NEW YORK and LONDON, Feb. 12, 2013 /CNW/ - Today, the Global Association of Risk Professionals (GARP) is pleased to announce a financial services industry committee has been formed to study development of the GARP Benchmark Portfolio Initiative (GBPI).
GBPI addresses the need that the market requires a better way to understand how banks measure risk. Currently risk measures are difficult to evaluate, as each reflects the underlying unique business and portfolio mix of each firm, as well as the specific assumptions and methodologies they utilize.
GBPI proposes the use of benchmark portfolios against which banks would run their risk measures. The results will enable market participants to better understand the reasons for differences as well as the relative conservatism or aggressiveness of firms' risk measures, and ultimately better gauge the capitalization levels and fiscal health of banks and other financial institutions.
Banks and other organizations participating on the study committee include BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Nomura and Standard Chartered Bank.
"There is an industry-recognized need for increased transparency and education among global financial services firms, as well as an industry desire to work in partnership with global supervisors to increase systemic stability," said Richard Apostolik, GARP's President and CEO.
The GBPI study committee has commenced its work around bank trading and wholesale loan benchmark portfolios. Its work will then be expanded to include additional benchmark portfolios representative of the holdings of Global Systemically Important Financial Institutions.
One important objective of the initiative is to develop a "public-private partnership" between the industry and its regulators. This will help to avoid duplication of efforts, ensure disparate markets, regulatory regimes and global interconnectedness are accounted for as much as possible, and will allow for the leveraging of expertise to ensure a high level of confidence exists in the results.
"The challenges this study presents are significant, but their successful resolution will result in a uniquely positive, sustainable and pro-active contribution toward better risk management," Mr. Apostolik added.
About the Global Association of Risk Professionals
The Global Association of Risk Professionals (GARP) is a not-for-profit membership organization dedicated to preparing professionals and organizations to make better-informed risk decisions. GARP's membership represents more than 150,000 risk management practitioners and researchers at academic institutions, banks, corporations, government agencies, and investment management firms in 195 countries. GARP administers the Financial Risk Manager (FRM®) and Energy Risk Professional (ERP®) exams—certifications recognized by risk professionals worldwide. GARP is committed to advancing the role of risk management via education for professionals at all levels of expertise. Visit www.garp.org.
Global Association of Risk Professionals (GARP)
SOURCE: Global Association of Risk Professionals (GARP)