Effective product control : controlling for trading desks - Original PDF

دانلود کتاب Effective product control : controlling for trading desks - Original PDF

Author: Nash, Peter

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Improve financial product control operations with this comprehensive reference Effective Product Control provides detailed "how–to" guidance for the product control function, serving as a control standards primary reference for both internal and external stakeholders. Coverage includes tasks, roles, and functions, presented in an accessible way for introductory readers, while also offering best practice and improvement examples for the seasoned professional. Readers will learn how to handle risk exposure, exception reports, PNL, and more, and better grasp the relevant regulation, compliance rules, and standards. Key touch points include risk management, audit, accounting, treasury, trading and product sales, along with an examination of taxation and regulatory interaction including SOX, control review, valuations, and liquidity levels. Teaching and student ancillary materials include lecture slides, case studies, questions and answers, and functional documents that facilitate fundamental understanding. Product control within financial services organizations monitors trades, trade patterns, and entire portfolios to assess the remits and risks being taken, acting as the primary conduit between the trading desk and risk management, accounting, auditing, and financial functions. This book gives readers a foundation in product control, with detailed guidance toward every aspect of the function. Gain a deeper understanding of common product controller tasks Structure an effective and efficient product control function Carry out audit and regulatory review more effectively

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CHAPTER 1 An Introduction to Product Control THE EMERGENCE OF PRODUCT CONTROL Finance within banking is unlike finance in most other types of industries. In most non-banking companies, the finance team is separate from the producer. For example, in a manufacturing company the finance department is not on the shop floor, and in a retail company it is not in the stores. Most likely, finance is housed in the head office. In these industries, the value of the product is not often in dispute. Usually the cost of sales and production, or margin per unit, is known and the revenues are the function of a simple calculation. There is also often a team of management accountants providing information to the product line managers on the results of their business and assisting in analytics on those results. In banking, it is not that simple. Finance is more integral to the production because the products banks deliver are financial. In the 1990s, with increasing volumes of trading, a greater pool of financial instruments and higher levels of complexity, it was necessary for banks to establish a dedicated function within finance to control evolving sales and trading desks. With that, management accountants within finance morphed and grew into a function called product control, which came to dominate large swathes of finance, establishing footprints all over the developed world and later on, the developing world. Over the past decade, these large swathes have been migrating from the more expensive financial centres such as London, New York, Tokyo, Hong Kong and Singapore, to cheaper locations such as India, Poland and the Philippines. This change has presented opportunities for aspiring workers in the developing nations and presented uncertain career paths for those remaining in the shrinking financial centres. We will look at this trend in more detail in Chapter 2

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فصل 1 مقدمه ای بر کنترل محصول ظهور کنترل محصول تامین مالی در بانکداری بر خلاف امور مالی در اکثر انواع دیگر صنایع است. در اکثر شرکت های غیربانکی، تیم مالی جدا از تولیدکننده است. به عنوان مثال، در یک شرکت تولیدی، بخش مالی در طبقه مغازه نیست، و در یک شرکت خرده فروشی در فروشگاه ها نیست. به احتمال زیاد، امور مالی در دفتر مرکزی قرار دارد. در این صنایع، ارزش محصول اغلب مورد بحث نیست. معمولاً هزینه فروش و تولید یا مارجین هر واحد مشخص است و درآمدها تابع یک محاسبه ساده است. همچنین اغلب تیمی از حسابداران مدیریت وجود دارد که اطلاعاتی را در مورد نتایج کسب و کارشان به مدیران خط تولید ارائه می‌کنند و در تجزیه و تحلیل آن نتایج کمک می‌کنند. در بانکداری به این سادگی نیست. امور مالی بیشتر به تولید کمک می کند زیرا محصولاتی که بانک ها ارائه می دهند مالی هستند. در دهه 1990، با افزایش حجم معاملات، استخر بیشتر ابزارهای مالی و سطوح بالاتر پیچیدگی، لازم بود بانک ها یک عملکرد اختصاصی در حوزه مالی برای کنترل فروش و میزهای معاملاتی در حال تحول ایجاد کنند. با آن، حسابداران مدیریت در امور مالی شکل گرفتند و به عملکردی به نام کنترل محصول تبدیل شدند که بر بخش های بزرگی از امور مالی تسلط یافت و در سراسر جهان توسعه یافته و بعداً در جهان در حال توسعه ردپایی ایجاد کرد. در طول دهه گذشته، این مناطق بزرگ از مراکز مالی گران‌تر مانند لندن، نیویورک، توکیو، هنگ کنگ و سنگاپور به مکان‌های ارزان‌تری مانند هند، لهستان و فیلیپین مهاجرت کرده‌اند. این تغییر فرصت هایی را برای کارگران مشتاق در کشورهای در حال توسعه ایجاد کرده و مسیرهای شغلی نامشخصی را برای افرادی که در مراکز مالی رو به کاهش باقی مانده اند ارائه کرده است. در فصل 2

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Author(s): Nash, Peter

Publisher: John Wiley & Sons, Year: 2018

ISBN: 9781118939789,1118939786,9781118939796,1118939794

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Contents Preface xiii Acknowledgements xv About the Author xvii PART ONE Working in Product Control CHAPTER 1 An Introduction to Product Control 3 The Emergence of Product Control 3 The Purpose of Product Control 3 Different Types of Product Control 5 Skills, Qualifications and Experience 6 Organizational Structure 8 The Desk 10 CHAPTER 2 Changing Landscape of Product Control 15 Offshoring 15 XVA 19 Greater Levels of Capital 19 Greater Focus on Liquidity 20 Notes 21 CHAPTER 3 Key Stakeholders 23 Front Office: Sales and Trading Desk 23 Chief Operating Officers (COOs) 25 Operations 26 Middle Office 27 Market Risk 28 Financial Reporting 29 Management Reporting 29 Finance Change 30 vii viii CONTENTS IT 30 Operational Risk 32 Regulatory Reporting 32 Accounting Policy 34 Tax 34 Audit 36 Finance Shared Service 37 Summary 37 Notes 37 PART TWO Technical Skills CHAPTER 4 Accounting Standards: Recognition and Measurement 41 IAS 39 Financial Instruments: Recognition and Measurement 42 IFRS 9: Financial Instruments 60 IFRS 13: Fair Value Measurement 66 Notes 71 CHAPTER 5 Market Risk 75 What Is Market Risk and How Is It Generated? 75 How Is Market Risk Measured by a Bank? 77 Note 85 CHAPTER 6 Pricing Financial Instruments 87 How to Approach the Pricing of a Financial Instrument 87 Pricing Examples 89 Notes 105 CHAPTER 7 Internal Control 107 What Is Internal Control? 107 Establishing an Internal Control Framework 110 Example of Front to Back Internal Controls 117 Notes 122 PART THREE Profit and Loss Controls CHAPTER 8 System Feeds, End of Day Rates and Profit and Loss Estimates 127 System Feeds 127 End of Day 129 End of Day Rates 130 Contents ix P&L Estimate 135 Note 136 CHAPTER 9 Review of New and Amended Trades 137 New Trades 137 Amended Trades 152 Notes 164 CHAPTER 10 Review of Mark-to-Market P&L 165 Defining Mark-to-Market P&L 165 Attributing MTM P&L 166 Risk-Based P&L Estimates 170 Changes in the End of Day Prices 173 When to Validate the MTM P&L 176 CHAPTER 11 Funding, Fees and Charges 177 Funding 177 Fees and Charges 185 Note 187 CHAPTER 12 Profit and Loss Adjustments 189 The Need for P&L Adjustments 189 Controlling P&L Adjustments 190 Notes 194 CHAPTER 13 Profit and Loss Commentary 195 Who Is the Reader? 198 When Is P&L Commentary Required? 198 CHAPTER 14 Profit and Loss Reconciliations and Sign-Offs 201 Flash vs. Actual 201 Desk P&L Sign-off 203 P&L Reconciliation 205 PART FOUR Valuations CHAPTER 15 Independent Price Verification 209 Components to IPV Process 210 Note 224 x CONTENTS CHAPTER 16 Valuation Adjustments 225 Why Valuation Adjustments Are Required 225 Bid–Offer 225 Day 1 Reserves 234 Model Valuation Adjustment 234 XVA and Collateral Agreements 235 Recording and Reporting of VAs 239 Notes 239 PART FIVE Balance Sheet Controls CHAPTER 17 Balance Sheet Substantiation and Analysis 243 Substantiating the Balance Sheet 243 Frequency of the Balance Sheet Substantiation 248 Evidencing the Balance Sheet Substantiation 249 Unsupported Balances 249 Lines of Responsibility 255 CHAPTER 18 Dividending of Profit and Loss and FX Selldown 257 CHAPTER 19 Controlling Nostros 261 Introduction to Nostros 261 Controlling Nostros – Cash Breaks 262 Risk-Weighting Cash and AVE breaks 266 Provisioning for Nostro and AVE Breaks 267 Notes 268 PART SIX Financial Accounting and Reporting CHAPTER 20 Financial Accounting Entries 271 Financial Accounting Entries 271 Chart of Accounts 284 Accounting Rules Engine 286 Notes 289 CHAPTER 21 Financial Reporting and Note Disclosures 291 Context of Financial Reporting 291 Profit and Loss 293 Contents xi Balance Sheet 295 Netting 297 Fair Value Hierarchy 304 Notes 309 PART SEVEN Supplementary Controls CHAPTER 22 New Product Proposals 313 Starting Line 313 The Review 314 The Sign-Off 319 CHAPTER 23 Rogue Trading 321 The Forefathers of Rogue Trading 321 The Fallout from Rogue Trading – The Bank 323 The Fallout from Rogue Trading – The Industry 325 Going Rogue 325 UBS Rogue Trading Incident, 2011 327 Notes 343 Index 347

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