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May 09, 2013 • Press Releases

DTCC Survey Shows Impact of New Regulations as Top Concern in Addressing Systemic Risks

Survey Polls Industry Leaders on Biggest Challenges to Mitigating Risk

New York, NY – May 9, 2013 – The impact of new regulations in the financial services industry is by far the most important systemic-risk concern facing the global capital markets, according to a recent client survey conducted by The Depository Trust & Clearing Corporation (DTCC). The survey revealed that 82% of industry leaders ranked meeting new regulatory requirements as a top concern in mitigating systemic risks.

“Given the massive scope of Dodd-Frank, CPSS IOSCO, Basel III and other new or enhanced regulations, the tremendous commitment of time and resources necessary to build and maintain compliance structures is clearly keeping people up at night,” said DTCC’s Michael Leibrock, Vice President, Operational & Systemic Risk Management, who cited comments received by respondents to the survey. “The findings suggest that if execution of regulatory mandates is done poorly, that could actually create risks which supervisors are trying to avoid, including the potential failure of a firm as a worst-case scenario,”

Top Ten Risks

DTCC’s survey ranked the following ten issues in this order of importance to its clients. In two cases, there were ties.

Top Ten RisksResponse %Commentary by DTCC Clients
1.Impact of New Regulations 82% The time and resources required to meet new regulators could result in companies “taking their eye off the ball” from managing day-to-day risk.
2. Disruption or Failure of a Key Market Participant 61% The “too big to fail” issue is still a concern as the interconnected nature of the financial system could cause a domino effect if one major player fails.
3. Cyber Security 53% Small firms with limited resources for IT departments or constant technology upgrades are considered the weakest link in combating cyber threats.
4. Significant Business Continuity Event 45% Unpredictable events such as natural disasters and terrorist acts, as well as more predictable events such as extreme weather, are both of considerable concern.
5. Sudden Dislocation in Stock or Bond Market 37% With yields on most bonds at or near historical lows, there is a significant risk that even a modest increase in yields could result in massive losses in the fixed income markets.
6. U.S. Recession 37% The ability of the U.S. government to address the deficit and the cumulative effects of heavy regulations are concerns.
7. Partial or Full Eurozone Breakup 35% The over-leveraged nature of certain Eurozone countries and lack of fiscal/monetary integration across the region, could lead to a forced or voluntary exit of one or more members.
8. Major Compliance or Governance Event 35% Respondents note a troubling trend in compliance violations by large financial institutions.
9. Interconnection Risks 25% Increasing linkages among global financial firms, combined with the high speed of transactions, is a cause for concern.
10. High-Frequency Trading 18% Faster trading and algorithmic trading could lead to future anomalies in the securities markets.


Of the 80 institutions that responded to the survey, banks and broker/dealers comprised the majority.

DTCC’s Role as Risk Mitigator

With 40 years of experience providing custody, netting, clearing and settlement services to the financial community, DTCC is the world’s largest post-trade processing infrastructure. In July 2012, three of its subsidiaries were designated Systemically Important Financial Market Utilities* by the Financial Stability Oversight Council. Because of its designation and central role as a risk mitigator for the financial markets, DTCC has an inherent interest in keeping a pulse on its clients’ positions on risk.

“The cooperative nature of our relationships with all our constituents has given us unparalleled insights into their needs. As a result, we have been able to develop many pioneering tools to manage risk across a broad range of financial instruments and market sectors,” said Noel Donohoe, DTCC Group Chief Risk Officer.

Among those tools are:

  • A Mortgage-Backed Securities (MBS) Central Counterparty to reduce risk and costs in the $100-trillion-a-year U.S. market for MBS.
  • Expansion of the Global Trade Repository infrastructure worldwide and by asset class to support reporting requirements for over-the-counter (OTC) derivatives.
  • The CFTC Interim Compliant Identifier (CICI) Utility to support OTC derivatives reporting requirements.

In addition, DTCC has provided the industry with proposals to:

  • Shorten the settlement cycle for U.S. cash securities transactions to mitigate counterparty risk, reduce costs and optimize capital.
  • Continue reducing and eventually eliminate the remaining physical securities certificates in the U.S. to reduce risk and costs, and boost efficiencies.
  • Establish a common infrastructure to provide certain middle office processes that support the front and back offices to reduce costs and operational risk for financial institutions and advance straight-through processing.
  • Introduce a global straight-through margin processing utility for over-the-counter (OTC) bilateral and cleared derivatives trades in response to significant changes resulting from regulatory, industry and market drivers.

* Being designated a Systemically Important Financial Market Utility means a company is required to meet prescribed risk-management standards and heightened oversight by the relevant US regulatory authorities. Systemic risks are generally defined as developments that threaten the stability of the financial system as a whole and consequently the broader economy.

About DTCC

DTCC has operating facilities and data centers around the world and, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions for thousands of institutions worldwide. With 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry, simplifying the complexities of clearance, settlement, asset servicing, global data management and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, derivatives, money market instruments, syndicated loans, mutual funds, alternative investment products, and insurance transactions. In 2012, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 131 countries and territories valued at US$37.2 trillion. DTCC’s global trade repositories record more than US$500 trillion in gross notional value of transactions made worldwide.Follow us on Twitter:

For Release: Immediately

Karen Gregory



Bari Trontz