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Michael Lewis’ “The Big Short: Inside the Doomsday Machine”
March 15, 2010 @ 09:01 AM | By Greg MacSweeney

If you ranked the people who are the most disliked by Wall Street executives, Michael Lewis is probably at the top of the list (along New York Attorney General Andrew Cuomo and probably U.S. Congressman Barney Frank). First Lewis writes “Liar’s Poker” about the excessive culture he witnessed while he was at Solomon Brothers, and now he follows it up with “The Big Short: Inside the Doomsday Machine,” a scathing critique of Wall Street and its actions before, during and after the credit crisis. Here is Lewis’ “60 Minutes” interview from Sunday’s episode, in two parts:

Inside the Collapse, Part I:

Watch CBS News Videos Online

For Part II, click below:

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Wall Street Firms Focus On Vendor Risk (video)
March 12, 2010 @ 10:00 AM | By Melanie Rodier

Vendor risk is top of the mind for most Wall Street firms these days. In this video clip, Larry Tabb, CEO and founder of TABB Group, tells us how the credit crisis is changing the vendor landscape as financial organizations seek more stable larger vendors to align with. Still, when the market recovers, we will start to see more innovation, particularly from smaller independent vendors, Tabb says.

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AIG Plans to Revamp Compensation Model
February 11, 2010 @ 09:02 AM | By Greg MacSweeney

AIG CEO Bob Benmosche plans to revamp the compensation model at the troubled insurer. The new model will rate employees on a 1 through 4 scale, with the top employees ranked as 1. The catch: only 10 percent of the bonus-eligible employees can be categorized as a 1, so expect a lot of anxiety at AIG as the new plan is rolled out. WSJ's Dennis Berman tells Simon Constable about a plan by insurer AIG to introduce four tiers of compensation for employees in this video clip.

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AIG and Backdoor Bailouts?
January 27, 2010 @ 10:02 AM | By Greg MacSweeney

WSJ's Dennis Berman tells Kelsey Hubbard about ongoing investigations into the bailout of AIG, including allegations of a coverup over payments made to some of the biggest banks who had exposure to the collapsed insurer. Was there a conspiracy to pay banks in full, but not make the news of the payments public? But the big questions: where was the Fed when AIG was writing the toxic contracts in the first place? Where was the oversight as AIG took on more and more excessive risk?

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Volcker Speaks Out On Financial Innovation (video)
January 26, 2010 @ 10:52 AM | By Melanie Rodier

In this WSJ video, economic adviser Paul Volcker gives his views on financial innovation: "I hear about wonderful innovation in the financial markets. But I'll tell you too, credit default swaps and CDO's took us right to the brink of disaster. Were they wonderful innovations we want to create more of? You want boards of directors to be informed about all these innovative products, and understand them. I don't know what boards of directors you're talking about. I have been on boards of directors. The chances that they're going to understand these products that you're dishing out, or you're going to want to explain them, frankly, is nil. Wake up, gentlemen."

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FDIC Looking to Cash In on Risky Behavior
January 07, 2010 @ 11:20 AM | By Greg MacSweeney

In order to replenish dwindling reserves, the FDIC is considering charging member banks more if they're involved in risky behavior, according to this report from American Public Media’s Nancy Marshall Genzer.

Geithner Testifies on Regulation
October 30, 2009 @ 10:45 AM | By Greg MacSweeney

The Federal Reserve should lose its authority to bail out big, failing financial firms like AIG and Bear Stearns under proposed reforms aimed at limiting the collateral damage from such failures, U.S. Treasury Secretary Timothy Geithner said. Geithner added in this video from the Wall Street Journal that the bankruptcy code should be the primary tool for failing financial institutions, but there might be some cases where a bail out would be necessary.

Investors Take Aim at Brokers
October 21, 2009 @ 10:44 AM | By Greg MacSweeney

Thousands of investors hit with losses last year are filing arbitration claims against their financial advisors -- and their odds of winning look to be rising, according to Clare McKeen, a video correspondent for Barrons. Since the market meltdown a year ago, nearly 5,000 arbitration cases have been filed this year, up 65 percent from a year ago. So far this year, investors have won 45 percent of cases against advisors. Moreover, post Madoff, Congress is considering letting disgruntled investors take their claims straight to court, which may increase the number of cases that investors win.

Ex-Bear Stearns Money Managers Meet Jury
October 14, 2009 @ 10:49 AM | By Greg MacSweeney

Jurors are selected in the criminal fraud trial for two former Bear Stearns hedge fund managers, as seen in he following video from Reuters. Allegedly, while the two were busy promoting the $1.4 billion funds to clients, they sent emails to each other expressing doubts about the value of the funds. The case is being widely watched by Wall Street and by prosecutors to see if this type of case can withstand legal scrutiny.

But how will the jury be selected in this high-profile Wall Street Trial? Read on ...

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Bet Your Life?
October 12, 2009 @ 10:19 AM | By Greg MacSweeney

Are Life Settlement Securities the next toxic asset? Less than one year after the credit crisis, firms such as Goldman Sachs, Credit Suisse and JP Morgan are creating life settlement securities which are made by repackaging thousands of life insurance policies into tradable securities. Policyholders get money upfront at a fraction of the policy’s value and investors are paid the full value of the policy when the policyholder eventually dies. A no brainer for investors, right? However, DBRS, a credit ratings agency, says that no life settlement security has met its standards for “safety and security” to date. And critics say these products are just like the exotic investments that triggered the financial meltdown. Wall Street claims the products are safe, because they could be structured in a way that not many people of the same age or with the same illnesses would be included in the same security. Now where have we heard that before?

Trustee to Sue Madoff Kin
September 28, 2009 @ 10:02 AM | By Greg MacSweeney

The trustee charged with recovering money for Bernard Madoff's victims says he plans to sue Bernard Madoff’s brother Peter; his sons, Andrew and Mark, and niece Shana for negligence and breach of fiduciary responsibility.

Watch CBS Videos Online

And there's more ...

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E.U. Unveils Controversial Financial Regulatory Plan
September 23, 2009 @ 11:13 AM | By Greg MacSweeney

Today the E.U. unveiled a plan to overhaul the way banks and financial markets are overseen. Officials hope to present the plan to the G20 in Pittsburgh as a blueprint for averting financial crises. Marketplace's Stephen Beard describes the report.

But will anything actually be accomplished? It’s been more than a year since the credit crisis began and there has been a lot of talk on both sides of the pond about regulatory overhaul, yet nothing has happened. Talk is cheap, but modernizing the regulators so they can monitor today’s (high speed and innovative) financial markets is going to take a lot of work and a huge investment. Simply put, the regulators are not capable of monitoring a mostly electronic marketplace that is getting more complicated and innovative by the day. If lawmakers want to financial regulatory reform, they had better be ready to open the checkbook to the tune of millions of dollars.

Here in the U.S., Congress is beginning two weeks of hearings on banking reform. Treasury Secretary Tim Geithner will defend a plan to merge two of the four federal regulators. But the move is drawing its fair share of debate. Marketplace’s John Dimsdale reports.

Fed Is Looking For a Few Good Traders
August 12, 2009 @ 11:06 AM | By Greg MacSweeney

The Fed is looking to hire traders, risk managers and analysts to help manage its investments, including roughly half-a-trillion dollars worth of mortgage-backed securities. But they won't make the same millions as Wall Streeters. American Public Media Marketplace’s Amy Scott reports.

The End Of Wall Street: Why It Happened
July 24, 2009 @ 10:07 AM | By Greg MacSweeney

Here is another well produced and interesting video from the Wall Street Journal about the credit crisis. I don't think there is fresh information here, or breaking news, but the video is easy to watch. Chapter two of this WSJ series takes a look at what was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called "weapons of financial mass destruction."

Iron Fist With Brass Knuckles Ruled Lehman Brothers
July 23, 2009 @ 11:42 AM | By Greg MacSweeney

Lawrence G. McDonald, the author of "A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers," speaks to WSJ's Dennis Berman about what went wrong at the top of the firm. McDonald says that Lehman just wasn’t ruled with an iron fist, “it was ruled with brass knuckles,” and that some of the “best and the brightest” who tried to bring attention to the subprime risks were immediately silenced by leaders at Lehman.

Is Wall Street’s Day of Reckoning Still to Come?
July 02, 2009 @ 10:12 AM | By Greg MacSweeney

“Liar’s Poker” author Michael Lewis hasn’t been a popular guy on Wall Street since he wrote the book 25 years ago. Since then, he has written about finance many times and he is working on a new book about the current financial crisis. Although the banks have been scared and many have been shaken to their foundations, Lewis contends that there may be more upheavals to come. He is also shocked that the Treasury, the SEC and other agencies haven’t really begun to investigate what happened in the subprime mess. He says that when he has interviewed numerous executives from financial institutions, such as AIG’s Financial Products division, they tell him that no one from a regulator has come to try to find out exactly what happened. That fact alone, is simply astonishing.

E.U. Drafts New Regulatory System
June 19, 2009 @ 10:11 AM | By Greg MacSweeney

E.U. leaders are backing a draft for a new regulatory system which includes a systemic risk board to spot credit problems before they become a danger to the financial system. Britain fought to retain total control over its financial oversight, but that may now be diluted in the regulatory draft. The draft also includes an upbeat note on financial recovery. Stephen Beard reports for American Public Media’s Marketplace.

The Most Sweeping Changes to Financial Regulation Since the 1930s
June 17, 2009 @ 10:52 AM | By Greg MacSweeney

President Obama is focusing on the next step to fix the financial system: proposing new regulations that are intended to help consumers and put limits on bankers. MSNBC’s Steve Liesman goes over some of the changes, as does CBS News’ Chip Reid in the following videos. Also, new financial regulations will create a new financial consumer protection agency, require banks to carry more capital on their books, regulate derivatives and more, reports American Public Media Marketplace’s Steve Henn in the following audio clip.

Watch CBS Videos Online

Exploring What Really Broke Bank of America
June 16, 2009 @ 08:47 AM | By Greg MacSweeney

A new Frontline documentary titled "Breaking the Bank" is airing tonight that tells the tale of Bank of America's rise to its ill-fated takeover of Merrill Lynch. Also, American Public Media’s Bill Radke gets the bigger picture from "Breaking the Bank" producer Mike Kirk in the following Marketplace audio clip.

The Man Who Knew About Madoff Before Anyone Else
June 15, 2009 @ 06:34 AM | By Greg MacSweeney

Harry Markopolos repeatedly told the Securities and Exchange Commission that Bernie Madoff's investment fund was a fraud. He was ignored, and investors lost billions of dollars. It didn’t take for Markopolos to figure out that Madoff was a fraud, he says in the following video. It took him five minutes to figure out he was a fraud and four hours to mathematically prove it. Markopolos sent five separate reports to the SEC starting in 2000. All of the reports were ignored. Steve Kroft from CBS’s 60 Minutes reports.

Watch CBS Videos Online

Can Credit Markets Thaw Without Toxic Assets Buyout?
June 11, 2009 @ 09:39 AM | By Greg MacSweeney

With banks raising capital, is there still a need for a government-orchestrated effort to get toxic assets off bank books? WSJ economics editor David Wessel explains that while it is possible for a recovery to happen without removing the bad assets from the banks’ balance sheets, the toxic assets remain a distraction. So the big question still remains: Do we need a "bad" bank to take these assets away from the “good” banks?

Peter L. Bernstein Dies, Proponent of Efficient Market Theory
June 09, 2009 @ 08:55 AM | By Greg MacSweeney

Peter L. Bernstein, the author of Against the Gods: The Remarkable Story of Risk and other books, died on June 5th at the age of 90. In this McKinsey Quarterly video from January 2008, the well-known author discusses the meaning of risk and explains why sophisticated mathematical models to control it sometimes go awry.

Ultimately, Peter L. Bernstein will be remembered for his development and refinement of efficient market theory, which helped him bring investing theory -- more than simply picking stocks -- to the general public. Bernstein, it seems, advocated increased regulatory oversight to strengthen the foundation of the markets, while also believing that the wealth and opportunity created by a free market were worth the risk. He also was a Keynesian and he argued that the health of the market economy required public spending on various projects.

Overreaching Derivatives Regulation Worries Dealers
June 05, 2009 @ 07:36 AM | By Greg MacSweeney

The regulator of the futures trading industry is proposing new rules for trading financial contracts known as derivatives. John Dimsdale reports that big wheelers and dealers are now fretting about overreaching regulation in this American Public Media audio clip.

Investment Bankers: CIA Wants You
May 29, 2009 @ 07:14 AM | By Greg MacSweeney

The CIA is recruiting investment bankers and other Wall Street types. If they can pass a few hurdles and stomach the $130,000 salary, the financial whizzes will work on tracking economic threats to national security. Steve Henn reports in this audio segment from American Public Media’s Marketplace.

The Rise of a Financial Stability Regulator
May 28, 2009 @ 10:14 AM | By Greg MacSweeney

Just as the Great Depression led to the creation of new institutions and financial practices, the Obama administration is on track to impact financial regulations. One of the new concepts involves a financial stability regulator, Wall Street Journal’s David Wessel explains. The big question remains: “How much power will be given to the new regulator?”

What Went Wrong When Bear Stearns Fell?
May 22, 2009 @ 07:18 AM | By Greg MacSweeney

It took 72 hours for Bear Stearns to crumble. In one day, Bear Stearns went from $18 billion in cash on hand to $3 billion, as investors panicked. Reporter Kate Kelly from the Wall Street Journal wrote about the final days of the investment bank's collapse in her book "Street Fighters" and talks with host Kai Ryssdal about what happened.

Book Dissects J.P. Morgan During the Financial Meltdown
May 14, 2009 @ 11:04 AM | By Greg MacSweeney

A new book dissects J.P. Morgan’s role in the financial crisis and how JPM managed to both help create the products that would ultimately derail the markets and also how JPM avoided some of the huge losses tied to the financial crisis. Author and journalist Gillian Tett, assistant editor, Financial Times, talks about her new book, "Fool's Gold" in which she analyzes J.P. Morgan and its role in the financial meltdown.

Was AIG's Fall Criminal?
April 28, 2009 @ 10:04 AM | By Greg MacSweeney

New information has surfaced in the federal investigation of the collapse of insurance giant AIG. As CBS News chief investigative correspondent Armen Keteyian reports, investigators wonder if AIG’s downfall was due to criminal acts, such as securities fraud. CBS News is reporting that a Justice Department criminal investigation is trying to figure out just how AIG crumbled. According to Keteyian, sources say investigators are digging into whether Joseph Cassano, the former head of London-based AIG Financial Products, and two of his top deputies -- Andrew Forster, an executive vice president, and Thomas Athan, a managing director -- committed securities fraud and other federal crimes.

Watch CBS Videos Online

Investigators Open 20 TARP-Fraud Criminal Probes
April 22, 2009 @ 09:54 AM | By Greg MacSweeney

Ever since taxpayer money was handed out to U.S. banks, the question has been "where did the money go?" TARP warns that one out of ten bailout dollars could be lost to fraud, amounting to possibly $100 billion or more. The lead investigator says that with so much money being handed out in such a short period of time, it is not surprising that schemes and criminals would try to benefit. Securities fraud and insider trading are just two types of crimes various government agencies are investigating. CBS News’ Chip Reid reports.

Watch CBS Videos Online

Geithner Under Fire on Capitol Hill Today
April 21, 2009 @ 09:34 AM | By Greg MacSweeney

A critical watchdog report out this morning on the Troubled Asset Relief Program (TARP) says Tim Geithner’s Treasury Department needs to do a better job of tracking how banks are using TARP money.

Geithner Responds to Krugman’s Bank Bailout Critique
March 30, 2009 @ 09:54 AM | By Greg MacSweeney

Treasury Secretary Tim Geithner responds to Nobel Prize-winning economist and New York Times columnist Paul Krugman’s critique of President Obama’s bank bailout with NBC’s David Gregory on “Meet the Press.”

25 People to Blame for the Financial Crisis
February 13, 2009 @ 08:20 AM | By Greg MacSweeney

There is plenty of blame to go around in the current economy. Congress, Wall Street, regulators, homeowners, CEOs, and the list goes on. But make no mistake, fairness and blame do not go hand in hand. Time Magazine has just published a list of the top 25 People to Blame for the Financial Crisis. While the list is fairly accurate, don’t expect similar lists, raving commentaries or funny Saturday Night Live skits at the expense of Wall Street to go away any time soon.

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Davos Diary, Day 2: Another Day, More Bad News from the Banking Industry
January 30, 2009 @ 10:52 AM | By Greg MacSweeney

Guest Blog Entry: by Ashok Vemuri, InfoSys

The mood continues to be very muted here at the WEF in Switzerland, with faces just as long as the coats that block out the bitter cold. While the parameters for the discussion were set yesterday, there is still no one who has set out an agenda or call to action that everyone can rally around to try and find a way out of the current economic quagmire. There are some themes starting to emerge, but everyone is still focused on the problems rather than the solutions.

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Davos Diary, Day 1: First impressions at Davos: Collaboration is the Name of the Game
January 29, 2009 @ 10:55 AM | By Greg MacSweeney

Guest Blog Entry: by Ashok Vemuri, InfoSys

This is my third time in Davos for the World Economic Forum and my overwhelming impression is that the atmosphere is ‘muted’. If you walk through the Congress Hall or global village, it’s as if someone has thrown cold water over the delegates, plunging the temperature to match the weather outside. There is just not the same energy and ebullience that usually defines Davos.

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Davos Diary, Day 1: What This World Needs Most … Will We Find it at Davos?
January 29, 2009 @ 10:41 AM | By Greg MacSweeney

Guest Blog Entry: by Richard Muirhead, Tideway

I remember January 1997. I was 25 living in an apartment in Russia opposite the Kremlin. Guns were routinely checked at the door in my local restaurant. This was before the stock market crash of 1998, before Putin, before $150 oil prices. I would stay up nights, moonlighting on my first software company and the Internet infrastructure and email client I used in Moscow was already better than what my employer provided. And I was itching to get out there and catch this wave!

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Obama Faces Bleeding Banks
January 22, 2009 @ 09:00 AM | By Greg MacSweeney

Despite billions of dollars of government bailout funds, many banks are still reporting huge losses. As CBS News’ Anthony Mason reports, newly-elected President Obama and his cabinet face huge fiscal challenges.

Watch CBS Videos Online

House Financial Services Committee Madoff Hearing (Video)
January 06, 2009 @ 08:54 AM | By Greg MacSweeney

If you missed the riveting, 3.5 hour House of Representatives Financial Services Committee hearing on the alleged Bernie Madoff affair, you missed one of CSPAN’s finest moments. View the full hearing, or a shorter version from CBS News, in the video players on the next page.

DISCLAIMER: Wall Street & Technology is not responsible for viewers’ irritation toward elected officials, Bernard Madoff, the SEC or your rapidly rising level of frustration and blood pressure while you watch this video.

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The Latest on the Madoff Scandal
December 16, 2008 @ 10:13 AM | By Penny Crosman

As Wall Street tries to recover from the shock of the $50 billion Madoff Securities fraud case, new details are emerging about how the scheme worked, the federal investigation of Bernard Madoff and his firm, and how investors all over the world have been affected. The media usually benefits from tragedies such as these and surely some journalism career will be kick-started by Madoff's spectacular crash. Some of the most interesting stories we've seen this morning are these:

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Weekend at Bernie's
December 15, 2008 @ 09:23 AM | By Greg MacSweeney

OK, I wasn’t really at Bernie Madoff’s house, and my weekend wasn’t as funny as the 1989 film Weekend at Bernie’s, but everywhere I went this weekend people were talking about Berard Madoff’s alleged $50 billion Ponzi scheme. First, a father in my son’s Saturday morning ice hockey class mentioned the alleged fraud to me as we were chatting. Then, later that afternoon as I was sitting on a Polar Express train ride in Phillipsburg, NJ, I heard a couple of adults discussing Bernie Madoff across the aisle. (If the kids were discussing Madoff, I really would have been floored). By the way, the train ride is a lot of fun for the kids — hot chocolate, Santa, elves, music, silver bells, the whole nine.

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Shock and Disbelief: Bernard Madoff Accused of Defrauding Clients of $50 Billion
December 12, 2008 @ 12:07 PM | By Greg MacSweeney

Bernard Madoff, the founder of Bernard L. Madoff Investment Securities LLC and a former Nasdaq Stock Market chairman, was arrested and charged with securities fraud in what has beeen called by federal prosecutors as a Ponzi scheme that could involve losses of more than $50 billion.

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Scheming to Get Some Bailout Love
November 26, 2008 @ 09:43 AM | By Greg MacSweeney

These two reporters have the right idea about how get a piece of the bailout pie, in this video from WallStrip.com. How can you get some bailout dollars? It’s easy. Become a bank holding company or an automaker. Heck, American Express became a bank holding company seemingly overnight. So can you! Well, maybe not, but given the flip flopping of Hank Paulson, you never know where bailout dollars will be headed next.

Watch CBS Videos Online

Regulators Place Hedge Funds on the Hot Seat
November 14, 2008 @ 08:03 AM | By Greg MacSweeney

Yesterday, Congress questioned heads of some of the worlds largest hedge funds about their role in the global financial meltdown in hearings on Capitol Hill. Not surprisingly, Congressional leaders are looking to regulate the largely unregulated hedge fund market.

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Financial firms change risk management practices (video)
November 11, 2008 @ 09:40 AM | By Melanie Rodier
S. Ramakrishnan, CEO of Reveleus and Mantas, Oracle, talks to WS&T about how risk management practices are already changing in light of the subprime crisis and economic turmoil.




Financial Firms To Meet Treasury to Talk about Troubled Assets (audio)
November 10, 2008 @ 11:43 AM | By Melanie Rodier

Today, there's a big meeting between the Treasury and financial firms to talk about TARP, the government's program to buy troubled assets. The meeting comes as a survey finds that financial players are so uncertain about how TARP would work, they aren't sure they want to participate. Here's more on this story in this Marketplace segment from American Public Media.

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Unknown Credit Default Data Could Inspire Regulators (audio)
November 04, 2008 @ 08:16 AM | By Greg MacSweeney

Regulators might be shocked into action when it comes to credit default swaps (CDS). The value of all the credit default swaps could be $40 trillion or $50 trillion -- nobody knows for sure, reports Bob Moon for American Public Media’s Marketplace radio program.

Related audio: The Sky Didn't Fall on Lehman Swaps, Yet

The Sky Didn't Fall on Lehman Swaps, Yet (audio)
October 24, 2008 @ 07:13 AM | By Greg MacSweeney

Hundreds of billions in losses were expected from Lehman Brothers' credit default mess. But the reality wasn't so disastrous after all -- more like $5 billion. But some experts say dealers are hiding CDS exposures and the real losses may be yet to come, according to this Marketplace segment from American Public Media.

Greenspan 'Shocked' by Breakdown (video)
October 24, 2008 @ 07:09 AM | By Greg MacSweeney

Former Fed Chairman Alan Greenspan said he was "shocked" by the breakdown in the credit system and told Congress the crisis was once in a century. (WSJ.com video)

While Greenspan Pans Derivatives Price Modeling, Vendors Fine-Tune Their Offerings
October 23, 2008 @ 05:05 PM | By Penny Crosman

In testimony before Congress today, Alan Greenspan placed the blame for the current financial crisis squarely on the use of mathematical models to determine value and risk for mortgage-backed securities: “It was the failure to properly price such risky assets that precipitated the crisis,” he said. “In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivates markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.”

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Congressman Waxman No Longer Believes Markets Can Self Regulate (audio)
October 22, 2008 @ 08:56 AM | By Greg MacSweeney

Today, Congress is holding hearings on the role that the ratings agencies have played in the credit crisis. In this American Public Media Marketplace radio interview, U.S. Congressman Henry Waxman (D-CA) who chairs the House Committee on Oversight and Government Reform, discusses some of the causes of the crisis and what new regulations might be in store of banking. Hint: Congress is no longer listening to lobbying from Wall Street that contends that the markets can self regulate.

Federal and NY State Prosecutors Investigating CDS Trading (NPR.org audio)
October 21, 2008 @ 08:42 AM | By Greg MacSweeney

Prosecutors are looking to see if traders manipulated the prices of credit default swaps in order to weaken confidence in financial companies, according to this report from NPR’s Marketplace Morning Report. Then the traders would short the financial stocks as the prices fell.

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HSBC Group COO Discusses Risk Management During the Financial Crisis (video)
October 16, 2008 @ 06:30 AM | By Greg MacSweeney
On the day that Lehman Brothers failed I spoke briefly with David Hodgkinson, group chief operating officer, at HSBC. Hodgkinson discusses how global banks need to work together to uncover potential risks and the role technology will play in uncovering new financial and market risks in the future. We were at the SIBOS 2008 conference in Vienna.

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One Way to De-Mystify Derivatives Valuation
October 14, 2008 @ 03:44 PM | By Penny Crosman

A primary cause of the current financial crisis, many people believe, is the difficulty -- some would say impossibility -- of properly valuing and pricing the complex derivatives on so many organizations' books. Just today, the superintendent of the New York State Insurance Department told a Congressional panel that a lack of transparency on credit-default swaps made it hard for the state to know what the broader effects of an AIG bankruptcy would be. Buyers and traders often don’t know what assets underlie credit default swaps and collateralized mortgage obligations and therefore can't easily determine what those assets are worth or how likely they are to default.

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BlackRock to the Rescue (NPR.org audio)
October 10, 2008 @ 10:24 AM | By Greg MacSweeney
BlackRock has long been a player in the mortgage backed securities market. In fact BlackRock's founder Laurence Fink played a large role in creating the market, according to Charles Murphy, adjunct professor at the NYU Stern School of Business in this NPR report. Now the Tresury Department may turn to BlackRock to take on some toxic assets as it tries to unfreeze the credit markets. continued...
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So Where Did Risk Management Go Wrong?
September 23, 2008 @ 10:24 AM | By Greg MacSweeney

Who dropped the ball? Risk managers? Traders? Executives? Regulators? Unfortunately, the answer isn't simple.

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The End Of An Era
September 22, 2008 @ 08:04 AM | By Penny Crosman

The news today that Goldman Sachs and Morgan Stanley are going to be converted to highly regulated commercial banks with strict capital ratio requirements marks the end of Wall Street's ultra profitable hayday. It will be welcomed by the American people, who are done bailing out once highrolling firms with tax dollars. "You flew too close to the sun, now your wings are melting, too bad for you," was a friend's reaction to this morning's news.

Could there be unintended consequences, for the markets and for the industry, of so quickly and dramatically reconfiguring this once powerful industry?

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A Payments Conference where No One is Talking About Payments
September 15, 2008 @ 06:30 AM | By Greg MacSweeney

A bankruptcy filing trumps payments technology news, even at a payments conference.

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Roundtable Analyzes Hedge Funds Best Practices (Part 2)
July 25, 2008 @ 11:00 AM | By Greg MacSweeney

In a recent roundtable, panelists offered advice on why it is important for hedge funds to increase transparency, perform "checks and balances" on valuations, add dedicated risk management functions and have a business continuity plan for trading operations. Ultimately, these practices will help reduce hedge fund risk and improve investor protections.

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Hedge Funds Best Practices Outlined by President’s Financial Working Group
June 25, 2008 @ 09:18 AM | By Greg MacSweeney

Eze Castle Integration recently hosted a roundtable discussion about the April 2008 Hedge Fund Best Practices Peport from the Asset Managers’ Committee to the President’s Working Group on Financial Markets. A panel of hedge fund industry executives from Equinox Partners, Ernst & Young and the law firm Bingham McCutchen joined Eze Castle Integration in discussing the Asset Managers’ and Investors’ Committee reports. This blog is the first of two that discusses the reports and requirements for hedge funds, as well as the panel discussion and recommendations.

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MF Global Hires Risk Consultant after Rogue Trader Loses $145.5 million
March 03, 2008 @ 01:04 PM | By Melanie Rodier

Brokerage MF Global has hired external risk consultants to review its order entry systems, after a rogue trader lost $141.5 million when he was able to exceed his limit order and place unauthorized trades.

The incident comes just weeks after Soc Gen revealed that a rogue trader lost more than $7 billion by placing unauthorized bets on European stock indexes.

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New Model Attempts to Price CDO Options
November 26, 2007 @ 06:54 PM | By Penny Crosman

In the aftermath of the CDO (collateralized debt obligation) crisis, for firms that are ready to dive into securitized credit products again, a new pricing model came out today for valuing exotic credit products such as options on tranches and forward starting CDOs (a forward starting CDO is a single tranche CDO with a specified premium starting at a specified future time).

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To Survive the Next Market Crisis, Be Like A Cockroach, Says Morgan Stanley Trader-Turned-Author
November 15, 2007 @ 09:46 AM | By Penny Crosman

Richard Bookstaber, author of the book Demon of Our Own Design, offered some unique advice last night to financial firms that want to survive future crises (like the current CDO fiasco): Be more like cockroaches. Not in the sense of living in drainpipes and scurrying out at night to scare unsuspecting apartment and office-dwellers, as New York City cockroaches do, but in a survival-of-the-simplest ideal. While many "super designed" insects in certain jungles that developed specialized adaptions for only one type of flower or seed pod are now history, the homely cockroach lives on and on.

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E*TRADE Gets Proactive About E-Mail Fraud
August 14, 2007 @ 11:45 AM | By Michael Ellison

Welcome. My name is Mike Ellison and I am the EVP at Corporate Insight. We’re a firm that looks at the retail experience at a number of brokerage, mutual fund, and banking firms. From time to time, I’m going to be blogging on subjects related to wealth management. Much of what I will be talking about will come from our experiences in maintaining live accounts at the firms we follow in our research. When we uncover something I feel would generate some lively discussion, I’ll post it and hopefully you’ll chime in with your opinions.

To open our discussion, we recently received an email from E*TRADE on identifying and avoiding fraud that I think should generate some dialog.

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Canaras Capital Protects its Data Against Botnet Threat
June 26, 2007 @ 05:58 PM | By Ivy Schmerken

If you work for an alternative asset management firm, so much rides on protecting intellectual property, customer data and the reputation of your firm. That is the message from Raffi Jamgotchian, chief information officer at Canaras Capital LLC, an alternative asset manager specializing in credit markets that was founded in 2006.

With botnets and other dangerous forms of crimeware anonymously launching distributed attacks on companies, Canaras Capital set out to protect the firm’s reputation.

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Gaming The System: Online Fraudsters Use ACH Efficiency for Illegal Benefits
May 22, 2007 @ 08:30 AM | By Greg MacSweeney

What'll the cyber crooks think of next? Well, this isn't a new idea and it certainly isn't the type of flashy heist you will see in this summer's sequel Ocean’s 13 with George Clooney, Matt Damon and crew. But hundreds of account holders have lost funds after a most likely phony firm named Equity First generated random routing and account numbers and tried to deposit one cent. If the one-cent deposit clears, the fraudsters know the account is active and they begin to withdraw funds. And for financial firms, it's just another risk to add to the list.

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SIFMA Chief Lackritz Testifies Before Senate
May 21, 2007 @ 09:02 PM | By Cory Levine

Marc Lackritz, CEO of the Securities Industry and Financial Markets Association, and the voice of the U.S. broker-dealer community, testified last week in front of the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Securities, Insurance and Investments. In his testimony, Lackritz reaffirmed SIFMA's support of a single-regulatory force and the adoption of a principle-s based regulatory approach. Being one of the most influential lobby groups on Capitol Hill, SIFMA has considerable sway in regulatory matters, and their staunch support of regulatory reform may yield meaningful change in the way securities firms are governed.

Read the full testimony here (PDF).

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Sarbanes-Oxley Costs Take a Nose Dive
May 16, 2007 @ 05:01 PM | By Melanie Rodier

Costs to comply with the Sarbanes-Oxley governance law dropped last year for the third year in a row, largely because managers have been spending less time on reviews.

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SEC Imposter Alert
May 10, 2007 @ 04:53 PM | By Melanie Rodier

Not only do companies have to worry about stolen laptops, rogue employees and hackers -- now they also have to worry about fake SEC examiners.

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Wall St. Still Unprepared for Pandemic, SEC Mulls Action
May 07, 2007 @ 09:00 PM | By Cory Levine

The United States Government Accountability Office released a report (PDF) on its latest year-long study on the resiliency of U.S. financial markets last week, and the results were mixed. After examining seven critical exchanges, clearing organizations, and payment processors, the GAO determined that the financial industry's progress in ensuring resiliency in the face of disaster was promising, but there is still much work to be done. The report's discussion of communications between the GAO and SEC were intriguing, indicating that disaster preparedness in the U.S. may evolve from being a matter of common sense to being a matter of regulatory compliance.

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JPMorgan Losing Data and Making Headlines
May 01, 2007 @ 09:31 PM | By Cory Levine

Two disturbing reports of carelessness with customer data have surface out of JPMorgan Chase this week. The first is a video posted yesterday on YouTube which allegedly shows customers' in-tact personal financial information being fished out of garbage bags left outside of Manhattan bank branches.

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Cuomo Wins Big on Data Privacy
May 01, 2007 @ 09:02 PM | By Cory Levine

New York's Attorney General Andrew Cuomo last week obtained the first settlement in court under the state's data breach notification legislation. While the punishment of the exposed company, Chicago-based claims management firm CS Stars, LLC, was relatively light, the development opens up new legal vulnerabilities for firms that do not follow proper procedure in the event of sensitive customer data exposure.

The leak potentially affected 540,000 New York consumers, according to Cuomo's office. New York law requires immediate notification in the event of a security breach involving customer data. CS Stars, complying with FBI instructions, did not announce the breach until 2 weeks after discovery.

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Keep An Eye On Your Outsourcers
May 01, 2007 @ 04:21 PM | By Penny Crosman

One message that rang out loud and clear from some of the compliance discussions today at the SIFMA show was: broker-dealers take outsourcing lightly at their peril. Broker-dealers retain regulatory responsibility for the functions they outsource. One of the regulators scrutinizing securities' firms outsourcing relationships is the NYSE. "There's been controversy over the rule we proposed [NYSE Rule 340]," said Grace Vogel, executive vice president, member firm regulation at NYSE Regulation. "We don't object to outsourcing. Where we see problems is when something goes wrong and a firm says, 'We're not responsible' and points to the outsourcer and says, 'go regulate them.' The outsourcer is outside of our jurisdiction. Firms should outsource functions, not responsibilities."

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Signs That A Hedge Fund May Be Trouble
May 01, 2007 @ 01:23 PM | By Penny Crosman

If your firm is a counterparty to a hedge fund, invests in or partially owns a hedge fund or places clients' money in a hedge fund, it may be somewhat accountable if the fund commits fraud, losses money or goes bankrupt. Of course, not all hedge funds are run by crooks or mismanaged, but hedge funds do have an 8.5% failure rate, and that rate is growing. In 2005, hedge funds lost $1 billion, in other words one dollar out of every thousand.

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Does Your Firm Own Too Many Yen?
April 09, 2007 @ 03:51 PM | By Penny Crosman

Are you exposed to too much foreign exchange risk? Most companies don’t know the answer to this question, according to executives at FiREapps, who released version 3.5 of their eponymous corporate foreign exchange management software today. The software sends queries out to a company’s financial systems and analyzes its corporate-wide foreign exchange exposures, based on real-time currency data.

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Do You Need to Obfuscate?
April 05, 2007 @ 05:34 PM | By Penny Crosman

Did you know that when you create an application using Java or .net, anyone can drag and drop that executable to a free decompilation tool such as Reflector (for .net) and then be able to see all the source code behind it? Such examining of code and perhaps reverse engineering can be done for benign reasons – to debug the application, for instance, or to provide better training or support. But sneak-peeking at software code can also be done maliciously, by competitors, disgruntled employees or hackers who want to steal intellectual property or get into a computer system. Obfuscation software inserts additional code into an application to prevent a would-be IP thief or hacker from being able to reverse-engineer the code.

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E-Discovery: You Have To “Backup” Your Claim
April 02, 2007 @ 03:33 PM | By Greg MacSweeney

In a follow-up to the first e-discovery blog entry, it seems that the courts are starting to hear cases on the new e-discovery rules. The courts are starting to work. It’s not that the courts haven’t been busy, but just now, we’re starting to see rulings that take into consideration the new Federal Rules of Civil Procedure (FRCP).

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With HyperFeed Litigation Pending, Exegy Launches Low-Latency Ticker Plant
March 20, 2007 @ 05:45 PM | By Ivy Schmerken

On the heels of breaking off an agreement last November to merge with Chicago-based market data vendor HyperFeed Technologies, Exegy Inc., a St. Louis-based technology provider is launching a new ticker-plant service initially to 21 Wall Street customers. But when Wall Street firms consider Exegy’s new ticker plant, should they care that Exegy jilted HyperFeed at the altar? And should they be concerned about a lawsuit pending in Illinois?

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Barney Frank: Banks’ Best Friend on Capitol Hill?
March 19, 2007 @ 04:49 PM | By Greg MacSweeney

If Barney Frank’s recently reported statements are accurate, banks and financial institutions may have a surprisingly friendly advocate on Capitol Hill. Frank, who also happens to be the influential chairman of the House Financial Services Committee, contends that banks should be exempted from SOX 404 compliance because they are already subject to similar provisions in an earlier law.

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E-Discovery: 100 Days and Counting
March 15, 2007 @ 03:12 PM | By Greg MacSweeney

This past weekend, we passed a milestone -- 100 days since the enacting of the new Federal Rules of Civil Procedure as they relate to eDiscovery. In summary, those Rules attempt to give courts guidance for how to treat digital data and information, in whatever form and context it is in.

The Rules try to contain the ever escalating costs that plaintiffs and defendants. So spreadsheets, letters, contracts, e-mails and all of those files that are stored on disk and on tape, on and off the network can, should, and must be “discoverable” to all of the parties engaged in litigation.

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Getting the Daylight Savings Monkey Off Your Back
February 27, 2007 @ 09:26 PM | By Cory Levine

On the list of forthcoming projects for CIOs is updating their systems to handle the changes in daylight savings time (DST) (DST). The Energy Policy Act of 2005 will cause DST to fall weeks earlier this year than in years past. With that in mind, industry analyst TowerGroup has issued recommendations on how financial institutions can deal with what they are calling "more a nuisance than the cause of any significant business outage."

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RSA Responds to Site-to-User Authentication Study
February 20, 2007 @ 02:28 PM | By Cory Levine

A couple of weeks ago, we wrote about a study that seemed to prove that site-to-user authentication was a broken practice. Well, not surprisingly, the purveyors of such technologies took exception to the notion that their product was ineffective. What follows is a response written by Louie Gasparini, co-CTO of the consumer division of RSA, the security division of EMC that sells Passmark site-to-user authentication technology.

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More Phishing Phun: Even Experienced Web Users are Becoming Victims
February 16, 2007 @ 03:10 PM | By Greg MacSweeney

You would think that by now almost every user of the Internet would know not to click on links in emails supposedly from financial institutions -– especially a bank that you have never heard of or have never done any business –- and enter your username or password.

But as this podcast and article from National Public Radio (NPR) points out, Web-savvy individuals are also falling victim to online financial fraud as phishers use newer technology to stay ahead of financial institutions and users.

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UNX Provides Access to Liquidity Sweeping Tools Via Instant Messaging
February 15, 2007 @ 09:28 AM | By Ivy Schmerken

Buy-side traders that feel comfortable using instant messaging to communicate with and route order flow to the sell-side community can now use IM to sweep crossing networks and dark pools.

The cool technology comes as the result of a partnership between Pivot Solutions, the developer of IMTRADER and UNX, an agency brokerage specializing in direct-market access and algorithmic technology.

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ING Traders Get Powers in Fingertips, Phone Home
February 14, 2007 @ 04:35 PM | By Cory Levine

ING has implemented biometric fingerprint scanning technology on its trading floor workstations. Dutch biometric consultant BioXS developed an integrated solution using matching software from BIO-key International combined with fingerprint readers from Zvetco. The solution is designed to eliminate the need for multiple complex passwords that were formerly required for access to ING's dealer room workstations, and free up technology staff who were constantly changing and replacing access codes.

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A Spy in the Ernst & Young Advanced Security Center
February 06, 2007 @ 04:00 PM | By Cory Levine

This morning I was invited to the Ernst & Young headquarters in Times Square to tour the firm's Advanced Security Center (ASC). The center, along with a location in Houston, employs a staff of 30 security professionals dedicated to performing assessments of companies' security infrastructure, and focusing on the financial services industry. Through the dually authenticated door-locks and under the concrete lined ceilings of the office were an impressive facility and a team of truly dedicated white hats, diligently probing the defenses of your bank or brokerage and mine.

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Site Authentication Method Revealed to Be a Bust
February 05, 2007 @ 02:16 PM | By Cory Levine

The New York Times reports today (free subscription required) that a new joint study out of Harvard and the Massachusetts Institute of Technology claims that a popular authentication technique is failing its users. Site authentication images — user-chosen images that appear on a Web site when a user logs in to prove the authenticity of the site — are not an effective authentication method.

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FSA and Institutional Investors Fly the Green Flag
January 31, 2007 @ 09:45 PM | By Cory Levine

In the wake of sentiment expressed at the World Economic Forum that financial services firms (and all companies) must go greener, the U.K.'s Financial Services Authority has issued a warning about the dangers of climate change as part of its 2007 Financial Risk Outlook, while a U.S.-based consortium of institutional investors released a scathing report on how companies in the S&P 500 disclose climate-related risks to investors.

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Wall Street Journal Chronicles Amaranth's Demise
January 30, 2007 @ 10:14 AM | By Penny Crosman

Today's Wall Street Journal provides a gruesomely fascinating account of Amaranth's final days ("Amid Amaranth's Crisis, Other Players Profited"). The mental image it conjures in the reader's mind is that of a pack of wolves, one of which has injured itself and lies dying of its wounds, the rest taking the biggest, juiciest hunks out of it they can while its heart still beats.

The Amaranth fiasco continues to affect the industry. In addition to the SEC's efforts to regulate hedge funds, the SEC, the Federal Reserve Bank of New York and the Financial Services Authority in London are investigating banks' and securities firms' lending practices to hedge funds.

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Day 3: A good climate for global regulation?
January 25, 2007 @ 11:27 AM | By Greg MacSweeney

Delegates are calling for global regulation that directly addresses climate change at the World Economic Forum in Davos. But can business, government and scientists agree on a solution that could actually have some impact on a global scale?

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Day 2 at Davos: Setting the Security Standard
January 24, 2007 @ 03:20 PM | By Greg MacSweeney

Not surprisingly, information and data security is one of the hotter topics in Davos among the attendees at the World Economic Forum. Logically, if there are regulators for the Internet, telecommunications and accounting, why don’t we have a standards in place for information and data security?

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FinCEN Proposes More Transactional Information Sharing
January 17, 2007 @ 03:51 PM | By Cory Levine

The Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury, released its paper today on the value of reporting on cross-border transfer of funds in fighting money laundering and terrorist sponsorship. According the document, such reporting would hold value, but would require that FinCEN implement a data warehouse architecture to manage the information submitted under any mandated reporting requirement.

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New Phishing Threat Discovered
January 11, 2007 @ 11:51 AM | By Cory Levine

Cory Levine, Wall Street & Technology

The cat-and-mouse continues, as researchers yesterday uncovered a new phishing technique being shared in the fraud community, which will enable criminals to bypass multi-factor authentication technologies. Analysts in the 24x7 Anti-Fraud Command Center operated by RSA discovered what they are calling the Universal Man-in-the-Middle Phishing Kit being sold in online forums. After analyzing a demo version of the kit, RSA concluded that this new user-friendly flavor of phishing could become big in the next 12 to 18 months.

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NYSE Behind the Ball
January 09, 2007 @ 04:09 PM | By Cory Levine

Cory Levine, Wall Street & Technology

The New York Stock Exchange yesterday filed a letter with the SEC requesting an extension to the deadline of the Reg NMS trading phase. The current target date is February 5, and the Exchange is looking for an extra four weeks to roll out Phase IV of its Hybrid Market.

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Vanguard Signs On for Knowledge Based Authentication
December 11, 2006 @ 02:10 PM | By Cory Levine

Mutual fund giant Vanguard has implemented the Knowledge Based Authentication (KBA) platform from Verid to reduce fraud risk. The firm will use KBA as part of the account opening process in the online and phone channels with certain types of accounts.

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U.K. Law Enforcement Impotent to Fraud
December 05, 2006 @ 04:48 PM | By Cory Levine

Cory Levine, Wall Street & Technology

A report from U.K. newspaper The Guardian reveals that financial institutions in the country are purposefully choosing not to report instances of online fraud and financial crime because they don't want to risk public exposure by law enforcement bodies that can do little or nothing about the crime — this from the mouth of a Metropolitan Police Detective Russell Day!

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When Risk Managers Cry Wolf
November 29, 2006 @ 12:16 PM | By Greg MacSweeney

By Greg MacSweeney, Wall Street & Technology

Avoiding "reputation risk" is a common justification for increasing security measures, protecting customers' financial information and reporting security breaches in a timely manner. But now more than 18 months after the big ChoicePoint incident when 163,000 accounts were affected by ID thieves, the doom and gloom that financial services risk professionals have predicted has failed to come true.

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FSA: U.K. Will Be OK in Flu Pandemic
November 28, 2006 @ 10:37 AM | By Cory Levine

Cory Levine, Wall Street & Technology

While I was eating leftover turkey last week, London's Financial Services Authority (FSA) completed a resiliency test of its financial markets and found that in the event of a bird flu pandemic, the backbone of the U.K. economy would be able to continue operating.

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The Big Board’s Big Dog Nods at Regulatory Consolidation, SIFMA Appoints Co-Chiefs
November 10, 2006 @ 12:03 PM | By Cory Levine

Cory Levine, Wall Street & Technology

In a speech at the Securities Industry and Financial Markets Association (SIFMA) launch event in Boca Raton, Fla, yesterday, NYSE Group CEO John Thain hinted at the future convergence of industry regulators. According to a Forbes.com report, Thane indicated that the current regulatory environment is less than ideal, and that overregulation of domestic markets is hindering their global competitiveness. “If we are not careful, we will in fact make the U.S. less attractive to the rest of the world,” he said.

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What if I Have Laryngitis?
October 25, 2006 @ 03:08 PM | By Cory Levine

Cory Levine, Wall Street & Technology

RSA, the security company acquired earlier this year by mega-vendor EMC, announced yesterday its Adaptive Authentication for Phone service, which provides automated, risk-based caller authentication for telephone banking services. In addition to developing a risk score for phone-based transactions and taking appropriate authentication measures, the service features what RSA is touting as the financial services industry's first voice biometric solution suitable to meet the FFIEC standards on risk-based authentication.

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Industry Passes BCP Test, but Uncertainty Lingers
October 20, 2006 @ 01:58 PM | By Cory Levine

Cory Levine, Wall Street & Technology

The securities industry underwent a simulated business continuity planning (BCP) test last Saturday, October 14 conducted by the Securities Industry Association, the Bond Market Association, the Futures Industry Association and the Financial Information Forum. The test was similar to a BCP test held a year ago, but industry participation was up, with over 250 securities firms, exchanges, markets, service bureaus and industry utilities testing the functionality of backup data centers, work centers and communication links.

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Wall St. Bests London in Both E-Mail Compliance and Compliance Evasion
October 16, 2006 @ 02:45 PM | By Cory Levine

Cory Levine, Wall Street & Technology

E-mail communications on Wall Street are under considerably more scrutiny than those traveling through the London financial industry, according to new survey results from e-mail compliance vendor Orchestria.

The survey conducted earlier this month questioned 300 people working on Wall Street in New York and in the City area of London. Sixty percent of workers in New York believed that their employers were in the right by monitoring their e-mail. In London, only 38 percent of respondents believed that that their firm was within its rights to do so.

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Hall of Shame: NYSE Regulation Releases October Rulings
October 12, 2006 @ 05:15 PM | By Cory Levine

Cory Levine, Wall Street & Technology

NYSE Regulation today released its monthly roundup of disciplinary actions. Some notable firms made the hit list this month as a result of technology failures, and one can only wonder how these violations got past the firms’ various regulatory checks. All totaled six firms and nine individuals were fined. Here are the highlights, or should we say lowlights:

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Finetix/Cadence Partnership Mitigates Hedge Fund Risk
September 28, 2006 @ 11:20 AM | By Tim Clark

By Tim Clark, Wall Street & Technology

Financial services consulting firm Finetix recently announced its partnership with Cadence Capital Group LLC, a New York-based hedge fund specializing in options, aggressive long-short and delta-neutral strategies. According to Cadence cofounder Dmitry Babayev, the partnership was designed, in part, to avoid a hedge fund catastrophe of Amaranth-like proportions.

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SunGard, Satyam Prepare for Disaster
September 27, 2006 @ 10:01 AM | By Tim Clark

By Tim Clark, Wall Street & Technology

In an effort to help companies minimize the risks to business and information technology (IT) operations created by influenza pandemics and other catastrophic events, SunGard Availability Services and Satyam plan to release new solutions aimed at retaining business continuity in times of crisis. Also, to demonstrate some of its capabilities, Satyam completed a three-day mock drill that simulated a disaster in three Indian cities.

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Could Technology Have Prevented the Amaranth Blowup?
September 26, 2006 @ 08:31 AM | By Tim Clark

By Tim Clark, Wall Street & Technology

As federal regulators begin to investigate the catastrophic blowup of hedge fund Amaranth Advisors—whose $6 billion in losses resulted from bad bets on natural gas futures—the industry at large is scratching its head as to why the fund adopted such a risky investment strategy to begin with. This begs the question: Could technology, risk management or otherwise, have prevented the Amaranth debacle?

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Regulator Turns Up the Heat on Derivatives Markets
September 20, 2006 @ 05:02 PM | By Cory Levine

By Cory Levine, Wall Street & Technology

The much-discussed global derivatives market had the spotlight turned its way this week by an official from the U.K.'s Financial Services Authority (FSA). In a speech at yesterday's International Swaps and Derivatives Association regional conference, Thomas Huertas, director of the Wholesale Firms division and banking sector leader at the FSA called out the continued inefficiencies, risks and "sheer sloppiness" within derivatives markets.

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Bank of Ireland Phishing Refunds: How Can Banks Reduce User-Controlled Risk?
September 07, 2006 @ 01:25 PM | By Greg MacSweeney

By Greg MacSweeney, Wall Street & Technology

Despite the generally accepted belief that the user is solely responsible for his or her user name and password, at least one bank -- and probably many more -- has quietly refunded customers who were defrauded by phishing attacks.

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Hedge Funds Get Operational Risk Rated, But Why?
September 06, 2006 @ 09:58 AM | By Cory Levine

By Cory Levine, Wall Street & Technology

Research and ratings authority Moody’s Investors Services has released the first of what it expects to be many ratings on the complex and opaque world of hedge funds. The ratings will be based on what Moody’s has dubbed Operational Quality (OQ), which addresses the internal and external aspects of the fund including valuation process, service providers, accounting controls, regulatory compliance, risk reporting and control, legal and financial structure, human resources, and other operational issues specific to the individual fund.

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Multi-Factor Authentication Adoption Picks Up Steam
August 25, 2006 @ 02:22 PM | By Greg MacSweeney

By Greg MacSweeney, Wall Street & Technology

Despite the approaching Federal Financial Institutions Examination Council's year-end deadline for the implementation of multi-factor authentication (MFA) at financial institutions, many FIs are still in the process of evaluating and selecting two-factor identification solutions. Some companies may still be in the evaluation phase of multifactor technology because the FFIEC's initial guidelines were purposely vague and have only recently been partially clarified with FFIEC's FAQ on its multifactor requirements.

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Enterprise Risk Management (ERM) and Technology Spending
August 22, 2006 @ 09:31 AM | By Greg MacSweeney

By Sandeep Vishnu, BearingPoint

Technology continues to play an increasing role in risk management as instantiated by the recent entry on the SOX technology burden by Brian Mitchell of JPMorgan. ERM poses a challenge from an expense allocation perspective in that every investment could be directed towards an underlying risk, and it becomes hard to separate out incremental risk-related investments. Some investments are, of course, straightforward. For example, implementing two-factor authentication to reduce unauthorized access is clearly a risk-related investment and should be counted as such.

However, a platform upgrade to increase capacity to reduce the number of dropped transactions is a business decision that addresses the underlying risk of transaction failure. Should this be viewed as an expense for ERM, the business, a central infrastructure group, or some combination of these or others?

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FFIEC Muddies the Authentication Waters
August 21, 2006 @ 12:50 PM | By Cory Levine

By Cory Levine, Wall Street & Technology

The financial services industry's effort toward secure authentication for online financial transactions was bumped up a spot or two on the old to-do list last week. The Federal Financial Institutions Examination Council (FFIEC) released a list of frequently asked questions, clarifying some of the lingering issues surrounding last year's guidance on risk-based authentication. Meanwhile, the Financial Services Technology Consortium (FSTC) announced its intentions to improve how financial institutions authenticate themselves to users, to curb phishing, pharming, spoofing and malware attacks.

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The SOX Technology Burden
August 18, 2006 @ 01:38 PM | By Greg MacSweeney

By Brian Mitchell, JPMorgan

Why has SOX become such technology burden?

In year one, SOX was a burden for all. The business had to define all of the key controls associated with financial reporting and it had to identify the key systems on which the business depends to support these controls. Meanwhile, the technology group applied a typical general computing controls assessment to those systems. In subsequent years, the situation has not improved for IT controls.

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It's Hard to Ignore the Hype: HSBC Security Flaw
August 10, 2006 @ 04:05 PM | By Greg MacSweeney

By Greg MacSweeney, Wall Street & Technology

At first glance, the security flaw within HSBC's online banking system that has been exposed by two researchers working within Cardiff University's School of Computer Science looks like another black eye for financial firms, which are battling the growing perception that personal data risks aren't being taken seriously. However, as often is the case with press coverage, the hype surrounding the flaw is probably a greater risk to HSBC than the actual security flaw itself.

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When Is a Risk Not a Risk?
August 07, 2006 @ 04:27 PM | By Greg MacSweeney

By Mike Everall, CISO, DrKW

Yes, we have all seen the seminars and training camps and white papers, such as: "This is how you manage risk!" The trouble is there are as many ways to "manage" risk as there are pundits and white papers. So, I say let's get back to basics and get the fundamentals laid out. What is risk? What are the types of risk? And when is a risk not a risk?

What is a risk?
A risk is when an active (or potentially active) exposure by your organization creates an adverse impact. This doesn't mean that passive risk doesn't exist: If you "passively" don't do something you can expose the organization just as badly as if you "actively" do something.

What are the risks?
There are many specific types if risk, but at the end of the day the four basic classes are: Financial, Operational, Reputational and Regulatory. Some argue that regulatory risk can be folded into the first three, but it makes it easier to explain regulatory risk to a non-professional colleague if you split it out.

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Is IT Neglecting Risk?
August 04, 2006 @ 07:55 AM | By Greg MacSweeney

By Greg MacSweeney, Wall Street & Technology

A survey of more than 200 governance risk and compliance (GRC) professionals, 37.8 percent of whom represent financial services companies, reports that the majority of respondents believe their IT departments aren’t meeting the GRC needs of the business. Fifty-five percent of respondents to the survey by the Open Compliance and Ethics Group and GRC solution provider Axentis indicated that their technology departments had a poor understanding of GRC technology demands. Participants with the least-favorable view classified themselves as legal, ethical or regulatory compliance professionals. Within this group, only 28 percent rated their IT departments’ understanding of GRC and its associated needs as above average.

In the financial industry specifically, however, IT might be doing a better job than the overall industry. In this survey, less than half of the respondents were from financial firms. With the financial industry being so focused on risk management, one can only hope that its IT community understands the importance of controlling technology risk.

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WS&T Risk Management Blog
July 25, 2006 @ 02:36 PM | By Vitali Zhulkovsky

The Wall Street & Technology Risk Management Blog is dedicated to risk management professionals in financial services who are looking for more information, latest trends, news and opinions on matters related to managing risk at a financial services organization. At the blog, updated frequently by WS&T's editors and special contributing bloggers from various Wall Street firms, readers will find an interactive forum to share ideas and comment on the latest news and trends.

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