Financial market losses and research gains

Institute Foundation Board member Dr Philipp Halbherr addressed this year's newly minted graduates of the Master in Advanced Studies in Finance today with a positive take on the credit crisis, - at least from a research perspective!

Addressing the graduates, he explained that he did not wish to add to the sense of financial gloom, and wanted instead to encourage talented people to research financial systems. "The crisis will provide a rich body of data and experiences, giving us a new basis for risk management in the future".

Recently elected as representative of the cantonal banks on the Board of Directors for the SIX Group AG, Dr Halbherr is Head of Investment Banking, and a member of the Executive Board, at Zürcher Kantonalbank.

Countries must not go it alone in terms of banking laws and regulations

I have just attended the Swiss Bankers Association annual press conference, where Association Chairman Pierre Mirabaud spoke about the importance of the strong connections between Swiss banks for weathering financial turmoil.

Mirabaud was keen to emphasize the number of Swiss banks that are not directly affected by the liquidity problems that continue to grip the headlines. He saw a way forward for Switzerland's banking system based on agreed international regulation and cooperation. "Global crises cannot be solved or prevented on a national level," he explained.

Held at the Zurich's Hotel Savoy, the press conference was attended by journalists from throughout Europe and representing all the major agencies. Later in the day Mirabaud announced new elections to the board of the Swiss Bankers Association, including Swiss Finance Institute Foundation Board member Patrick Odier.

Institute's rising activity with Stern

The Institute went public about its joint program with NYU Stern School yesterday and the story was reported in FT.com here with a piece by FT Business Education Editor Della Bradshaw. Briefly, the new executive MBA in banking and financial institutions management will commence in August 2009 with residential modules taking place in New York, Zurich and Singapore.

From FT.com
"As researchers and educators, we must promote a greater understanding of the risks and opportunities confronting our financial institutions," says Thomas Cooley, dean of NYU Stern. "Future executives graduating from this programme will require broader and more integrated financial knowledge, and will need to know how to manage financial institutions in a global context".

The news also received excellent cover in the Swiss press, with reports in Finanz und Wirtschaft and Le Temps.

We are looking forward to hearing more from Dean Cooley at this year's Annual Meeting, where he will participate in a round table discussion about finance in the wake of the credit crisis.

Certificate FAME evening session with BCV Executive Board Member

The challenges and opportunities for universal banks offering wealth management services was a key theme in an evening session of CFAME held last Thursday during the final week of the Certificate program.

Participants heard a presentation by BCV Executive Board Member and head of wealth management Christopher Preston (photo, right), who demonstrated that success is not simply correlated with an institutions's size. Founded in 1845 to contribute towards the economic development of the Swiss Canton of Vaud, BCV has solidly outperformed the Swiss stock exchange Banks index during the past 5 years.

Mr Preston described how BCV met challenges such as increasing competition, regulation and client sophistication with a strategy of client focus, team work and an eye for performance.

Zurich credit crisis conference assembles researchers from Europe, US and Asia

Lending behaviour, securitization and credit rating practices will be the focus of an upcoming conference organized by the BSI Gamma Foundation in Zurich. "The Credit Crisis: Causes, effects and lessons", September 2nd, is jointly organized with Finrisk and the SFI and will be hosted at the Swiss Exchange convention center.

Researchers from the IMF, University of Chicago, Hong Kong University and the Bank of England will present their findings on the crisis that initially, or at least officially, started in 2007 as a problem in the US subprime mortgage market.

The picture shows the results of a google trends search for the terms "credit crisis" and "easy credit". I offer this picture lightly, of course. But it acts as a nice heuristic for the relatively recent recognition of the crisis, and even suggests a weak anti-correlation between the two terms. For a more substantial SFI posting on the credit crisis click here.

Click here to register for the conference (deadline is next Monday, August 25th). I will post a report shortly after the event. Note that the conference academic director René Stulz will stay on in Switzerland the following week to teach a week-long course in integrated risk management in Geneva.

Princeton Professor Shin kicks off Industry Seminars

Last Friday, the Institute staged the first of its new Swiss Finance Industry Seminars with a presentation by Princeton's Professor Hyun Song Shin, who described his research on understanding the credit crisis.

Professor Shin's views on the credit crisis have been published recently in the Washington Post and he had just spent the week participating at a conference held at Study Centre Gerzensee, near Berne.

Professor Shin focuses on three 'puzzles' associated with the crisis. Namely, Why the crisis apparently affects some markets but not others? How a financial problem ostensibly limited to a mere portion of the home mortgage market could come to assume such global financial significance? And finally, How is it that subprime credit risk came to be so concentrated among such sophisticated financial players as the major banks?

He points the finger at excessive leverage and the problems that can arise when financial intermediaries significantly raise leverage during booms and then attempt to lower their leverage during downturns.

When will the crisis end? Shin believes that perceptions of financial risks will not decline anytime soon. Conditions will remain as they are, he claims, until aggregate balance sheets decline, and new capital is raised, to ultimately arrive at a situation in which corporate balance sheets are adequately supported.

The next seminar in the series, held on October 7th at 7am, will be given by Michael Brennan, University of California and London Business School. Prof Brennan's presentation is entitled The mispricing return premium. Click here to register.

Midway to CFAME

Participants in the 2008 Certificate in Financial Asset Management and Engineering course (CFAME) have reached the mid point of the 5 week program this week with presentations on Market and Credit Risk Management.

Institute Senior Chair Erwan Morellec and Assistant Professor Tony Berrada presented the tools needed to size up the risks facing financial institutions large and small. Earlier in the week saw presentations by Olivier Scaillet, whose work on estimating outperformance among fund managers featured recently in the New York Times.

CFAME's Class of 2008 displays the international mix so characteristic of program, with two thirds of the class coming from outside Switzerland. I spoke with financial planner Philip Amery (pictured, right), who'd made the journey from Adelaide, Australia and medical graduate Ahmed Alsaleh, and learned about the opportunities available to numerically-savvy financial folks around the globe. Both saw great opportunities in these challenging times.

Very refreshing.