Alex Gurr: Hi everyone, and welcome back to FS in Focus.2023 was a difficult year for the American financial services sector. We're over a year on from Silicon Valley Bank and Signature Bank collapsing, so we thought it'd be really helpful to focus this edition on the lessons learned over the past year. And to do just that, I'm absolutely delighted to be joined by Cindra Maharaj, who is one of our Partners here in the US, focused on risk. Welcome, Cindra. It's great to have you here.
Cindra Maharaj: Thanks, Alex. Great to be here.
Alex Gurr: So Cindra, clearly a lot can change in a year. What do you think the market has learned from these events?
Cindra Maharaj: One of the key things, Alex, that we learned is although banks are well-capitalised, liquidity and cash continue to play a really important role. What's different, though, from these collapses compared to 2008 is really the focus on short term liquidity. So what we saw coming out of this is the role of infrastructure and operational considerations really need to be considered. So can we actually monetise our collateral faster and in time? So how is the market changing as a result of that? Yes, I think the market's continuing to evolve. So we're continuing to see a lot of regulatory pressure coming down the pike. We're seeing banks and other financial institutions really getting focus from the regulators on creating the short term liquidity capabilities and continuing to build some of those operational capabilities around them. It's actually a really interesting question because it's different for regional banks or regional institutions to some of the larger institutions as well.
Alex Gurr: So it's a really good point. I was actually going to ask you, what sort of difference do you see in the way that the big global banks are responding versus the smaller regional institutions that you work with?
Cindra Maharaj: Yeah so it's interesting. I think the smaller regional institutions, especially coming off of the collapse of Signature and Silicon Valley, are actually under pressure right now to build some of the underlying core risk management capabilities.What do I mean by that? I mean governance. I mean stress testing. I mean analysis and reporting, unlike some of the larger banks or a lot of the GSIBs, so when we think about it, they've had to go through a lot of that coming out of 2008.
Alex Gurr: And do you see the larger banks as being well positioned, though?
Cindra Maharaj: It's a really good question Alex. I think what we're starting to see there is they’re also going through. So they're getting feedback or they're getting regulatory scrutiny on what's new and emerging risks. So it's not necessarily all of the core. So when we think about non-financial risks, when we think of operational resilience, cyber security, even climate kind of comes into that picture. How does that fit within their risk management frameworks? Another big one that's also starting to come out is data. And, you know, I was having a good laugh with some of my colleagues the other day, we’re still seeing BCBS (Basel Committee on Banking Supervision) 239 rearing its ugly head amongst our clients.
Alex Gurr: So it's really interesting, I mean, there's clearly huge amounts of regulatory scrutiny and pressure that's coming down the line. How are you finding that clients are coordinating that activity?
Cindra Maharaj: Yeah, I think you hit the nail on the head, that's a big issue right now as there are lots of different feedback points that are coming from a regulatory perspective. And how are they managing it? A couple of different ways. So I think I've seen some create what they call sort of a regulatory remediation committee where the committee is actually going up into the board. So making the board responsible and accountable for all of this change that's coming in. But I think the other one, I think that's at the very much at the top of the house, but I think it also needs to transcend as you go further down. And we're starting to see programmes emerge. And that's actually where we help a lot of our clients is to connect the dots across the front and back of the organisation. So when we talk about data for example, it's from data ingestion all the way down to reporting and really breaking down the silos across the bank.
Alex Gurr: So do you think financial institutions have learned the lessons of the past? And are we going to see another event like SVB and Signature as a result?
Cindra Maharaj: I think they've definitely learnt. I think we always learn. We learnt out of 2008, we learnt before that. So I think they've definitely learnt. I think what's going to be interesting though, are the risks look different every single time and are we going to be prepared for then what's that next risk? And I think breaking down those silos are really important to get there.
Alex Gurr: So as you think about the year ahead and you think about your clients, what is it that they're most focused on at the moment?
Cindra Maharaj: I think there are two key things here, Alex. One is they need to continue to be compliant with the reg agenda and keep up to speed, the regulators are becoming more agile, they're going to need to be more agile in how they manage that. Second piece though, is how do they continue to do that in line with their growth ambitions and with some of the emerging risks that continue.You are talking to a risk person right now,but with some of those new emerging risks that are coming into play.
Alex Gurr: So Cindra, thanks so much for your time, really appreciate your insight. So my key message for financial institutions, get to know your risk blindspots better. Ask yourself, is your organisation set up to react to the market shocks, like we saw last year? Do you have the right people in place, doing the right things at the right time with the right data? And how can you use the regulatory agenda to drive broader organisational change that you need and do so in an efficient and effective way?
If you'd like to discuss any of this with us further, then please do get in touch. But for now, that's all we have time for today and we'll see you next time. Thanks ever so much.
