Do the recent bank failures imply that the banking industry could use more actuaries?

Question

Curious to see what others think.

Answer 1

Nah, the Fed will just bail them out - they might as well layoff the rest of their risk management team and use the extra cash to purchase more 2% bonds in a rising rate environment /s

Answer 2

The banking culture is the issue here. Front desk traders are given the fattest bonuses and they're always given priority over backend risk management when it comes to voicing the wants and the needs.

Answer 3

The smaller banks were deregulated after trump pulled back Dodd Frank. From what I remember you had to do stress tests if you had >50B in AUM which was changed to >250B.

It's like saying that a life insurer didn't have to do CFT. It would he disastrous the minute shit hits the fan.

Also risk management isn't as valued in banks. They're considered more like business partners and often get overridden by trading / IB because of profit incentive. At a life insurer, you can't move a finger without the chief actuary saying yes

Answer 4

The US needs to join every other country and apply the strict global capital (Basel III) and reporting requirements (IFRS). However, it will never happen because political lobbying is entrenched within their system and those in power will continue to socialize the losses and capitalize the gains.

Answer 5

No. They need more MBA’s. XD

Answer 6

Maybe like how insurer deals with Cats with reinsurance, banks need their own reinsurance on bank runs.

No bank can survive a bank run, similar to how no p&c insurer can survive a cat that impacts most of its policies without adequate reinsurance?

Answer 7

Do actuaries convince life insurance companies to not have disintermediation risk? Every company I've worked for has had a strategy of long duration bonds and shorter duration liabilities. Seems like the exact same issue as the banks.

Of course, life insurer's liabilities may have a bit higher persistency.

My view is that banks have to hold 10% capital. If the industry/govt wanted banks to be safer, they would require this amount to be higher. But they don't. Banks probably just follow this rule and assume it's good enough. So really the govt is setting the risk tolerances, not the banks.

Answer 8

Banks need to be regulated differently which in turn might require actuaries to monitor

Answer 9

In our models stress tests are 50 basis points maybe now 100. No one ever stressed 400 basis points. I don’t see how an actuary would have dreamed of this once in 50 years disaster

Answer 10

No it doesn’t. Would you, as an actuary, push the bank’s management to hold a lot of short term assets to “duration ALM”? I guess actuaries would do that, but nobody listens. We are not as important as you would think, just focus on matching numbers brother!