RISK MATRIX: LPHI RISKS Risk analys

RISK MATRIX: LPHI RISKS Risk analysis always needs to consider the probability of an event occurring and the impact (or seriousness) in the event that it does occur. LPHI risks are amongst the most difficult to manage, and the history of banking crises around the world (both individual and systemic) indicates that a high proportion occur when a bank (banks) finds itself operating in this area of the matrix. This is partly because it tends to induce disaster myopia where low-probability risks (even if they have high impacts) are discounted

altogether and behaviour is implicitly based on the assumption that the probability is zero. These are difficult risks to handle also because it is not realistic to price for them: this might, for instance, involve an attempt to price a risk that could destroy the bank! The only realistic option is to limit the bank’s exposure to such risks. Although the FSA adopts a similar methodology in its risk-based approach to supervision, supervisors can also be subject to the same disaster myopia in the case when LPHI risks emerge. It may also be difficult for a supervisor to intervene when detecting a LPHI risk most especially if, to date, the bank’s behaviour has yielded good results, and no obvious problem has yet emerged. Our central thesis is that NR’s highly focussed business strategy involving a high and unusual dependency on securitisation and short-term wholesale market funding exposed it to such a LPHI risk. The drying up of liquidity in the relevant London and international markets was a very low probability event (it is difficult to recall when it last occurred) and yet would have a large impact and be serious for banks with business models that relied heavily on securitisation and short-term funding through these markets. It would also appear that, while some generalised warnings about liquidity risks had been made from time to time, supervisors did not take action in the case of NR which suggests that they may have been subject to disaster myopia. THE NR BUSINESS MODEL A central theme has been that the central problem for NR was its particular business model that exposed itself to a LPHI risk. The particular business model of NR was that it pursued a strategy of fast growth in mortgage lending based on a high proportion of wholesale market funding together with planned securitisations of its mortgages. There were, however, two particular features of NR’s business model: (1) the relative importance of wholesale funding compared with other banks, and (2) the fact that securitisation was an integral and dominant part of the bank’s strategy and business model. Furthermore, it would appear that the bank did not take out any form of liquidity insurance through, for instance, agreed lines of credit with other banks. Table 1 shows the significantly higher proportion of wholesale funding in the case of NR (62 percent) compared with the average of 45 percent for other UK banks in the sample.

Hasil (Bahasa Indonesia) 1:

RISIKO MATRIKS: Analisis LPHI risiko risiko selalu perlu mempertimbangkan kemungkinan terjadi peristiwa dan dampak (atau keseriusan) dalam hal hal itu terjadi. LPHI risiko adalah di antara yang paling sulit untuk mengelola, dan sejarah perbankan krisis di seluruh dunia (baik individu dan sistemik) menunjukkan bahwa proporsi yang tinggi terjadi ketika bank (Bank) menemukan dirinya beroperasi di daerah ini matriks. Hal ini sebagian karena cenderung untuk menginduksi bencana miopia mana probabilitas rendah risiko (bahkan jika mereka memiliki dampak tinggi) potongan harga altogether and behaviour is implicitly based on the assumption that the probability is zero. These are difficult risks to handle also because it is not realistic to price for them: this might, for instance, involve an attempt to price a risk that could destroy the bank! The only realistic option is to limit the bank’s exposure to such risks. Although the FSA adopts a similar methodology in its risk-based approach to supervision, supervisors can also be subject to the same disaster myopia in the case when LPHI risks emerge. It may also be difficult for a supervisor to intervene when detecting a LPHI risk most especially if, to date, the bank’s behaviour has yielded good results, and no obvious problem has yet emerged. Our central thesis is that NR’s highly focussed business strategy involving a high and unusual dependency on securitisation and short-term wholesale market funding exposed it to such a LPHI risk. The drying up of liquidity in the relevant London and international markets was a very low probability event (it is difficult to recall when it last occurred) and yet would have a large impact and be serious for banks with business models that relied heavily on securitisation and short-term funding through these markets. It would also appear that, while some generalised warnings about liquidity risks had been made from time to time, supervisors did not take action in the case of NR which suggests that they may have been subject to disaster myopia. THE NR BUSINESS MODEL A central theme has been that the central problem for NR was its particular business model that exposed itself to a LPHI risk. The particular business model of NR was that it pursued a strategy of fast growth in mortgage lending based on a high proportion of wholesale market funding together with planned securitisations of its mortgages. There were, however, two particular features of NR’s business model: (1) the relative importance of wholesale funding compared with other banks, and (2) the fact that securitisation was an integral and dominant part of the bank’s strategy and business model. Furthermore, it would appear that the bank did not take out any form of liquidity insurance through, for instance, agreed lines of credit with other banks. Table 1 shows the significantly higher proportion of wholesale funding in the case of NR (62 percent) compared with the average of 45 percent for other UK banks in the sample.

Hasil (Bahasa Indonesia) 2:

MATRIX RISIKO: LPHI RISIKO Analisis risiko selalu perlu mempertimbangkan kemungkinan peristiwa yang terjadi dan dampak (atau keseriusan) dalam hal itu tidak terjadi. Risiko LPHI adalah diantara yang paling sulit untuk mengelola, dan sejarah krisis perbankan di seluruh dunia (baik individu maupun sistemik) menunjukkan bahwa proporsi yang tinggi terjadi ketika bank (bank) menemukan dirinya yang beroperasi di daerah ini dari matriks. Hal ini sebagian karena cenderung menginduksi miopia bencana di mana risiko probabilitas rendah (bahkan jika mereka memiliki dampak yang tinggi) didiskontokan sama sekali dan perilaku secara implisit didasarkan pada asumsi bahwa probabilitas adalah nol. Ini adalah risiko sulit untuk menangani juga karena tidak realistis untuk harga untuk mereka: ini mungkin, misalnya, melibatkan upaya untuk harga risiko yang bisa menghancurkan bank! Satu-satunya pilihan yang realistis adalah untuk membatasi eksposur bank terhadap risiko tersebut. Meskipun FSA mengadopsi metodologi yang sama dalam pendekatan berbasis risiko untuk pengawasan, pengawas juga bisa tunduk pada miopia bencana yang sama dalam kasus ketika risiko LPHI muncul. Ini juga mungkin sulit bagi seorang supervisor untuk campur tangan ketika mendeteksi risiko LPHI terutama jika, sampai saat ini, perilaku bank telah menghasilkan hasil yang baik, dan tidak ada masalah yang jelas belum muncul. Tesis pusat kami adalah bahwa sangat difokuskan strategi bisnis NR yang melibatkan ketergantungan yang tinggi dan tidak biasa pada sekuritisasi dan jangka pendek pasar grosir pendanaan terkena ke risiko LPHI tersebut. Mengeringnya likuiditas di London dan pasar internasional yang relevan adalah peristiwa probabilitas sangat rendah (sulit untuk mengingat ketika terakhir terjadi) dan belum akan memiliki dampak yang besar dan serius bagi bank dengan model bisnis yang sangat bergantung pada sekuritisasi dan pendanaan jangka pendek melalui pasar-pasar ini. Hal ini juga akan muncul bahwa, sementara beberapa peringatan umum tentang risiko likuiditas telah dibuat dari waktu ke waktu, pengawas tidak mengambil tindakan dalam kasus NR yang menunjukkan bahwa mereka mungkin telah dikenakan miopia bencana. THE NR MODEL BISNIS tema sentral telah bahwa masalah utama untuk NR adalah model bisnis tertentu yang yang terkena dirinya untuk risiko LPHI. Model bisnis tertentu dari NR adalah bahwa itu mengejar strategi pertumbuhan yang cepat pinjaman hipotek berdasarkan proporsi yang tinggi dari pendanaan pasar grosir bersama dengan securitisations direncanakan hipotek nya. Ada, Namun, dua fitur tertentu model bisnis NR ini: (1) kepentingan relatif dari pendanaan grosir dibandingkan dengan bank lain, dan (2) fakta bahwa sekuritisasi adalah bagian integral dan dominan strategi dan model bisnis bank. Selain itu, akan muncul bahwa bank tidak mengambil bentuk asuransi likuiditas melalui, misalnya, kredit dari bank lain yang disepakati. Tabel 1 menunjukkan proporsi signifikan lebih tinggi dari dana grosir dalam kasus NR (62 persen) dibandingkan dengan rata-rata 45 persen untuk bank lain Inggris dalam sampel.