American Consequences - September 2020


CRO X is the Chief Risk Officer for a large, well-known, "globally systemic" financial institution. That's regulator speak for "darn big and important." He's requested to write under anonymity for American Consequences so he can freely speak his mind without undue retribution...

I n this time of a global pandemic and many other scary monsters hiding under the bed, I find myself answering the question... What's it like being a Chief Risk Officer of a major financial institution in times like these? The answer ranges from scary to confusing, depending on how prepared your company was for such events. Second-quarter 2020 U.S. GDP is down 32.9%. The S&P 500 and Nasdaq are at, or near, all-time highs (depending on the day). Tesla has a market cap approaching $400 billion off a de minimus bottom line. The Federal Reserve's balance sheet is approaching $8 trillion. The 10-year Treasury yield is below 50 basis points. And confirmed COVID-19 cases globally approaching 30 million with deaths nearing 1 million. Excess deaths, a measure that compares actual to expected mortality, suggests that the real COVID-19 impact could be substantively larger, with figures understated by 20% to 40% in developed countries and by substantially more in emerging countries. The economy, markets, and mortality pictures provide perhaps the most fascinating, uncertain, and volatile backdrop in recent memory for those focused on risk.


September 2020

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