The global climate crisis has triggered the financial sphere to address the way in which it conducts business. Climate risk consideration is currently growing in the banking industry but should also be considered by banks in the Credit Valuation Adjustment...

Following Russia's annexation of Crimea in March 2014, the United States (US) and the European Union (EU), together with other countries, imposed mainly economic sanctions on Russia. Since Russia's recognition of the self-proclaimed autonomous republics of Donetsk and Lugansk, followed...

For several months now, we have been in an economic and financial environment that we have not seen for some years. In May, inflation in the Eurozone reached 8.1%, with six countries exceeding 10%, while the United States recorded an...

The war in Ukraine, as well as the unprecedented sanctions imposed by the European Union, the United States and their partners against Russia have had major consequences for financial services institutions. For foreign companies operating in Russia or Ukraine, the...

Since the European crisis management framework was established in 2014, there have not been many failing banks in Europe. However, the recent global health pandemic, combined with the ongoing conflict in Europe between Russia and Ukraine, could easily change this....

The invasion of Ukraine by Russia on 24 February 2022 is considered the most significant geopolitical event since the Second World War. While there is no question of military intervention by the European Union (EU) at the moment, the EU...

The widespread use of working from home (WFH) during the pandemic, regardless of sector or geographical location has required organisations and their information systems (IS) management to be very agile in deploying or increasing their capacity for remote collaboration. Some...

The identification and management of non-performing loans or NPLs as early as possible by banks are among supervisors’ current high-level priorities. Indeed, when prudential, monetary, and fiscal crisis mitigation mechanisms are tapered, the weakening of borrowers’ creditworthiness could materialise, along...

Local and international trends have transformed the way banks operate, affecting their capital positions and profitability. In particular, ongoing digitalisation programmes and technological innovation continue to add pressure on traditional banking models, including the supply chain. While management’s focus on...

With the current ultra-low interest rate environment and market volatility having a negative impact on banks’ returns and, ultimately, their capital positions, operating models must quickly adapt and become more cost-efficient to maintain profitability. This drive for cost-efficiency has become...

Brexit, or the UK's departure from the European Union, became a reality on 1 January 2021. In terms of the regulatory impact for the financial sector, and the banking sector in particular, the UK being a third country, UK banks...

The Targeted Review of Internal Models (TRIM) was one of the largest projects by the European Central Bank (ECB) aimed at identifying potential sources of unwarranted or non-risk based variability in Significant Institutions (SIs) risk-weighted assets (RWA) from the use...

Click here to read 'Key takeaways & industry challenges following the ECB TRIM project – a focus on credit risk (Part 2)' As articulated by the ECB in its recent TRIM reporting, the 236 findings cover different key aspects of...

With more than half of the world’s fastest-growing economies located in Africa1, the continent’s economic outlook is a positive one. Average annual GDP growth since 2000 is over 5%, placing Africa as the second-fastest growing economy behind Latin America. Real...

One of the anticipated challenges in the transition from IBOR rates to risk-free rates (RFRs) is the management of its impact on quantitative models. The ones currently used for pricing IBOR-linked financial instruments account for term rates which are “forward-looking”....

An important milestone in the IBOR transition is the change in rates used by LCH and CME for discounting and Price Alignment Interest (PAI) calculations for USD OTC cleared swaps. Indeed, on October 16, 2020, they moved from using the...

The revised market risk framework – also known as the Fundamental Review of the Trading Book (‘FRTB’) – not only impacts an institution’s regulatory capital charge calculation for market risk, but also affects operational, governance and business strategies. FRTB brings...

One of the major challenges of IBOR transition is the availability of historical data on alternative risk-free rates (RFRs) required to implement interest rate model changes or re-calibration. With the Secured Overnight Financing Rate (SOFR) only published since April 2018,...

With COVID-19, being declared a pandemic on March 11, 2020, financial institutions have had to shift most of their resources to mitigate the risks that have arisen. This has adversely affected important activities, one of which is market participants’ efforts...

Impacts from the COVID-19 pandemic have reverberated across every part of the global economy. Small businesses are struggling to pay their employees, banks are grappling with collapsing local economies, and many borrowers across the nation cannot meet their monthly mortgage...

The Risk-Free Rates Working Group (RFRWG) published an update on the impact of COVID-19 on the timeline for firm’s plans to transition away from GBP LIBOR on the 29th April. While the central assumption of LIBOR’s publication being ceased after...

The Alternative Reference Rates Committee (ARRC) continues to support market participants in their efforts to transition from USD London Interbank Offered Rate (LIBOR) towards the Securities Overnight Reference Rate (SOFR). Following the Financial Conduct Authority’s (FCA) March 2020 statement that...

As we continue to feel the effects of the global pandemic, the banking sector, like many other sectors, now faces unprecedented uncertainty about the economic outlook ahead. While banks go into this pandemic in a stronger position than the global...

The expected 2021 disappearance of LIBOR requires robust fallback language for cash products and derivatives alike. Industry associations have taken initiatives to reform the historic fallback language of securities, with ISDA proactively leading the way on derivatives and national working...

Since Libor was first used in financial markets in 1986, it has become the foundation of the global interbank funding market. However, regulators ruled that Libor’s volatility during the last global financial crisis (GFC) and a rate-rigging crisis in 20121...

With Libor’s cessation date at the end of 2021 looming, global regulators are hastening their IBOR fallback strategies. Yet while market momentum has increased for multiple published RFR indices, among them the GBP SONIA, the EUR €STR, and the USD...

Financial market participants – at least the largest ones – are actively preparing for the expected discontinuation of the London Inter-Bank Offered Rate (LIBOR) after 2021. Transitioning towards a LIBOR-free world is a challenge that requires the involvement and coordination...

With little more than two years to go, Libor’s cessation date continues to near. The voluntary agreement of panel banks submitting to Libor will conclude at the end of 2021, from which risk-free rates (RFR) are expected to replace Libor...

With significant IBOR reform on the horizon, Mazars brought together industry experts, practitioners and regulators to discuss the challenges and opportunities they face. Speakers included the Bank of England Market Division’s Alastair Hughes, EFRAG’s Didier Andries and Mazars’ IBOR lead,...

A raft of recent consultations on Ibor reform indicates that we may finally be making some progress. We have seen the International Swaps and Derivatives Association (ISDA) issue another round of consultations for Inter-Bank Offered Rates (IBORs) trying to solve...

Could the transition period towards the new alternative Risk-Free Rates (RFRs) be more complex than initially envisaged? The speech given by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the Financial Conduct Authority (FCA), on the 28 January...

The whole financial system relies on reference interest rates, more precisely on InterBank Offered Rates (IBORs) whose integrity and reliability have raised some concerns since the 2008 financial crisis and the LIBOR manipulation scandal. These IBORs are used to determine...

Because of the 2008 financial and economic crisis, banks have accumulated billions of non-performing loans (NPLs) on their balance sheets. Even 10 years after this major economic event, the situation is not yet back to normal in some countries. In...

Digital transformation has expanded the need for security, continuity and resilience. Today’s business must embrace an enterprise risk management strategy that includes legal, regulatory and political considerations. Enterprises today face a significant level of security challenges across their organizations. IT...

In recent years, we have seen a tremendous surge of interest in measuring and managing operational risks, both as a result of regulatory developments in corporate governance and capital adequacy, as well as due to a growing realisation that an...

Non-performing loans (NPLs) remain at the forefront of the European regulatory agenda, with two major consultations run by the European Central Bank (ECB) and the European Commission (EC) over the recent weeks, both in relation to the introduction of minimum...

With Solvency II fully in force, the insurance industry has entered a new phase of transformational development. For many insurance companies, Solvency II has provided the opportunity to make better sense of risk and yet, insurance companies continue to operate...

Measuring banking risks is a difficult exercise, but striking a balance between simplistic and overly complex measurement techniques is the key to accurate risk measurement. This was the substance of the European Central Bank’s (ECB) Chair of the Supervisory Board,...

Cyber as an organsational risk In 93% of data breaches, the targeted systems were compromised within minutes. 83% of the time, those breaches were not discovered for weeks, leaving the attackers with plenty of time to do their damage and...

There is a clear pipeline of jumbo disposal Non-Performing Loans (NPLs) in Italy, thanks to the ECB push, however vendors will need to take into careful consideration a few factors in their decision, such as recent regulatory reforms of insolvency...

Non-Performing Loans (NPLs) are a key issue and will continue to be on the European agenda as a top priority for a long time. On the one hand, the ECB guidelines are already applicable, as they represent a best practice...

The European Central Bank (“ECB”) recently launched public consultation on guidance to banks on non-performing loans (“NPL”). Consultation periods runs until 15 of November 2016. As NPL harms the profitability, funding and capital of banks and more globally the real...

At a time when the European Banking Authority’s stress tests have provided valuable insights into the solvency levels of European banks, these banks are continuing their efforts to formalise the conceptual and operational framework of risk management. While changes in...

Banks prepare for the reinforcement of prudential supervision via the Single Supervisory Mechanism (SSM). After successive waves of new regulatory requirements in recent years, the outlook for the calculation of risks and Pillar 1 capital requirements is becoming clearer. At...

The number of electronic money players in the European market has increased in recent years, from 4 in 2010 up to 48 in 2014*. Add to this the fact that numerous players beyond the banking world have also created their...

Since the 2008 crisis, the financial sector has been under scrutiny. Identified as one of the crisis root causes, the importance of risk management framework and risk culture and its interconnectedness to ensure the long run financial stability of each...