The Risks Of Clearing And Settlement Systems

To elaborate further, a banking representative is required to present or extend some kind of product referral after every conversation. The representative makes the referral and phrases something incorrectly. If the consumer misinterprets the information and later disputes the validity of a debt, a lawsuit will arise. Most of the time, if the expense is petty, a firm will pay out a demand without dispute. If the issue goes to court and is pursued, the conversation between the representative and the consumer will be reviewed and interpreted in favor of the consumer. As a result of common complacency issues, the government imposed regulations to reduce the frequency of claims. Preventing unnecessary suits, fees, or fines is a priority amongst all financial institutions and Sun Trust should have incorporated such external influences in their risk register along with contingencies to resolve the issues and implement preventative measures.

The Office of the Superintendent of Financial Institutions (OFSI) regulates the Canadian banks; the regulation is in accordance with the Bank Act of 1992 and is regularly updated to find ways to protect the banking system from falling (Lynch, 2010). The top six Canadian banks are tightly linked, and equipped to consolidate if one bank should fall (Lynch,

6. Why limiting yourself to dealing directly with a bank may very possibly not be your best bet.

The current Canadian security regulation is managed by laws and agencies that have been established by Canada’s 13 provincial and territorial governments. Each of the province has its own security regulator that is in charge of administration of the securities acts, regulations and rules. The idea of setting up a national single security regulator has been suggested by various reports that have outline a range of problems with the current system (Mark 121). The reports suggests that the current system needs improvement and in a prompt manner. Concerns have been put forward that the current regulation is too complex and is harmful to the security market operations. The current system has also ben said to increase compliance costs hurting the Canadian market competitiveness (Mark 123). In addition, the current regulatory system has been said to be slow to respond to changes in the environment as there is need for agreement from all the thirteen authorities. The global security market has also rendered its support for the establishment of a single regulatory system. However, despite the problems and concerns over the current system in the last decade, the current system still remains in place due to certain barriers if change to a centralized security regulatory system that exist.

Analyze the risk associated with exchange-traded derivatives, such as futures and options, and what brokers might do to minimize the risk to investors.

What are some of the problems that individuals might face if they use one of the “problematic” financial institutions? – Some of the problems that individuals might face are that they might lose money or don’t get to earn the

Acted as a SWIFT subject matter expert for regulatory consulting team that helped a US custody bank determine its OFAC screening requirements for its SWIFT messages. Our team catalogued all of the SWIFT messages used by the bank (e.g., Cash, Securities, FX), reviewed OFAC regulations as they related to the custody bank’s transactions and made OFAC screening recommendations designed to remediate the bank’s regulatory risks. Ultimately our recommendations for improving the bank’s SWIFT message OFAC screens were accepted and implemented by the client

As easily seen in the graph from the Federal Reserve’s Study (Reserve, Gerdes and Liu), the number of noncash transactions has greatly increased. Although the number of checks used has decreased greatly, Automated Clearing House transactions – which pass through the Federal Reserve’s control - are still a major player in the number of transactions.

During the volatile and instable period, the risk was obviously brought to a new level. Morgan’s Private Bank kept their eyes open all the time. I concluded two main aspects.

Two inherent risks associated with launching these new services are: 1. the short term contract of business owners. Since the

Financial transactions are very common in today’s world. In these types of transactions, security must be created. These creations of securities are known as securitization. Security is a financial claim which is exhibited by document. The main feature of securitization is marketability. Henceforth, securitization is creation of marketable and tradable securities which is hinged on the inflows and outflows (cash flows) of the assets and liabilities of an individual. Cash flows refer to those generated in the asset side of the balance sheet mainly receivables; cash in bank and hand, plant and machinery. The Special Purpose Vehicle (SPV) uses these cash flows to issue marketable securities to investors so that funds for the payment to the asset originator can be arranged. Securitization is an innovation in the financial markets. For innovative financing sources, exceeding individual’s cash flow status, acquiring better liquidity position and issuing new securities to new individuals or group of investors, these innovative financing sources have become a necessity. For mortgage financing in secondary markets, securitized instruments are also essential. An asset is eliminated from the balance sheet when it is securitized.

Although IRC helps bank to capture risks more effectively, especially when market and credit risks collide, there is a significant weakness still be existing. It is the overlap of counterparty credit risk cooperated with over the counters (OTC) and repo-style transactions between IRC and CVA (Stretton, 2011). As a consequence, it will lead to duplicate capital charge for the banks. Suggested by Linsz (2010) – the corporate Treasurer of Bank of America, the Committee should apply an integrated approach to combine the overlapping risks by deleting the risk above in IRC model, hence build up more accurate capital charge for banks. In fact, Bank of America thinks duplicated capital charge is inappropriate with risk management practices (Linsz, 2010).

At this stage, the information collected should be evaluated in order the likelihood of the risks to be assessed, as well as the impact of these risks on the banks, the entire banking system and, on a larger scale, the national economy. As a matter of fact, the likelihood and the impact of the risks are determinants of the classification of the risks as low, medium or high. Having regard to four elements –customer, country, product and interface – the risk profile can be determined. More precisely, the risk concerning the customer is associated with the source of his incomer, his past financial activities and transactions and the intended nature of the activities. Furthermore, the risk emanating from the country of origin of the income or the country of the financial activities involves these jurisdictions, in which there are significant deficiencies in detection of money laundering and lack of cooperation for the prevention of money laundering. Concerning the product, the risk involves the extent of attractiveness to money launders and openness provided to financial criminals for concealing the illicit origin of their income. Regarding the element of interface, the risk illustrates the manner in which the product is sold or acquired.

In this competitive era, it is imperative for a well functioning economy to imply effective methods for businesses to pay their employees, suppliers and investors, for households to purchase goods and services, and for governments to collect taxes and make payments, such as pensions and interest on bonds. These payments, known as retail or low value payments include debit and credit card transactions, cheques and direct entry transactions (Hunt & Terry 2014). In order to improve the efficiency of the payment system, Reserve Bank of Australia introduced a new settlement arrangement. The new ‘same day’ settlement system would increase the rate of supply of funds and reduce the risks associated with deferred net-payment system. The

Large value payment are increasingly associated with foreign exchange and global security transactions thereby becoming divorced from underlying world trade.