are deterred with the backend load.
#Backstops are required in the banking arena beyond penalties
Of course, if you park liquidity in a time deposit liability side product, at a bank, you might have to pay a penalty for early withdrawal.
But, the highest liquidity risk is emanating from the sight deposits pool.
Run-on-the-bank risk is hard to mitigate if assets don't sell
Also, the standard practice is to call in the treasury department and borrow short-term through the interbank market to fund liquidity drains.
Call and Clean lending is done via the wholesale market for Fi credits.
Also, Repo markets can be used.
The problem is that when a commercial or any other financial institution is in trouble, it is hard to mobilize new funds aka liquidity at low rates in the interbank market.
Retail deposits react negatively to higher markup rates.
This paper is about FIDC Insurance Reinsuring the deposits.
Harnessing the free market: Reinsurance models for FDIC deposit insurance pricing
proquest.com/openview/3d365…
The next step in Systemic Risk Management should revolve around the Reinsurance of all financial institutional risks.
Insurance of Financial Claims by FDIC and the central bank guarantees needs additional actuarial coverage
This project should be on top of the policy.
The problem is with the mindset which trickles from the top!
If you expect the Government of the day to be your father or mother, you expect to be bailed out time and again!
Govt should not be a parent.
It should be a servant to the people.
The banking mindset must change.
When failed banks were being bailed out during and after the GFC, it sends the wrong message!
It encouraged gambling and pardoned white-collar criminals who had defrauded innocent people.
#TARP was a big mistake in my opinion.
It incentivized bad behaviour.
The most lethal aspect of economic policy is to show the financial institutions which accept deposits the doors to the money printing press or national exchequer chest!
If you give them money, you are reinforcing harmful learning processes, which creates a "psychic" problem.
Did credit rating agencies downgrade #SVBBank before the run began?
I am not in the loop on this.
If someone could tell me their credit ratings history?
Most of the credit rating firms that make billions through fancy services and ECAI exercises were partly to be blamed for the GFC
Didn't they see this coming?
A bank which holds a large fixed-income portfolio and runs a maturity mismatch during the rate hike cycle remains obscure
Black Swan Risk is one thing!
But being illogical is not a defence of BS and randomness.
This #SVBCollapse is bad risk management oversight and a lack of liquidity contingency planning by the treasury desk.
Please improve four things next time =>
1. Surveillance
2. Institutional Resilience through BCP (which is often confused with only IT/ MIS/Cyber disruptions)
3. Market Intelligence based stress testing
4. External Credit Rating Assessments
#SVBCrash #SVBBank
When risk managers were shown the door after the GFC and their quantitative models were blamed, it gave the risk-takers an immense psychological edge.
They had good reasons to insult middle and back office controllers.
Gatekeepers should always be supported and NOT discouraged.
Why didn't #SVB bank and their risk managers check asset and liability side exposures and simulate scenarios of analytical model-based outcomes?
This is risk management 101.
Unfortunately, Altman Z Score cannot be applied to banks.
Otherwise, that is an excellent credit risk tool used for early warning signalling and bankruptcy prediction.
#SVBCrash #SVBCollapse #SVBBank #FED #FDIC

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Risk Manager(ERM/Actuarial Sciences/Quant)

Risk Manager(ERM/Actuarial Sciences/Quant) Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @SAH16928046

Mar 13
Not every financial company should be structured as a bank, thereby accepting deposits, intermediating funds across markets, and reporting capital adequacy ratios using the @Bis guidelines.
This is the lesson I derive from the #SVBCollapse
#SVBCrash
@Bis What is the point of pasting SVB CAR and Capital Ratio Metrics?
What sense could one derive from them before the run began?
They didn't reveal the full picture to the creditors, depositors, or shareholders.
CAR is a metric which exemplifies loss absorption capacity
Now?#SVBCrash
We need to revert to the Glass Steagall Act to understand economic history.
Why it was introduced in the aftermath of the Great Depression.
Why FDR and his team drew Chinese walls between Investment and Retail Banking institutions?
federalreservehistory.org/essays/glass-s….
Read 6 tweets
Mar 13
Yes, we have spoken a lot about public failure and the lessons we draw from the Socialist Bloc nations of Eastern Europe during the Cold War and the USSR as their patron-in-chief, which broke up due to state inefficiencies
We are not quick to pontificate about Market Failure
#SVB
After GFC and several other frauds and financial failures within the private sector post-2008, it is time we hold corporate white-collar workers accountable for their misdeeds.
Yes, not everything is Fraud or portends to be a Financial Crime.
But, incompetence is a Moral Crime!
LTCM, Enron and WorldCom, GFC were only the tips of the iceberg.
American Corporate Management Standards have tremendously deteriorated due to a lack of professional ethics, or possibly due to a lack of competition.
When Japan & West Germany were competing, the Yanks did well.
Read 4 tweets
Mar 12
The #SVBCrash also further exposes the uselessness of the Basel 3 Accord and its modifications over the years
Why nobody is discussing the utter failure of @BIS_org which makes financial institutions invest billions in technology and staff recruitment, etc
We need answers
@BIS_org And the liquidity risk metrics reporting and filing which were introduced by @BIS_org under BASEL 3 were not fully implemented by the FED beyond certain large banks
But, still, certain aspects of Basel 3 were fully incorporated by the #SVB to make risk disclosures to the public.
Read 8 tweets
Jan 30
#Incident reporting should follow & precede #riskmanagement?
The two are slightly different areas of specialization
in the office environment.
It is akin to the debate between #reliability and #safety.
Both are contrasting concepts in organizational #resilience studies.
They are certain leading businesses including big banks that have separated incident reporting desks from risk management co-ordination cells.
Actually, incidents are events which require an eye and a taxonomy for recognition.
Coding outcome events into loss database is essential
The most difficult area in financial risk management was the coding of operational risk incidents or potential events having adverse negative probabilistic outcomes, which can yield material quantifiable losses in the financial statements.
@BIS_org changed the AMA RiskMetrics
Read 13 tweets
Jan 30
What makes you wait, bitterly, might not exist at all!
That is the risk of believing in something.
That "something" could be anything.
#doubt #disbelief #mysticism #existentialism
Enter into a void as described by #Kierkegaard.
This void needs to be filled in.
This is what humans waste their time on, mostly.
Filling the #void to overcome the crisis of existence.
Psychologically broken people may be looking for others to combine and complete themselves.
Read 4 tweets
Jan 26
There is a problem in the financial risk management and financial engineering profession, that #quants tend to overwhelm their customers (in-house staff or external parties) with mathematical informatics.
Big Data science and ML Machine learning dashboard analytics & traditional time series econometrics presented via the system screenshots or PDF sheets attached to emails could be more helpful for the telephone operator mindset traders and dealers, only if appropriately described
More information can at times backfire!
It tends to obfuscate the human mind, negatively impacts decisions and actions in real-time, and renders the decision support systems incapacitated with tech-savvy dipped acronyms, notations,& expressions.
Disseminating Communication risks
Read 15 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(