The Board of FDIC (Federal Deposit Insurance Corp.) yesterday issued a proposal for over 8,500 US smaller banks to have the option of adopting a simpler US version of Basel II guideline.

This survey was conducted in 103 countries across risk practitioners, regulators responsible for ERM, consultants and/or vendors working in ERM and members in other related professional roles. The respondents were from firms that were amongst the largest in the respective countries as well as from mid tier and smaller firms as well.

For many countries, 1st Jan 2008 accreditation being a big milestone for Basel II project sponsors and executives who i am sure have spent many sleepless nights during last 2-3 years on the Basel II accreditation and model validation initiatives.

Reviewing the current state of Basel II initiatives in 2008, provides some interesting insights on the journey of Basel II early adopters. The Basel II was expected to first be implemented as per the 2008 timelines in the 13 financially important countries represented on the Basel Committee on Banking Supervision (BCBS). They include Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Spain, Sweden, Switzerland, the UK and US. And majority of the Tier 1 financial institutions in the above economies achieved their host country Basel II accreditation on 1st Jan 2008.

Whilst reading up on the convergence of supervision practices for financial conglomerates operating across Banking, Capital Markets and Insurance, I came across some interesting developments in the Insurance supervision world led by International Association of Insurance Supervisors (IAIS). There is a BIS Joint Forum comprising IAIS, Basel II, IOSCO to deal with issues common to the banking, securities and insurance sectors, including the regulation of financial conglomerates.

Supervisors undoubtedly being key influencers of Risk mgmt practices globally. This article focuses on the developments in the supervision world and its impact on Risk mgmt in the Insurance industry.

Whilst researching on creativity and innovation in markets, I came across a creative offering around financial literacy from Fed Reserve and found it fascinating enough to blog on this, even though other bodies too have done this e.g. Stock exchange simulations, FX markets games etc.

In preparation for a Risk mgmt and Excel bootcamp here in Barcelona, I was studying the European Risk mgmt practices related to transparency and risk controls specially in context of Private equity, Hedge funds and much publicized M&A deals. At a broad level, these are about more transparency for investors based on EU instituted guidelines for streamlining M&A regulations last year as well as related to Hedge Funds operations. These are expected to have wide ranging implications for the markets guidelines in the US and the rest of the world too.

This blog is about some interesting facts about risks and defaults in the world of microfinance, micropayments, peer to peer lending and financial inclusion initiatives.

Summary: Last month in June, APRA released the market draft prudential standard APS 330 Capital Adequacy: Market Disclosure (APS 330). This sets min. prudential disclosure requirements for locally incorporated ADI’s (Authorized Deposit taking Institutions) and a limited set of (quantitative only) disclosures for foreign owned subsidiaries.

Key Point - As more & more financial institutions get creative about reaching out to the youth market by establishing presence in 3D online worlds, it is going to be interesting as to how the traditional Risk management practices will evolve to keep up with this new online presence and associated risks. Will this be managed by the Technology Risk experts or would it fall under Retail Banking Channels Op Risk honchos ?

Background:
Internet & Web as a financial services channel continues to shake up some of the traditional business models in a flat world. The consumer demographics is shifting from the baby boomers in the US & EU towards the generation X and generation Y - specially in BRIC countries & emerging markets such as Brazil, China, India, South East Asia - where a significant proportion of population is below age of 30 and ripe for financial products.

Banks tap social networks to target youth market -
As some of us know the amount of time spent by generation X & generation Y online is taking a quantum leap every single day. As a result some of the more creative financial institutions are preparing to reach out to the future customers by establishing presence in 3D online worlds. These includes pretigious names such as ABN AMRO, ING, Germany's Wirecard Bank, with a virtual branch in 3D online universe Second Life.com Another science fiction game Entropia Universe, has completed an auction of five virtual banking licences that allow firms to set up real world banking systems in the universe. Other examples being the Belgian financial services group Fortis has launched a MySpace-style social network for European entrepreneurs. The UK's Yorkshire Building Society (YBS) has introduced a virtual assistant to its Web site to answer online queries from mortgage customers. Dutch bank ING Direct, also has launched a viral video marketing campaign that promotes its new 'orange mortgage' to renters and potential first time home buyers.

All of these have their own unique Risk exposures - possibly the most sigificant being the customer data protection as well as reputation risk and the most importantly who one is dealing with as most assume online Avtars !

SEC Staff Announces Availability of Anti-Money Laundering Compliance Tool
FOR IMMEDIATE RELEASE
2007-67
Washington, D.C., April 16, 2007 - The Securities and Exchange Commission's staff today announced the availability of a new compliance tool to assist anti-money laundering (AML) compliance efforts by broker-dealers. The "AML Source Tool" is on the Commission's website at: http://www.sec.gov/about/offices/ocie/amlsourcetool.htm
Broker-dealers have compliance obligations under statutory and regulatory provisions and related rules of the securities self-regulatory organizations (SROs). The AML Source Tool, developed by the SEC's Office of Compliance Inspections and Examinations (OCIE), compiles and organizes key AML laws, rules and related guidance applicable to broker-dealers and provides links to these materials to promote easy accessibility.
"We're hoping that this AML Source Tool will assist broker-dealers with their AML compliance efforts," said Lori Richards, Director of OCIE. "It puts all AML requirements in one easy-to-reference location. While we initially developed the Source Tool for our own SEC examiners, we think it also will be an invaluable reference tool for broker-dealers and their internal AML compliance staff."
The Commission's staff appreciates the assistance it received from the staff of the U.S. Treasury Department's Office of the Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets and Control (OFAC), as well as from the NASD and NYSE.
http://www.sec.gov/news/press/2007/2007-67.htm

Sleepless in Seattle, I start this blog to share, discuss and most importantly learn about the new Frontiers in Risk & Compliance - both current & futuristic trends with signficant impact on the Risk Mgmt & Compliance practices & profession.

My future observations would focus on the following 10 Risk frontiers:

1. Risk Visualization
2. Next Generation Risk & Compliance Architectures
3. Risk Pricing Clusters
4. Risk & Compliance Taxonomy
5. Pan Regional Risk Data Grids
6. Digital Assets Mgmt
7. Cross Industry Risk mgmt practices
8. Incubating Centers of Risk Mgmt Excellence & practices
9. Risk Management Career Options
10. Embedding Risk Mgmt & Compliance in an organisational DNA