Knowledge Base Articles
Part I: Asset and Liability Management Using LSMC - Introduction to the Framework
In the first part of the ”Asset and Liability Management using LSMC” article series, we outline an ALM framework based on a replicating portfolio approach along with a suitable financial objective. This ALM framework, albeit simplified, is constructed to provide a straightforward replication of the complex interactions between assets and liabilities. Moreover, a brief introduction to the LSMC method used to generate all underlying risk factors is presented.
End of LIBOR Event Summary
We are delighted to present a free summary of a recent event hosted by Kidbrooke Advisory in a partnership with FinCAD and Erik Vynckier dedicated to analysing the consequences of moving away from -IBOR. The discussion involved exploring differences between the -IBOR and the alternative reference rates, technical aspects of the transition, fallback contracts' intricacies and their potential impact on the trading positions, as well as the situation at the Swedish market.
Summary: Swedish FSA releases consumer protection report
The Swedish Financial Supervisory Authority (FI) releases a yearly consumer protection report featuring customer security highlights in the Swedish financial industry. As in the previous years, the main risks related to customer security relate to mortgages and loans. The interest payments can potentially threaten the economies of the individuals in case of the economic downturn or the increase in interest rates. Another threat that is amplifying in the context of the digitalising society relates to customer data protection. The FI calls for more advanced security systems that would protect the consumer at all stages of a payment transaction. The improvement of these solutions is especially relevant in the context of increased instances of financial fraud. Finally, FI announces that the protection of the wealth management customers and the enforcement of the MiFID II requirements regarding third-party inducements becomes a vital area of the regulators' future work.
March 2019 News Update
We've selected the most relevant global news within the fields of automated financial advice, data intelligence and balance sheet risk this March. The rise of the robo-advisors concern the brokers, although many see this development as a helpful complement to the traditional wealth management business, stressing the regulatory burden as well as IT legacy systems' challenges. Meanwhile, Brexit leads to a spike in risk-aversion among the customers of Do-It-Yourself investment platforms. On the balance sheet risk side, the experts stress the importance of timely preparations to IFRS 17, FRTB and the transition from LIBOR. The machine learning tools are put to use in fraud detection in the banking industry context, and the Positive-Incentive ESG-based Loans gain prominence among the banks and corporations.
End of LIBOR: A Rising Challenge for The Insurers
Driven by the consequences of the global financial crisis in 2008 and the LIBOR scandal in 2012, the world’s financial regulators set off the search for alternative reference rates that could better reflect the underlying market and would be more difficult to manipulate. Since financial institutions use the reference rates to design contracts of various kinds, the impact of this change will be considerable. However, most of the available analysis and other material on this topic describe the challenges of such a transition only for banks, frequently leaving out the insurers who are significantly affected by the change as well. Therefore, it becomes essential to highlight global best practices regarding the preparation for replacing the -IBOR in the insurance industry.