With Treasury prices today showing a renewed flight to quality, a March, 2014 FedFin report on geopolitical risk has renewed urgency.  In the near term, falling Treasury yields will further complicate monetary policy and exacerbate fixed-income earning pressure – assuming of course that already scarce Treasury supplies do not become so constrained as to create worrisome repo-market fails.   Later this year, these stresses will, we believe, be explicitly reflected in the FRB’s CCAR standards for the largest banks, joining or supplanting recent EU market-risk exercises for the largest institutions.  Qualitative risk-management standards for geopolitical risk will also come under scrutiny, especially with regard to the CCAR’s qualitative criteria.

An August, 2013 report from FedFin details critical board and senor-management considerations related to CCAR, including new risks like those created by the Ukraine crisis.  If you have any questions, please send an email to info@fedfin.com or call 202-589-0880.