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- Product code: 22914
- ISBN: 189759724X,
ISBN13: 9781897597248,
288 pages, hardback
Published by Harriman House on 2003
, 2nd Rate this book...
Rating: 3.3/5 (4 votes cast)
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Description of Back Office and Beyond |
The 1st edition of Back Office and Beyond became the benchmark source and reference for 'best practice' in back office procedures. Better attention to back office procedures would have prevented disasters at Barings, Sumitomo, and other causes celebres - not to mention the latest debacle at Allfirst in the USA.
This ground breaking book is an essential read for anyone wanting his/her organisation to thrive and survive, containing particularly practical guidance and advice and now extends its cover to the implications of CAD II. There is a compelling requirement for aspects of risk to be situated in the Back/Middle Office areas. Indeed, they should be involved at first base: for if data is not captured accurately, there is little chance of the institution's risk profile being accurate. With so many banks offering similar products and pricing, accurate and speedy settlements have become a competition issue not to be ignored. As an additional reason for purchase, this edition now offers a guide to Equities' settlement also.
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Contents of Back Office and Beyond |
1. IN THE BEGINNING
History
Systemic risk
2. THE SET UP AND ROLE OF BACK OFFICE
Set up
The role of back office
Reputation
Risk
Reward
Physical settlement
Post-settlement
Processing
Deal completed by front office
Manually completed tickets
Partially mechanised tickets
Straight-through processing
3. THE LIFE OF A DEAL
Deal capture
Front office systems
Deal ticket encoding
Swapping instructions
Standing settlement instruction (SSI) agreements
Validation of data
Third party payments
Releasing confirmations/payments
Treatment of exceptions
Payments
Value dates
Maturity dates
Payment methods
Deadlines
Netting
Bilateral
Multilateral
Types of netting
Close-out netting
Clearing and payment systems
Clearing
Settlements in Euro
Calculation of debit and credit cap
Summary - EBA/TARGET
Vostro accounts
Herstatt risk
Non-standard settlement instruments
Certificates of deposit (CDs)
Calculation of proceeds of secondary market C/D
Discounted instruments
Non-deliverable forwards
Bonds
Derivative settlements
Currency options
Futures
Interest rate swaps
Repurchase agreements (repos)
Delivery
Tri-party repo
Haircuts
Coupons
Margin Calls
Documentation
The TBMA - ISMA Agreement
4. POST SETTLEMENT DUTIES
Confirmations
Cash management
Reconciliations
Nostro reconciliations
Nostro statements
Statement despatch
Book-keeping
Nostro investigations
5. ANCILLARY RESPONSIBILITIES
Limits/exposure
Dealer's position
Dealing profit and loss
Profit and loss accounting
Brokerage
Money laundering
Ghost money
Data maintenance/protection
Recording of telephones
6. POST EMU / THE FUTURE
Conversion
Post euro
Swaps
Euro Libor and Euribor
Regulatory changes
New instruments
7. RISK
So what is internal control?
Counterparty risk
Operational risk
Internal control structure
Message from the top
Risk assessment
Management information
Control activities
Monitoring activities
How to achieve 'best practice' in controlling risk
Analyse breakdowns
Employ internal auditors from varied disciplines
Make control a company - wide responsibility
Illustrating controls
The cost of control
Operational/technological risk
Settlement risk
Settlement exposure
Legal risk
Political risk
Adverse publicity risk
Fraud
Market risk
FX spot
FX forwards
Interest rate risk
Gap risk/re - pricing risk
Yield curve risk
Basis risk
Liquidity risk
Correlation risk
Replacement risk
8. RISK MANAGEMENT
Recent developments
Payment netting
Multilateral netting
Legal documentation
Netting by novation
Close-out netting
Modern risk management methodologies
Value at risk
The covariance method (or correlation method)
Historic volatility
Monte Carlo simulation method
Stress testing
Back testing
Sine qua non conditions for successful risk management
Investigation
Back office support check confirmations
Automated matching systems
Record trading transactions accurately
The middle/back office
Providing timely information to management
Nostro reconciliation
Audit support: internal and external staff
Daily mark to market
External valuation
Limits
Country limits
Currency limits
Settlement exposure
Duration of settlement exposure
Stop loss/profit orders
9. THE REGULATORY ENVIRONMENT
Bank for international settlements (BIS)
Amendment to the capital accord
The risk measurement framework
Scope and coverage of the capital charges
General market risk
The maturity method
The duration method
Interest rate derivatives
Calculation of capital charges under the standardised methodology
Allowable offsets
Division of risks
The treatment of foreign currencies
Measuring the exposure in a single currency
Measuring the FX risk in a portfolio of foreign currency positions
Asset liability risk management methodology
Gap analysis
Duration analysis
simulation approaches
Cad II
Rationale for a new accord: need for more flexibility and risk sensitivity
How will it work?
The first pillar: minimum capital requirement
How capital adequacy is measured
Credit risk
The standardised approach for credit risk
The internal ratings based approach (IRB)
Credit risk mitigation and securitisation
Operational risk
Overall capital
The second pillar: supervisory review process
The third pillar: market discipline
Practical implications
10. EQUITIES
Settlement dates
Nature of stocks
Nature of trading/matching
Shares traded
Securities settlements
Key steps in clearance and settlement
Alternative channels for settling cross-border trades
Risk in cross-border settlements
Settlement through a local agent
Settlement through a global custodian
SELF TESTS
CASE STUDIES
APPENDICES
1. Market interactivity
2. Market authorities/documentation
3. Automated systems
4. Settlement of transactions in the international securities markets
5. Real time gross settlement via continuous linked settlement
6. Repo settlements
7. The key attractions of CHAPS euro
8. Euro facilities at the First Chicago Clearing Centre (FCCC)
9. EBA - Euro 1 Operation
10. Major ISO trading currency codes
11. Formulae
12. Calendar basis
13. Operational risk according to GARP
14. Futures contracts: examples on the LIFFE
15. Model Code: summary of sections
16. Useful addresses
17. Relative size of stock markets
18. Security settlement statistics
19. Abbreviations and Acronyms
GLOSSARY
SOFTWARE COMPANY DIRECTORY
BIBLIOGRAPHY
INDEX
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About Mervyn King |
After graduating in Classics from the University of Cambridge in 1969, Mervyn King gained over twenty years' treasury experience in senior positions with the top names in the City. Subsequently he became Chairman of the Executive Committee of FEL and following his mandate in 1995 to design their Pre-Diploma Examination (now ACI Dealing Certificate) he turned his focus to training.
Since 1998 he has emerged as a trainer of international renown in treasury, risk and back office procedures, training staff from banks, IT software companies and supporters to the industry. He is also a past Editor of Forex-Inter, the official journal of the ACI.
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