Hugo Banziger of Deutsche Bank gave a presentation entitled "Reshaping The New Agenda for Risk Management".
Hugo started by saying by outlining the ways in which regulation is changing the markets. Whilst positive overall on the benefits of regulation, he expressed surprise at the regulation on OTC derivatives which he say as helpful in managing risk, and not the cause of the crisis.
He emphasised that whilst regulation is important, that regulation should not be a substitute for risk management and said that regulation in particular does not address:
- The quality of assets held
- The quality of management
- The quality of infrastructure
He additionally mentioned that whilst welcoming Basel III, the economic effect will be to make the supply of credit more expensive to the detriment of economic growth in the real economy.
Given the quality issues he identified above, he then moved on to show what he had done about them in terms of:
- People – what quality of people do you have?
- Processes – where are the holes that things will fall through?
- Systems – can you get a complete picture of risk?
- Portfolio Level Risk – across all asset classes and business units
On people, he advocated a "home grown" risk management team, with people rotated across different roles within risk. He takes the fact that other institutions hire his staff as a frustrating complement to Deutsche Bank risk management. He has implemented a "passport" for his staff which shows what they are trained/competent in and how they are annually tested against this, across both technical and softer management skills. He was funny and quite dismissive that if "anyone does not know what an option is and how it works they are out!" even for lawyers as well as risk managers.
On processes, he has set up a new "risk operations" centre of competence to centralise form filling for risk managers, enabling risk managers to spend more time on risk and less on admin. He stated flatly that just because you find that risk managers spend 50% of their time on admin does not mean you have to accept this and you can do something about it. He also said that he is moving the jobs to where the people are, rather than asking people to move (e.g. risk centre in Berlin to catch Berlin maths graduates).
On systems he has spent EUR30 million in 20 months on sorting out the consistency of data and models within market risk. During the crisis it took DB 48 hours to pull together their mortgage portfolio exposure which was too long. He says that initiatives like this are part of a 10 year investment in systems, data and analytics. His ultimate aim is to have an interactive real-time control centre for all risks in the bank and to move away from paper-based daily reporting. He also mentioned that he had grown his market risk team from 70 to 200 post-crisis.
On Portfolio Risk he says that more time needs to spent on knowing risk apetite and knowing how this fits against risk capacity for the bank. He emphasised that risk managers are there to defend P&L and not capital. He said that portfolio/business model risks were his biggest source of risk.
Inspiring speaker, very confident, open about past losses and mistakes made. Biggest difference to many speakers here was that he put forward tangible actions to address things such as risk culture rather than just talking around them.