ディスクロージャー研究学会



(青空に物事を晒すと虫干しされ綺麗になる)

文書No.
961210e

Risk Management Spurring Changes in Departments Monitoring Market Risk

    Trader of Reuter

    Mr.NobuoNishimura Editor of Trader  

 Japan's financial institutions, largely the major banks, are now squarely confronting the management of market risk using risk management techniques, and practical application of risk management can now be seen in trading departments. This is more than an effort to comply with the BIS agreement. Amid efforts to overcome the late 80s bubble era and the problems encountered in the wake of the bursting of the bubble, financial institutions were reawakened to the importance of risk management, and they became determined to aggressively manage their assets. Banks which are enthusiastically embracing risk management and also said to be the leading group in this area are Fuji Bank and Tokyo-Mitsubishi Bank among the city banks, the Long-Term Credit Bank of Japan among the long-term credit banks, and the largest regional bank, Bank of Yokohama. “Our interest is to maximize return,” says Hirofumi Watanabe, deputy general manager, planning section, Treasury and Capital!

 Markets dept, of The Bank of Yokohama. Behind this is the desire to eliminate the passive image of risk management.

 In October of 1995, Bank of Yokohama merged its capital, forex and securities divisions into one, thus establishing a Financial Markets Division. This division's planning group, headed by Watanabe, uses Value-at-Risk (VaR) to measure market risk. This is combined with real-time information (obtained with systems such as REUTERS) on front office position information for a unified management approach, enabling the bank to squarely challenge the market using crystal-clear criteria. Meanwhile, on October 1, the Long-term Credit Bank of Japan revised the organizational structure of its head office. It spun off its risk management section, which had been part of its general planning division, making it an independent section, and positioned it as a middle office managing the entire bank's market risk and credit risk functions. Mr. Akihiko Imamura, joint general manager, risk management dept, said that, “Our goal is to minimize risk and maximize return. Toward that end, we measure, monitor, and issue reports on market risk, and give advice and suggestions to the front office.” His section has the authority to stop a deal if a trader exceeds a specified risk level.

 At the interface between the risk management section and the front office is the risk manager, Mr Uchi, manager, risk management dept.LTCB. Based on the current rate of return requirements, Uchi furnishes the required risk values to each front office department and each individual trader. Also, while monitoring minute-to-minute changes in prices, trading scenario analysis incorporating risk value considerations are provided. Fuji Bank's Overall Market Risk Assessment Section and Sumitomo Bank's Market Management Division, are also middle offices possessing similar functions.

 In the case of these progressive banks, the middle offices are directly linked to top management. The direct manager is usually a vice president, but in the case of Bank of Yokohama, information is delivered by personal computer to the bank's president. According to Soji Suzuki, the president of Risk Management Institute, Inc. (slated to be established at the end of October), a think tank specializing in risk management, “top management has the responsibility to its shareholders to carefully implement a risk management program.” In the past, the concept of risk management was not very strong in the front office, and the necessary personnel were not cultivated. In the future, true professionals are likely to be demanded to staff this area.

 Recently, rating agencies such as Moody's and S&P have indicated that risk management will also be subject to rating. Not only banks, but corporations as well, will have to hustle to respond. Bank of Yokohama, which merged all of its risk management functions into one department, has apparently also streamlined its front office departments. Also, some banks which have their traders on an annual salary system, are already showing an inclination toward using performance-based evaluation data. There are certainly limitations to the measurement method, i.e., VaR. The current situation is that if “the front office doesn't understand the system, we can't control behavior.” It won't be long before the front office will be open to receiving evaluation data based on scientific criteria, as determined from the measurement of risk. When that happens, there is a chance that the front office organization, including personnel and trading methods, will change.


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