While the real crisis is building up

Welcome to a new world! Following a phase of brutal consolidation, investment banking will be carried out by a handful of huge commercial banks themselves under direct or indirect control of governments or regulating authorities.

Bank and asset management businesses will be “re-siloed” in ecosystems defined according to risk environment, regulatory requirements and technical constraints. This will improve their agility, make their risk manageable, allow for transparency and simplify disclosure policies -at least this what we would like to think.

From an IT and risk management perspective there will be focus on

            -Electronic trading and clearing. Those derivatives which can be standardised and simplified enough to go to clearing houses will survive. The rest will go. Expect massive downsizing.

            -Outsourced valuations of derivatives and complex instruments (they won’t trade but will need portfolio valuations)

            -Active systems for cross-asset margining (net collateralized exposure in real-time or near time)

            -Active systems for portfolio concentrations (industry, currency, credit, risk factors)

            -Next generation risk architecture (re-engineering information flows, desktop. data mining, search, risk dashboard, etc)