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You are here: - Back Office and Beyond -

Back Office and Beyond A guide to procedures, settlements and risk in financial markets By: Mervyn King Normal price: 55 Our price: 36.3 + postage Bargain: save £18.7 ! Product code: 22914 ISBN: 189759724X 288 pages Format: Hb Published by: Harriman House, 2003, 2nd edition There are no reviews available for this book 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. Back Office and Beyond - Chapter headings 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 Authobiography of 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.