Central Risk Book - Worst Job in Bank
“Investment in central risk book is a waste of money.”
-says the global head of equity trading at one US bank
Central risk book is a buzz word,but in bank,it is not a glamorous word. It is a miserable non-trivial function.
Critics of central risk books include:
1.PnL of bank’s central risk book is terrible.
2.They are not supposed to make money. If they do, then they are very likely taking risk bet which is not allowed.
3. It is a back office utility function rather than a source of revenue.
4. It is not getting enough respects.
5. Central risk book traders can be easily replaced by IT and Risk people.
6. Unfair competition . Central risk book want to see flow across all desks, then use that information to trade against internal desks, and finally replace those desks.
7. Risk aggregation could accumulate large position that hard to hedge.
It’s time for bank to rethink the role of central risk book.
-says the global head of equity trading at one US bank
Central risk book is a buzz word,but in bank,it is not a glamorous word. It is a miserable non-trivial function.
Critics of central risk books include:
1.PnL of bank’s central risk book is terrible.
2.They are not supposed to make money. If they do, then they are very likely taking risk bet which is not allowed.
3. It is a back office utility function rather than a source of revenue.
4. It is not getting enough respects.
5. Central risk book traders can be easily replaced by IT and Risk people.
6. Unfair competition . Central risk book want to see flow across all desks, then use that information to trade against internal desks, and finally replace those desks.
7. Risk aggregation could accumulate large position that hard to hedge.
It’s time for bank to rethink the role of central risk book.
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