Major regulatory reforms such as European Market Infrastructure Regulation (EMIR), Dodd-Frank Act (DFA), and various initiatives under the Basel III process introduced primarily as a response to major financial crisis, have materially altered the way financial institutions (FIs) use and risk manage over the counter (OTC) derivatives.
For Banks, regulatory reforms have triggered a tighter operational environment with increased costs and consequently a need for inevitable changes in their business models.
A fundamental review of existing derivatives business is required in order to determine the optimal product mix going forward and to evaluate the true economic valued added of the derivatives activities.
In addition, as regulatory requirements are becoming increasingly complex, banks and other financial institutions are facing the dual challenge of introducing required regulatory changes in their derivatives valuation and risk management process and at the same time implementing best market practices.
For pension funds and insurance companies, challenges are of a different nature but comparable in complexity. The ever-evolving approach from the dealer counterparties with respect to derivatives pricing and valuation continues to be a major issue for buy side firms and poses significant day-to-day operational challenges for them. Other pressing issues which require immediate attention are:
- deciding on a clearing model
- investing in infrastructure upgrade
- putting in place margining and segregation rules and portfolio reconciliation procedures
- meeting regulator-imposed trade reporting requirements
- finding optimal collateral transformation mechanisms
At Solum Finacial, we assist our FI clients, in Europe and internationally, by providing unbiased, independent and transparent advice across the wide range of issues listed above.
Solum’s strength in FI’s derivatives risk advisory is embodied in our people and is based on experience acquired in tier one global financial institutions. We are seasoned front office professionals and over the years have built our reputation on expertise, teamwork and integrity.
Our ultimate goal is to become a highly regarded and trusted advisor for each of our clients.