{"id":135187,"date":"2026-01-23T18:08:03","date_gmt":"2026-01-23T23:08:03","guid":{"rendered":"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/financial-services\/global-risk-management-amid-macro-shocks\/"},"modified":"2026-01-23T18:10:56","modified_gmt":"2026-01-23T23:10:56","slug":"global-risk-management-amid-macro-shocks","status":"publish","type":[3762],"link":"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/financial-services\/global-risk-management-amid-macro-shocks\/","title":{"rendered":"Global risk management amid macro shocks"},"content":{"rendered":"<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed' data-anchor='row-69d072cc7febb'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-7\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer bbg-spacer--lg\"\n    >\n<\/div>\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p class=\"small\"><strong><span style=\"font-size: 14px; letter-spacing: 1px; color: #0062dd;\">ARTICLE<\/span><\/strong><\/p>\n\t\t\t<\/div>\n\n\t\t\t<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div>    <h1 class=\"bbg-metadata bbg-metadata--title\">Global risk management amid macro shocks<\/h1>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 50px !important\"\n    >\n<\/div>    <ul class=\"bbg-categories_list\">\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/financial-services\/\" rel=\"category tag\">\n                    Financial Services\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/markets\/\" rel=\"category tag\">\n                    Markets\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/regulation\/\" rel=\"category tag\">\n                    Regulation\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/treasury\/\" rel=\"category tag\">\n                    Treasury\n                <\/a>\n            <\/li>\n            <\/ul>\n<\/p>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-5\"\n    style=\"\"\n    >\n    <div id=\"\" class=\"wpb_content_element bbg-single-image align-left\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"800\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/430739873rs.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"stock chart display\" title=\"stock chart display\" \/>\n        \n            <\/figure>\n<\/div>\n\n\n\n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--full-bg-bleed' data-anchor='row-69d072cc89704'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-6 bbg-column--m-width-6\"\n    style=\"\"\n    >\n    <p>    <p class=\"bbg-metadata bbg-metadata--date\">January 23, 2026<\/p>\n\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><strong>Bloomberg Professional Services<\/strong><\/p>\n\t\t\t<\/div>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2 bbg-column--valign-middle bbg-column--m-width-2 bbg-column--s-padding-right-2\"\n    style=\"\"\n    >\n    \t\t<div class=\"bb-tts\" \n\t\t\tdata-selector=\"main\"\n\t\t\tdata-label=\"Speak this page\"\n\t\t\tdata-custom-play=\"Play\"\n\t\t\tdata-custom-pause=\"Pause\"\n\t\t\tdata-custom-stop=\"Stop\" \n\t\t\tdata-overlay=\"false\" \n\t\t\tdata-invert=\"false\"\n\t\t\tdata-no-time=\"false\"\n\t\t\tdata-no-button-text=\"false\"\n\t\t\tdata-one-button=\"true\"\n\t\t\tdata-one-style=\"true\"\n\t\t\tdata-hide-stop=\"true\"\n\t\t\tdata-voice=\"Gordon\"\n\t\t\tdata-pitch=\"1\"\n\t\t\tdata-speed=\"1\"\n\t\t\tdata-align=\"flex-start\"\n\t\t>\n\t\t<\/div>\n\t\t\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-compact row-padding--bottom-compact bbg-row--full-bg-bleed' data-anchor='row-69d072cc8bac9'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <p>\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">Empirical evidence suggests\u00a0the frequency and severity of\u00a0macroeconomic shocks are\u00a0increasing, driven by geopolitical tensions, climate change, global\u00a0inflation\u00a0and supply chain disruption.\u00a0Financial institutions, therefore, require a stronger risk management framework than ever.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Here we explore how banks and other market participants worldwide are responding to this new era of heightened uncertainty.<\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<h2><span class=\"TextRun SCXW211428700 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW211428700 BCX0\">Global tariffs<\/span><\/span><span class=\"EOP SCXW211428700 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/h2>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">The\u00a0significant macroeconomic\u00a0event\u00a0that\u00a0took place in April\u00a02025,\u00a0was\u00a0shortly\u00a0after\u00a0the US\u00a0announced it would\u00a0impose\u00a0far-reaching trade tariffs on the rest of the world.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">While\u00a0the imposition of the tariffs had been widely\u00a0anticipated,\u00a0many\u00a0financial institutions\u00a0under-estimated the extent to which they would affect markets.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\t\t\t<\/div>\n\n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--full-bg-bleed' data-anchor='row-69d072cc8d81b'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-3\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div><hr class=\"bbg-separator bbg-separator-1\" style=\"height:1px;\" \/>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 32px !important\"\n    >\n<\/div>\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p class=\"small\"><strong><span style=\"font-size: 14px; letter-spacing: 1px;\">PRODUCT MENTIONS<\/span><\/strong><\/p>\n\t\t\t<\/div>\n\n\t\t\t\n<div\n  id=\"cta_8126116659941512800\"\n  class=\"wpb_content_element bbg-cta no-icon\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p left\">\n      <a\n        class=\"bbg-cta-link link\"\n        href=\"https:\/\/global-bps-new.webflow.io\/bank-treasury-and-risk-workflows\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"Bloomberg Bank Treasury and Risk Solutions\"\n        >\n                      Bloomberg Bank Treasury and Risk Solutions\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div><div\n    class=\"bbg-spacer\"\n        style=\"height: 32px !important\"\n    >\n<\/div><hr class=\"bbg-separator bbg-separator-1\" style=\"height:1px;\" \/>\n<\/p>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-1\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-6\"\n    style=\"\"\n    >\n    \t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">Risk managers were especially caught off guard by the fact that it\u00a0wasn\u2019t\u00a0just the\u00a0stock markets that came under pressure but the bond markets as well.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Sam Ahmed, former Group Chief Operating Officer for Financial Markets at DBS, APAC says that existing linear modelling at many reginal and global banks were ill-equipped to deal with this kind of \u2018Black Swan\u2019 event.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed' data-anchor='row-69d072cc90f9a'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    \t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">He says that there were three orders of risk that risk managers had to consider:\u00a0that Donald Trump would win the US election, that\u00a0the swingeing tariffs would lead to massive volatility and\u00a0that\u00a0once this happened US Treasuries would sell off.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cMore than 90% of\u00a0financial institutions\u00a0anticipated\u00a0the first two orders of risk\u00a0in their models. Where they fell short was on the third order risk.\u00a0Risk managers\u00a0assumed that,\u00a0if\u00a0US equity markets sold off, they could simply buy US Treasuries.\u00a0That\u00a0didn\u2019t\u00a0work this time\u00a0and instead we saw money flowing into emerging markets,\u201d says Ahmed.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span class=\"TextRun SCXW164711244 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW164711244 BCX0\">Sim<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">ilarly, several European and U.S.\u00a0<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">institutions<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">\u00a0also faced unex<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">pected cross-asset volatility as traditional\u00a0<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">correlations between equities and Treasuries broke down, reinforcing the need for adaptive risk\u00a0<\/span><span class=\"NormalTextRun SCXW164711244 BCX0\">frameworks across regions.\u00a0<\/span><\/span><span class=\"EOP SCXW164711244 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\n\n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--margin-top-compact bbg-row--margin-bottom-compact bbg-row--full-bg-bleed' data-anchor='row-69d072cc928ff'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<div\n    class=\"bbg-column\"\n    style=\"\"\n    >\n    <div class=\"bbg-interstitial\" aria-label=\"interstitial\" tabindex=\"0\">\n\t<style>\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\tbackground: url(https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Interstitial_bg.png);\n\t\t\t\tbackground-repeat: no-repeat;\n\t\t\t\tbackground-position: center center;\n\t\t\t\tbackground-size: cover;\n\t\t\tpadding: 104px;\n\t\t\t\n\t\t\t\n\t\t}\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content, .bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content p{\n\t\t\tcolor:white;\n\t\t}\n\t\t@media (max-width: 768px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 32px;\n\t\t\t}\n\t\t}\n\t\t@media (max-width: 480px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 18px;\n\t\t\t}\n\t\t}\n\t<\/style>\n\t<div class=\"wpb_content_element bbg-card  bbg-card-dark bbg-card_hasCta has_interstitial\" id=\"card_1\" data-card_type=\"no_image\">\n  \n  \n  <div class=\"bbg-card__innerwrapper\">\n    <div class=\"bbg-card__content\">\n      \n      \n                      <h3 class=\"bbg-card__title\">Discover more with Bloomberg newsletters<\/h3>\n      \n              <div class=\"bbg-card__wysiwyg bb-wysiwyg\"><p>Subscribe now<\/p>\n<\/div>\n          <\/div>\n\n          \n<div\n  id=\"cta_248382954255264523\"\n  class=\"wpb_content_element bbg-cta icon icon-arrow\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p right\">\n      <a\n        class=\"bbg-cta-link link interstitial_cta\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/insights\/newsletter\/\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"\"\n                role=\"button\"\n        aria-label=\"Learn more\"\n        >\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n\n      <\/div>\n\n  <\/div>\n\n<\/div>\n\n\n<\/div>\n\t\t\t\n\t\t<\/div>\n\t<\/section>\n<\/div>\n<div  class=\"bbg-row-container\">\n\t<section\n\tclass='bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed' data-anchor='row-69d072cc974a5'\t>\n\t\t\t\t<div class=\"\n\t\tbbg-row--content\t\t\"\n>\n\t\t\t\t\t\t<p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    \t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<h2><span class=\"TextRun SCXW26693849 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW26693849 BCX0\">Stress testing<\/span><\/span><span class=\"EOP SCXW26693849 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/h2>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span class=\"TextRun SCXW122275373 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun CommentStart SCXW122275373 BCX0\">A<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">n over-reliance on historical data\u00a0<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">and correlations<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">\u00a0<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">in stress tests\u00a0<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">meant that many<\/span><\/span><span class=\"TextRun SCXW122275373 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW122275373 BCX0\">\u00a0<\/span><\/span><span class=\"TextRun SCXW122275373 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW122275373 BCX0\">banks w<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">e<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">re ill-equipped to model different scenarios upon the introduction of new tariff<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">s<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">.<\/span><span class=\"NormalTextRun SCXW122275373 BCX0\">\u00a0<\/span><\/span><span class=\"EOP SCXW122275373 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cWe live in a world where you cannot f<\/span><span data-contrast=\"auto\">orecast future movements based on historic correlations. Banks need to change their linear view of the\u00a0world and introduce more randomness,\u201d\u00a0says Ahmed.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Monte Carlo stochastic\u00a0modelling is\u00a0a good way\u00a0of doing this.\u00a0While many large banks already use\u00a0Monte Carlo techniques within their\u00a0critical finance functions, Ahmed\u00a0says that\u00a0experience with the trade tariffs shock has persuaded\u00a0many to review\u00a0the risk that they are capturing.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Stress testing,\u00a0however, can only take\u00a0banks so far.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cYou can do lots of stress testing. You can double-stress the book. You can market-stress the book. But you\u00a0don\u2019t\u00a0know exactly what the next event is going to look like,\u201d says the head of\u00a0liquidity management at an\u00a0APAC\u00a0bank.\u00a0\u201cEverybody\u00a0knew about the tariffs, but nobody\u00a0knew about the numbers.\u201d<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">This\u00a0has been\u00a0a perennial problem\u00a0with\u00a0stress testing\u00a0and is one of the reasons\u00a0banks have been looking to update their models, introducing\u00a0methods\u00a0such as reverse stress testing and macroprudential analysis.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cCollectively, shocks like these underline the need for dynamic, real-time risk reporting that can apply a variety of data-driven stress tests to model changing conditions and external events,\u201d says David Allright, Global Head of Sell-Side Risk Product at Bloomberg.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Under pressure from regulators,\u00a0banks\u00a0have also been increasing the frequency with which they run stress tests \u2013 something that the head of liquidity management says is a positive.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This recalibration is mirrored globally, for example, both the Bank of England and the U.S. Federal Reserve have broadened scenario testing to capture non-linear and climate-related risks, underscoring that stress testing modernization is now a global regulatory trend. <\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<h2><span class=\"TextRun SCXW88434521 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW88434521 BCX0\">Intraday liquidity<\/span><\/span><span class=\"EOP SCXW88434521 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/h2>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">The increased prevalence of macroeconomic shocks is also causing many\u00a0to wonder\u00a0if\u00a0their assets can be easily converted into cash\u00a0in\u00a0times of\u00a0crises.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">This is an issue that has been simmering for a\u00a0few years, ever since\u00a0rising interest rates caused a\u00a0run on Silicon Valley Bank in the US.\u00a0Its eventual collapse\u00a0marked\u00a0the third-biggest banking failure in US history.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The SVB failure contributed towards the overall stress and uncertainty in the banking system that\u00a0ultimately brought\u00a0down Credit Suisse.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cSometimes a bank failure is not about solvency. It\u2019s about logistics,\u201d says Roland Ho, Head of Asset Liability Matching at OCBC. \u201cBanks need to be confident that they can easily convert what they consider HQLA [high quality liquid assets] into cash to meet their obligations on an intraday basis.\u201d<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">This is an issue that\u00a0is top of the mind for\u00a0many\u00a0regional and global\u00a0regulators.\u00a0At the end of August,\u00a0the Monetary Authority of Singapore\u00a0published\u00a0<\/span><a href=\"https:\/\/www.mas.gov.sg\/publications\/consultations\/2025\/consultation-paper-on-proposed-guidelines-on-liquidity-risk-management\"><span data-contrast=\"none\">new liquidity risk management guidelines<\/span><\/a><span data-contrast=\"auto\">, which outlined more granular\u00a0details of what the regulator\u00a0expects.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cAs the market adapts to heightened liquidity requirements, modelling real-time behavioural\u00a0scenarios will be fundamental to strengthening overall risk management,\u201d says Bloomberg\u2019s\u00a0Allright.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">To strengthen its own liquidity management, OCBC has\u00a0used\u00a0blockchain technology to\u00a0establish\u00a0a new short-term US\u00a0dollar funding mechanism with JP Morgan.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cEven before the US markets\u00a0open, we are able to\u00a0tap into dollar funding\u00a0should the need arise,\u201d says Ho.\u00a0\u201cThis is\u00a0important for our risk management \u2013 and for addressing any concerns that the regulators might have.\u201d<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span style=\"font-weight: 400;\">In Europe, the ECB has also intensified scrutiny of intraday liquidity buffers following the Credit Suisse collapse, while in the U.S. regulators have renewed emphasis on contingency funding and real-time liquidity monitoring, making these priorities truly global. <\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<h2><span class=\"TextRun SCXW217936622 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW217936622 BCX0\">Interest rate shocks<\/span><\/span><span class=\"EOP SCXW217936622 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/h2>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span style=\"font-weight: 400;\">Sudden swings in interest rates have also changed how risk management units assess exposure, with the result that many institutions have been looking to shorten the duration of the assets they hold.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cIf rates move up too sharply, then our asset valuation will take a hit,\u201d says Ho. \u201cTo address this, we have shortened the duration of our interest rate risk, while at the same time increasing the notional amount of the interest rate risk that we take on.\u201d\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are two sides to this. While rising interest rates might put pressure on asset valuations, they also provide a boost to Net Interest Income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe look at the impact of interest rate changes across the different risk measurements. We manage everything centrally rather than look at things in isolation. This improves our overall risk profile,\u201d says Ho.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Interest rate shocks could also encourage more hold-to-collect accounting for fixed income assets.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cFor most of the bonds that we purchase, we apply \u2018Fair Value Through Other Comprehensive Income\u2019 accounting. This still causes certain fair value reserve changes that impacts the bank\u2019s capital, namely Common Equity Tier 1. Applying hold-to-collect accounting will remove some of this volatility,\u201d says Ho.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, bookkeeping must line up with how banks trade. Hold-to-collect accounting should only be used for those assets that are kept on the balance sheet, rather than sold, with the purpose of extracting regular cashflows from them.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another danger for banks is that higher rates could encourage depositors to take their money elsewhere, leading to a funding squeeze. This dynamic has been seen not only among regional banks in Japan but also among smaller lenders in Europe and the U.S., where deposit migration toward larger institutions and money market funds has intensified amid rising rates.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cSmaller regional banks in Japan are now facing an outflow of deposits to other banks with higher credit, or those that offer higher savings returns. This is a significant challenge for many institutions, who may need to find new investment opportunities,\u201d says Tsuyoshi Oyama, CEO of RAF Laboratory, a risk management consultancy based in Tokyo.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These outflows have forced many institutions globally to reassess their funding models and seek new investment opportunities,\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, looking for higher-yielding investment opportunities can introduce more risk.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cMarkets might be booming now, but they can easily turn around. It\u2019s a risky situation,\u201d says Oyama. <\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<h2><span class=\"TextRun SCXW156453042 BCX0\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW156453042 BCX0\">Structural shift<\/span><\/span><span class=\"EOP SCXW156453042 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/h2>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span style=\"font-weight: 400;\">It\u2019s not just short-term market uncertainty that banks are concerned about. They are also wondering whether recent macroeconomic shifts are symptomatic of a wider structural shift.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cLooking at the financial eco-system, we are seeing a decline in the use of US dollars. Countries like China and a few others are now trying to promote their own currencies for use as collateral,\u201d says Ahmed.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While some countries may be promoting the use of their own domestic currencies, the US has one very important thing in its favor: it is widely traded between investors that sit outside of the US market.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cI have not yet seen a situation in which CNH was traded, but where China wasn\u2019t either the buyer or the seller,\u201d says the head of liquidity management quoted at the start of this article. \u201cCyclically the dollar may be declining, but structurally I\u2019m not so convinced. One has to ask: what is the economically viable alternative to the dollar? Right now, there isn\u2019t one.\u201d\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Ashok\u202fDas, Deutsche Bank\u2019s Head of Global Emerging Markets and fixed income and currencies trading for Asia, points out that there is no other market that can match the depth of the dollar.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cPeople are not going to give up the dollar just because the geopolitical risk on the currency is more than it was in the past,\u201d he says.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, he acknowledges that there is a shift taking place, and this is something that risk managers might have to start thinking about.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThose that are exposed to US dollars definitely want to diversify or hedge that exposure a bit more. At the same time, investors in certain countries want their invoices to be in their home country [currency]. It\u2019s not a de-dollarisation, but we are going to see a lot more fragmentation in the markets,\u201d says Das.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This trend is not limited to Asia. European treasuries are similarly exploring currency diversification through euro-denominated collateral markets, while in the Americas, U.S. institutions are balancing dollar dominance with growing demand for local-currency settlement options.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThis could deliver \u201ca real shock\u201d to a system that\u2019s always relied on a centralized pool of eligible collateral,\u201d Das adds.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As risk managers from Singapore to London to New York adapt to these evolving challenges, the next phase of resilience will depend on globally integrated liquidity access, cross-regional data transparency, and unified risk governance frameworks. <\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><span data-contrast=\"auto\">To learn more about Bloomberg Bank Treasury and Risk solutions <a href=\"https:\/\/global-bps-new.webflow.io\/bank-treasury-and-risk-workflows\" target=\"_blank\" rel=\"noopener\">click here<\/a>.<\/span><\/p>\n<p><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\t\t\t<\/div>\n\n\t\t\t\t\t\t<div\n\t\t\tclass='bb-wysiwyg ' style=''>\n\t\t\t<p><em><span class=\"TextRun SCXW265164597 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW265164597 BCX0\">This blog is a global adaptation of the \u201cMacro Shocks Prompt Reset in APAC Risk Management\u201d report. To read the original report, click\u00a0<\/span><\/span><a class=\"Hyperlink SCXW265164597 BCX0\" href=\"https:\/\/www.bloomberg.com\/professional\/insights\/risk\/macro-shocks-prompt-reset-in-apac-risk-management\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"TextRun Underlined SCXW265164597 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW265164597 BCX0\" data-ccp-charstyle=\"Hyperlink\">here<\/span><\/span><\/a><span class=\"TextRun SCXW265164597 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW265164597 BCX0\">.<\/span><\/span><span class=\"EOP SCXW265164597 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/em><\/p>\n\t\t\t<\/div>\n\n\t\t\t<div class=\"bbg-accordion transparent\">\n\t<input type=\"checkbox\"  id=\"bbg-accordion-toggle-69d072cc9a85f\">\n\t<div class=\"bbg-accordion-parent\" data-accordion-toggle aria-expanded=\"false\">\n\t\t<label class=\"bbg-accordion-label\" for=\"bbg-accordion-toggle-69d072cc9a85f\">\n\t\t\t\t<h5 class=\"bbg-accordion-title\" data-label=\"Disclaimer\">\n\t\tDisclaimer\n\t<\/h5>\n\n\t\t\t\t\t<\/label>\n\t<\/div>\n\t<div class=\"bbg-accordion-content\">\n\t\t\t\t\t<div class='bb-wysiwyg '>\n\t\t\t<p>The information and data included in these materials are for illustrative purposes only. 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