The 4 th GCC Regulator’s Summit, Doha Financial Stability and Risk Management Session
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Transcript of The 4 th GCC Regulator’s Summit, Doha Financial Stability and Risk Management Session
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The 4th GCC Regulator’s Summit, DohaFinancial Stability and Risk Management Session
22 February 2010Jahangir Khan – Director Risk and Compliance, DIFC Authority
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Economic Landscape 2000-7
Regulatory Landscape 2000-7
Intra-Organisational Landscape 2000-7
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KEY TOPICS
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• Historically low interest rates
• Rising real property prices fuelled by credit availability
• Creation of sub-prime mortgage lending market w/high risk & interest rates
• Excess capital globally driving demand for financial assets
• Institutions search for alternative investments after DOT.COM crash
• Formation of securitized sub-prime mortgage pools w/higher yields – ‘Mortgage Backed Securities’
• Wide-spread take-up and distribution to Hedge Funds, Pension Funds, Insurance Co’s, Banks etc in the form of CDOs, CMOs, MBSs, SIVs
ECONOMIC LANDSCAPE 2000-7
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ECONOMIC LANDSCAPE 2000-7
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REGULATORY LANDSCAPE 2000-7
• Lack of application of Prudential Regulation and Supervision on NBFIs and Affiliates
• Lack of Focus on Large Unregulated Institutions (Market Makers) re. systemic risk
• Shortcomings of micro prudential regulation
• Policy pressure to purchase sub-prime debt (Freddie, Fannie & Banks)
• Lack of scrutiny around Credit Rating Agency practices and methodologies
• Mark-to-Market asset calculation
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INTRA-ORGANISATIONAL LANDSCAPE 2000-7
• Lack of understanding of risk at BoD level
• Compensation Structures tied to share value
• Risk Aversion vs. Shareholder Value
• Risk Management and Compliance operating in silo’s
• Inadequate disclosure practices
• Unethical business practices e.g. ‘Structuring to rating’
Jahangir KhanDirector, Risk and Compliance
DIFC | Dubai International Financial CentreLevel 14, The GateP.O. Box 74777, Dubai, UAET: +971 4 401 0067M: +971 56 6034775
[email protected] http://www.difc.ae