Resources

Rethinking operational risk in the Basel III endgame
ABA Banking Journal from the American Bankers Association
The Basel III "endgame" proposal faces severe backlash, leading to anticipated revisions. ABA and others call for withdrawal due to economic repercussions, especially in operational risk treatment. Clifford Rossi, a UMD professor, contributes to the critique.

New UMD Smith SERC-ABA Report Defines ‘Basel III Endgame’ Flaws
Smith Brain Trust
Federal regulators are drafting new capital rules for banks, which are being contested by industry experts like Clifford Rossi. Rossi argues against the rules, warning of adverse economic impacts.

A California CRA Law Undercuts Itself
National Mortgage Professional
Independent mortgage banks (IMBs) step in as traditional banks retreat from residential lending. A study by the Urban Institute, involving analysis by Clifford Rossi of the University of Maryland in states like Maryland, shows IMBs outperforming in lending to low- and moderate-income communities, sparking debate over regulations.

Reflections on Daniel Kahneman’s Contributions to Risk Management: The Power of Human Frailties
GARP CRO Outlook
Daniel Kahneman's groundbreaking Prospect Theory sheds light on why banks sometimes take excessive risks, revealing how human behavior, beliefs, and biases influence risk-taking. Clifford Rossi of the University of Maryland applies this theory, showing how cognitive biases impact banking decisions and risk management.

Smith MQF Team Excels in ‘Credit Risk Transfer’ Project for Freddie Mac
Smith Reality-Based Learning
Smith's Quantitative Finance students, under Professor Clifford Rossi's guidance, developed a sophisticated model for valuing credit risk transfer securities, contributing to advancements in mortgage finance.

Balancing the Business Model and Concentration Risk
GARP CRO Outlook
It is extremely difficult to identify, measure and manage adverse concentrations. Why is it important to understand the effects of concentration risk on different business units and risk types, and what steps can financial institutions take to address this challenge?

These 28 regional and community banks exceed regulators' threshold for high commercial real estate concentration risk: here's what's really at stake
Business Insider
A bank's internal risk management function works with the business division to create risk metrics that are recommended to the board. But risk management is often set aside and not looked upon as an equal partner, Rossi said. Banks get into trouble when weak governance practices allow the business areas to dominate the risk-taking discussion.

The Bottom Line on Trust: Institutions Can’t Count on It
GARP CRO Outlook
The public has soured on government and politics, media and the corporate world. For banks, it will take “all hands on deck,” from “resiliency teams to marketing teams to the bankers themselves,” to turn attitudes around.

Capital One-Discover merger raises concerns about effects on credit card holders
CBS
Capital One's $35 billion acquisition of Discover faces scrutiny from lawmakers and regulators over concerns about reduced competition and potential harm to consumers, highlighting broader worries about consolidation in the credit card industry and its impact on financial stability.

Geopolitical Risk Is Spreading Across the Risk Spectrum. Are You Prepared?
GARP CRO Outlook
Geopolitical threats are escalating, causing headaches for businesses worldwide. What proactive steps can financial institutions and their risk managers take to assess and mitigate these risks?

New York Community elevates former Flagstar CEO amid continuing turmoil
American Banker
Industry watchers are monitoring New York Community Bancorp's deposit stability after a stock drop post-earnings, amid concern over leadership and regulatory oversight following the departure of Chief Risk Officer Nicholas Munson. "Finding the best candidate as quickly as possible is paramount", said Rossi.

Banks push back against proposal to cap overdraft fees to as low as $3
The National Desk
The Biden administration's proposal to slash overdraft fees to $3 faces fierce resistance from the banking industry, arguing it may stifle innovation and harm consumers. This financial feud unfolds against the backdrop of recent collapses and broader regulatory discussions on the future of banking.

New Year's Resolutions for Risk Managers in 2024
GARP CRO Outlook
Finding balance in managing risk and return is extremely challenging, especially during periods of uncertainty fueled by geopolitical tensions, cyber threats, financial instability and other volatile events. But financial institutions and their FRMs can take steps to curtail this year’s biggest projected tail risks.

How vulnerable is your pharma facility to natural disaster?
Smith Student, Matthew Rumrill & SERC Director, Cliff Rossi
Recently, pharmaceutical supply chain disruption has been a major concern to the FDA and industry, amplified by the pandemic and rising geopolitical risk. Assessing facility risk should be an essential part of your supply chain management process.

Factoring climate risk in pension choices not so simple
The Baltimore Sun
One of the least known aspects of the tools used to assess climate risk at financial institutions is the wide variability of results that are produced by such models and the inability to validate their results with any degree of reliability unlike other models used to assess financial risk.

Progressive groups target asset managers after their ESG support wanes
American Banker
Progressive shareholder groups are targeting the asset management arms of JPMorgan Chase, Goldman Sachs, State Street and BlackRock over a recent decline in their support for environmental, social and governance measures at public companies.

The FHFA's New Vision: A Wonderful Life for the Federal Home Loan Banks?
GARP CRO Outlook
FHLBanks have moved away from their intended mission as community-oriented mortgage lenders and are therefore in need of a revamp. The Federal Housing Finance Agency recently mapped out its plan for reforming FHLBanks, but while the regulator’s recommendations should move the needle, more revisions are needed.

The Case for Enterprise Risk Management in Higher Education
Smith Brain Trust
Companies have managed risk for years. Traditionally, each business unit evaluates and handles their own risk, then reports to the CEO. Now, conventionally, the practice is holistically evolving to “enterprise risk management” or “ERM.”

Commercial Real Estate in Demise
Maryland Smith Research
Pre-pandemic, healthy demand for office and retail spaces signaled a growing commercial real estate (CRE) market. Loans were readily available, often with favorable terms. But the COVID lockdowns shifted the landscape significantly with businesses shuttering.

Operational Risk Capital Proposal: Time to Hit the Pause Button
GARP CRO Outlook
The so-called Basel III Endgame could lead to significant amendments in operational loss estimation at big banks. But these recommended regulatory revisions could have unintended consequences, and all parties involved would be wise to reconsider B3E’s operational risk impact before pushing forward.

“Housing Market Predictions: The Real Estate Forecast for the Next 5 Years”
The Mortgage Reports featuring Cliff Rossi
“The US housing market is buffeted by two drivers: high interest rates and low housing inventory. Both have significantly increased the cost of housing and created the worst affordability crisis in memory. Higher rates have effectively stranded many homeowners with low-rate mortgages from putting their homes up for sale, and that phenomenon exacerbates the housing supply crunch.” Rossi

Opinion: How to avert an impending homeowners insurance crisis
Housingwire
To ensure the vitality of both homeowners insurance and mortgage markets, a combined private-public insurance solution at a national level is required to distribute natural disaster risk more efficiently, thereby lowering the costs and access to insurance and helping reduce pressures from a housing affordability crisis already in full bloom.

How to Reduce Bank Failures: A Novel Approach
GARP CRO Outlook
Poor risk governance, culture and infrastructure have been responsible for many financial meltdowns, including this year’s SVB and Signature Bank fiascoes. Regulators keep trying to fix this problem by increasing capital requirements, but there is a better solution: a quality score that assesses the effectiveness of banks’ risk management.

SVB and Signature Bank Fallout: Why We Need a New Approach to Regional Bank Regulation and Risk Management
GARP CRO Outlook
Regulators seem intent on once again increasing capital and liquidity requirements for banks of a certain size – but data shows that mid-sized financial institutions remain less risky than larger banks. What’s needed, instead, is a more proactive safety and soundness strategy that addresses the root causes of recent bank scandals: poor governance and ineffective risk management.

UMD Experts: Pharma Facilities Sit in Path of Tornadoes, Other Weather Disasters
Maryland Today
Drugs used to treat heart and kidney failure were among a dozen medicines that Pfizer had to limit to emergency orders after a July tornado ripped through Rocky Mount, N.C., injuring 12 and devastating one of the pharmaceutical company’s manufacturing facilities.

New Analysis Examines Hurricane Risk Implications for Low-to-Moderate-Income Mortgage Borrowers
Maryland Smith Research
Amid Idalia’s landfall at a UBS-projected $9.36 billion total cost and a collapsing Florida home insurance market, a new study assesses hurricane risk across the United States as well as Florida’s housing market.

Smith Experts Assess Drug Manufacturing Risk from Natural Hazards
Maryland Smith Research
A July tornado that tore across the Rocky Mount, N.C., region left severe damage including to a Pfizer facility. Amid subsequent supply chain disruption, the manufacturer alerted hospitals to a list of 12 drugs available only through emergency orders “due to their high medical need,” effective “immediately and until further notice.” The disruption further prompted action from risk management expert Clifford Rossi and students in the Master of Quantitative Finance (MQF) program at the University of Maryland’s Robert H. Smith School of Business.

SEC Cites Smith Research in New Cybersecurity Disclosure Rules for Public Companies
Smith Brain Trust
Research from the University of Maryland’s Robert H. Smith School of Business weighs significantly in new disclosure rules concerning cybersecurity-related issues from the Securities and Exchange Commission (SEC). Any SEC-registered business is subject to the updates.

Building a Healthy Risk Culture: A Q&A With Clifford Rossi
GARP CRO Outlook
Banks with effective risk cultures are less prone to errors and more equipped to handle shocks. But what specific steps do they need to take to develop proper risk management values, and what are the traits CROs desire when they search for talent to support their risk management beliefs?

Banks could have credit ratings downgraded as Fitch sees risks in economy, interest rate increases
CBS The National Desk
Ratings agency Fitch could cut the ratings of U.S. banks across the industry as it evaluates its health in the fallout of a handful of large bank failures earlier this year and a drop in the overall credit rating of the United States amid ballooning deficits and partisan fights over funding the government.

ICE’s $12bn mortgage tech deal builds heft in US home loans
Financial Times
“By concentrating the technology solution in the hands of, say, one or two providers, it puts more pressure on the [system] plumbing,” he [Cliff Rossi] said, adding: “If there is a hiccup in the origination or in the servicing process, that can have pretty significant adverse impacts on not just the companies, but also on the customers downstream.”

Why IMBs Don’t Need A CRA Cramdown
Mortgage Banker Magazine
The reasons banks have retreated from mortgage lending, especially FHA programs, mostly stem from the 2007-2008 financial crisis, says Clifford Rossi, director of the Smith Enterprise Risk Consortium at the University of Maryland and a former banking industry executive.

When El Niño exacerbates global warming: Record heat, record flooding, record wildfires
CNBC
When global warming and El Niño are hitting at the same time, “it can be difficult separating what is just a weather event or if it is part of a longer trend,” Timothy Canty, professor in the Department of Atmospheric and Oceanic Science at the University of Maryland, told CNBC.

The Commercial Real Estate Dilemma and Its Impact on Bank Risk Management
GARP CRO Outlook
Banks that are heavily invested in the troubled CRE market now face a variety of complex risks, from the remote work trend to rising inflation to the uncertain future of office space. Which risks present the greatest threat, and can banks take proactive steps to mitigate them?

In Q2, DC-area companies are back in the billion zone
Technical.ly
Clifford Rossi agreed that deals are likely going to stay small. In this environment, he said, investors are a little more hesitant to cut those large checks. But he sees the Q2 data as a positive in total and expects to see even more deals coming out of the third quarter than the region saw in the first half of the year. Startups / Venture Capital

After Spring Crisis, US Banks Face Subdued Profit Outlook
Barrons
Clifford Rossi, a former risk management executive at Citigroup and a professor at the University of Maryland, said the shift in monetary policy has also burdened banks with unrealized losses, which reflect the erosion in value of long-term US Treasury-linked assets due to interest rate increases.

In push to protect banking system, banks could have to hold more cash
The National Desk
“Taking it to at least $100 billion makes a lot of sense. Then you're going to be looking at more of those kinds of SVB, Signature Bank risks in a much more scrutinized way than what we had coming into the first quarter,” said Cliff Rossi.

A Systemwide Approach to Managing the Risks of Continuous Manufacturing
ISPE
Understanding and managing risks to continuous manufacturing (CM) technology is central to any decision to greenlight CM in a production-ready environment. Applying a systemwide risk management (SRM) approach to manufacturing is essential to ensuring manufacturing projects are vetted in a comprehensive and consistent manner.

Is Your Maryland Home At Risk for Damages from Climate Disasters?
Smith Brain Trust | White Paper
Many Maryland homeowners are increasingly faced with the threat of costly home repairs from extreme weather events. With climate change, these events are becoming more frequent and more intense. And that could mean bigger problems for homeowners – particularly those who don’t have the extra cash.

The Collapse of Silicon Valley Bank: Smith Experts Analyze and Explain It
Maryland Smith Research
Smith experts Cliff Rossi and Bill Longbrake recently spoke with Progyan Basu, clinical professor of Accounting and Information Assurance, about the impact of this failure on the banking industry and the economy as a whole.

Toxic Train Derailment Vexing for Real Estate Industry
Smith Brain Trust
Health safety for residents following the Feb. 3 Norfolk Southern train derailment in East Palestine, Ohio, has been a top concern. Has it really been safe enough to return – both for the short- and long-term?

How to Bolster Climate Scenario Analysis
Smith Brain Trust
The Federal Reserve Board has engaged six of the biggest U.S. banks in a pilot Climate Scenario Analysis (CSA) to assess and “advance the ability of supervisors and banks to analyze and manage emerging climate-related financial risks.”

Risk Lessons from FTX
Smith Brain Trust
FTX postmortems have included Axios describing the cryptocurrency exchange as a “house of cards” comparable to Enron, Theranos, Bear Stearns, Lehman Brothers and Madoff Investment Securities. Plus, Moody’s writes the collapse “will radically transform the crypto ecosystem, further shaking trust and raising doubts around its ongoing prospects.”

A Climate Change Call to Arms for Risk Modelers
Smith Brain Trust
The numbers reflect the rising stakes for risk modelers, says Clifford Rossi. Extreme events, like Ian, tend to confound these practitioners “partly because of their rarity and lack of reliable data – but also due to their potential for high losses and their nonfinancial nature,

Jamie Dimon Blasts Fed’s Stress Test. Smith’s Clifford Rossi Partially Agrees, Explains
Smith Brain Trust
The Federal Reserve’s bank stress test is “capricious” and “arbitrary.” . . . “It’s inconsistent. It’s not transparent. It’s too volatile.” These descriptors came late last week from JPMorgan Chase CEO Jamie Dimon during his bank’s quarterly earnings call.

Mitigating Drug Shortages via a Quality Management Rating System is Viable: New Study
Smith Brain Trust | White Paper
The pharmaceutical industry needs an additional apparatus – a quality rating system – to address recent supply shortages that are attributable to deficiencies in manufacturing practices, says Maryland Smith’s Clifford Rossi.

Climate Finance Risk Management Virtual Bootcamp Dovetails with SEC Proposed Disclosure Rules
Smith Brain Trust
The Securities and Exchange Commission recently proposed updated rules for public companies to report the climate-related impact of their businesses to the federal government and their shareholders.

Aspects of Science, Technology, and Law Connecting Cybersecurity and Environmental Security
Dr. Robert Brammer - White Paper

A Comparative Risk & Financial Analysis of Batch and Continuous Pharmaceutical Manufacturing Technologies
Cliff Rossi - White Paper

Improving U.S. Banking Regulation in an Era of Climate Change
Dr. Robert Brammer - White Paper

Understanding the Risks of Multiple Credit Scores in Mortgage Lending
Cliff Rossi - White Paper