RMA encourages more institutions to participate in this industry-wide effort to identify best practices and establish benchmarks.
Philadelphia, Pa. (July 13, 2006) —The Risk Management Association (RMA) today announced preliminary results of its Market Risk Survey on Trading Activities and Counterparty Risks. This survey, initiated by RMA’s Market Risk Council, provides detailed insights into the current practices and planned development relating to the measurement and control of market risk in trading activities and counterparty credit risk. A presentation of the preliminary results was made at RMA’s Market Risk Officers Round Table in New York on June 27.
This study is the fifth in a series of market risk studies being conducted by RMA to identify best practices and provide an ongoing benchmark in the area of trading activities and counterparty credit risk. This past spring, 37 large institutions in the U.S., Canada, the United Kingdom, Europe, Australia, and Asia completed the Web-based survey. More institutions are expected to complete the survey before the final results are released this fall.
“Like RMA’s previous market risk studies, this one provides a benchmark for participants to measure their performance against that of their peers,” said Curtis Knight, RMA’s director of Market Risk and Securities Lending. “The response to our research effort has been global, making these studies especially valuable. RMA encourages institutions that have not already participated in this survey to join in this important research effort.”
Following the completion of the study in August, RMA will discuss the results at a special forum that will be open to all institutions. Study participants will receive the final results for free. The final report will show overall aggregate results and will deliver factual information. For instance, it may indicate, as the preliminary results do, that 88% of participants use scenario results to quantify and communicate tail risk. Most also use scenario results to set limits.
In the final report, frequencies will be broken down by geographical location (U.S., Canada, United Kingdom, EU, Asia, etc.) and leading practitioners. Institutions will also receive an Excel® spreadsheet with their individual results for comparison against the overall results, against others in their geographic area, and against the leading practitioners. Where appropriate, comparisons to prior surveys will be analyzed and written into the final report.
To participate in or to learn more about the survey, contact Fran Garritt, RMA, at 215-446-4122.
Trading Activities Survey Topics
The trading activities portion of the survey contained 66 multiple-choice questions regarding:
- Organization of the market risk management function
- Data collection and storage
- Measurement techniques
- Valuation practices
- Scenario analysis
- Limits setting and reporting
- Actual risk management results
- Capital allocation
Counterparty Credit Risk Survey Topics
The counterparty credit risk portion of the survey contained 94 multiple-choice questions regarding:
- Methodology
- Credit standards
- Netting
- Derivatives trading supported by collateral
- Derivatives trading with re-couponing
- Early termination clauses
- Repo trading
- Credit risk IT structure and architecture
About RMA
Founded in 1914, The Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry. RMA promotes an enterprise approach to risk management that focuses on credit risk, market risk, and operational risk.
Headquartered in Philadelphia, Pa., RMA has 3,000 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 17,000 risk management professionals who are chapter members in financial centers throughout North America, Europe, and Asia/Pacific. Visit RMA on the Web at www.rmahq.org.
Contact:
Kathie Beans
The Risk Management Association
PR Manager/Senior Writer
1801Market Street, Suite 300
Philadelphia, PA 19103
PH: 215-446-4095
FX: 215-446-4101