DTCC has published a new white paper to raise awareness of key risks and emerging threats facing the finance and investment industry and proposes actions to help address them.
While the stability and resiliency of the global financial marketplace has improved significantly since the 2008 crisis, the paper published by DTCC (The Depository Trust & Clearing Corporation) identifies key risks facing the industry and opportunities to mitigate them to help protect market stability.
The paper, ‘The Next Crisis will be Different: Opportunities to Continue Enhancing Financial Stability 10 Years after Lehman’s Insolvency’, identifies a series of actions to tackle new challenges that have emerged related to the macro environment, market risks and the advent of new technologies. These include:
- Expanding central clearing for both cash and derivatives markets to more fully take advantage of the risk management benefits provided by central counterparties.
- Boosting regulatory harmonisation and cooperation among all stakeholders to harness the full potential of derivatives trade repositories as early warning signals for systemic risk buildups.
- Improving risk transparency by globally mandating the use of Legal Entity Identifiers (LEIs) in regulatory reporting.
- Further optimising and accelerating the US equity settlement cycle beyond T+2 to further reduce the exposure associated with unsettled trades.
- Ensuring that enterprise data management capabilities become foundational to financial firms’ risk management frameworks.
“The risk landscape has experienced a significant evolution over the last decade, which has led to a more resilient and stable global financial ecosystem,” said Andrew Gray, DTCC managing director and group chief risk officer.
“However, additional work is required to fully address some of the vulnerabilities that triggered the financial crisis as well as to tackle new risks that have surfaced over the past decade,” he said.
“We must maintain a forward-looking approach to identifying and anticipating threats and developing solutions to reduce them, which could help prevent or mitigate another crisis.”
Greg Bright is publisher of Investor Strategy News (Australia)