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All this C-suite nonsense is just a bunch of... nonsense, it needs to stop. Let me explain what I mean. After a quick google: What is a Chief risk officer? CR

All this C-suite nonsense is just a bunch of... nonsense, it needs to stop. Let me explain what I mean. After a quick google: What is a Chief risk officer? CROs report to the board and the CEO on various issues, including insurance, IT security, financial audits, internal audits, global business variables, fraud prevention, and other internal corporate matters. That's all cost-center stuff, none of that has anything to do with the banking line of business. It doesn't need to be chief anything and it had nothing to do with the failure of SVB. A bank's entire business and reason for existence is risk pooling and risk arbitrage, making money on the interest rate spreads between being on different sides of different products. The CEO of a bank cannot afford not to be qualified to be the head of banking risk. He should have quants working for him and reporting to him, but the buck stops with him. Responsibility works best in a hierarchy, you're in charge of something, you report to somebody who is in charge of you and what you do, but at a minimum, the CEO needs to know the core business cold, and sideline delegate only things that are not of that nature. A bank needs that job description up above, but it's not C suite. Having a C-suite encourages egotism and distributes risk (not interest rate risk) in an un-responsible way, if you have a chief of something, why it must be taken care of, right? There's only room for one chief. In addition to that, COO, CFO, CMO have pretty standard meanings, but no reason they can't be called VP of Operations, Treasurer/Controller/VP of Finance, and VP of Marketing though. And then, no need for a CEO, just have a President. (that corporations have a president is encoded in law, btw, but not CEO)

ranger207 4y ago
Counterpoint: without a dedicated person in charge of this, responsibility will be diffused among the organization and everyone will assume someone else is taking care of it
paulddraper 4y ago
Everyone knows if there's not a Chief Custodial Officer, the bathrooms won't get cleaned.
- labster 4y ago
  Not only a CCO, but a Director of Privies and Urinals. When it comes to busy bathrooms, head-count is important.
riskneutral 4y ago
> Let me explain what I mean. After a quick google: What is a Chief risk officer? ... That's all cost-center stuff, none of that has anything to do with the banking line of business. This is hilarious. Next time, at least try asking ChatGPT instead of Google before becoming an expert on something new and explaining it to others on the Internet. What you read is the CRO job description for a CRO of any corporation. All large corporations have CROs, and the CRO is responsible for the risks that all corporations have (security, insurance, etc). A bank CRO's job description includes all of that plus the banking risks, such as credit risk, capital markets risk and liquidity risk. A bank run, in particular, is a negative result of liquidity risk.
- fsckboy 4y ago
  the rest of my point is the same, if a bank has a chief risk officer, it's the President of the bank, or an EVP. There are quants who track, measure and calculate financial risk, but that's a line responsibility, they're not chiefs. If you want to call the President of a "financial risk banking company" the chief of something, he's CEO, not CRO, even though risk management is his main job.
- Aeolun 4y ago
  I think what OP is trying to say is that just because there is no CRO, doesn’t mean there is nobody that cares about risk. It’s a red herring. If the CRO left, the whole organisation under and above him didn’t suddenly disappear. Chances are they have a top lieutenant that knows as much if not more of the actual risk than the CRO.
  - waynesonfire 4y ago
    I'd fire the CRO if I was tired of their shit too.
    - jjeaff 4y ago
      Or one might fire the CRO if they are tired of their incessant, daily nagging that the entire business it at risk and that we need to make sweeping changes that are going to negatively affect next quarter profitability.
pclmulqdq 4y ago
As much as I agree with you about the silliness of the C-suite, the job of "head of risk" is an important position at a bank because they: 1. Keep people hired for their greed honest (in terms of creating their models), and 2. Keep track of "soft" risks that can't be tracked by models well and tail risk that is underpriced by models (ie keep track of the nebulous concept of "modeling risk"). In opposition to the rest of the senior executives - who encourage greed and actively ignorance of "soft" risks to make more money.
chadash 4y ago
The buck does not stop with the CEO, it stops with the company’s board, who represent investors and who the CEO answers to. The CRO often reports to the board and at the very least, communicates directly with them. The reason for the role of CRO is that the CEO, CFO and other C suite executives are not really aligned with investors incentive-wise. If the bank does really well, the CEO gets huge bonuses. If the bank crashes, the CEO gets fired but typically doesn’t lose all their money like investors do. Hence the need for the board’s function in risk management and a CRO to help them with that. In a bank, the risks are unique and often hard to see which is why risk management is often a huge department. None of this exonerates the CEO. Of course they are to blame when things go wrong. But when financial risk is a huge part of a business, it’s good to have some backup for that role as well.
- 7speter 4y ago
  I'd love to know whose on the board of SVB. Is it leadership from other companies that were SVB customers?
  - IG_Semmelweiss 4y ago
    Signature bank, which also collapsed last week, had Barney frank (of Dodd-Frank banking regulation) on its board. Life doesn't get any better.
Spooky23 4y ago
If your organization is designed to have a C-level official to manage things like internal audit, and that job is vacant for an extended period, it’s unlikely that the VP of Audit has the political capital to be heard. The shitshow around this bank is a case study for poor or no internal controls.
- landemva 4y ago
  The regulators allow mark-to-maturity on underwater bonds. When do the regulators wake up and set more reasonable rules?
  - Spooky23 4y ago
    It’s not particularly relevant. Regulators aren’t there to ensure that soft bumpers are in place for companies like a kiddie bowling alley.
blackoil 4y ago
LOL. You want same person to be responsible for quarterly profits, long term investments and risks assessment. And than will act surprised when it crashes.
LudwigNagasena 4y ago
No such thing as a cost center in business. It is an idea that comes from “C-suite nonsense”. Either someone provides marginal value above their marginal cost or they don’t.

ranger207 4y ago

Counterpoint: without a dedicated person in charge of this, responsibility will be diffused among the organization and everyone will assume someone else is taking care of it

paulddraper 4y ago

Everyone knows if there's not a Chief Custodial Officer, the bathrooms won't get cleaned.

labster 4y ago
Not only a CCO, but a Director of Privies and Urinals. When it comes to busy bathrooms, head-count is important.

riskneutral 4y ago

> Let me explain what I mean. After a quick google: What is a Chief risk officer? ... That's all cost-center stuff, none of that has anything to do with the banking line of business. This is hilarious. Next time, at least try asking ChatGPT instead of Google before becoming an expert on something new and explaining it to others on the Internet. What you read is the CRO job description for a CRO of any corporation. All large corporations have CROs, and the CRO is responsible for the risks that all corporations have (security, insurance, etc). A bank CRO's job description includes all of that plus the banking risks, such as credit risk, capital markets risk and liquidity risk. A bank run, in particular, is a negative result of liquidity risk.

fsckboy 4y ago
the rest of my point is the same, if a bank has a chief risk officer, it's the President of the bank, or an EVP. There are quants who track, measure and calculate financial risk, but that's a line responsibility, they're not chiefs. If you want to call the President of a "financial risk banking company" the chief of something, he's CEO, not CRO, even though risk management is his main job.
Aeolun 4y ago
I think what OP is trying to say is that just because there is no CRO, doesn’t mean there is nobody that cares about risk. It’s a red herring. If the CRO left, the whole organisation under and above him didn’t suddenly disappear. Chances are they have a top lieutenant that knows as much if not more of the actual risk than the CRO.
- waynesonfire 4y ago
  I'd fire the CRO if I was tired of their shit too.
  - jjeaff 4y ago
    Or one might fire the CRO if they are tired of their incessant, daily nagging that the entire business it at risk and that we need to make sweeping changes that are going to negatively affect next quarter profitability.

pclmulqdq 4y ago

As much as I agree with you about the silliness of the C-suite, the job of "head of risk" is an important position at a bank because they: 1. Keep people hired for their greed honest (in terms of creating their models), and 2. Keep track of "soft" risks that can't be tracked by models well and tail risk that is underpriced by models (ie keep track of the nebulous concept of "modeling risk"). In opposition to the rest of the senior executives - who encourage greed and actively ignorance of "soft" risks to make more money.

chadash 4y ago

The buck does not stop with the CEO, it stops with the company’s board, who represent investors and who the CEO answers to. The CRO often reports to the board and at the very least, communicates directly with them. The reason for the role of CRO is that the CEO, CFO and other C suite executives are not really aligned with investors incentive-wise. If the bank does really well, the CEO gets huge bonuses. If the bank crashes, the CEO gets fired but typically doesn’t lose all their money like investors do. Hence the need for the board’s function in risk management and a CRO to help them with that. In a bank, the risks are unique and often hard to see which is why risk management is often a huge department. None of this exonerates the CEO. Of course they are to blame when things go wrong. But when financial risk is a huge part of a business, it’s good to have some backup for that role as well.

7speter 4y ago
I'd love to know whose on the board of SVB. Is it leadership from other companies that were SVB customers?
- IG_Semmelweiss 4y ago
  Signature bank, which also collapsed last week, had Barney frank (of Dodd-Frank banking regulation) on its board. Life doesn't get any better.

Spooky23 4y ago

If your organization is designed to have a C-level official to manage things like internal audit, and that job is vacant for an extended period, it’s unlikely that the VP of Audit has the political capital to be heard. The shitshow around this bank is a case study for poor or no internal controls.

landemva 4y ago
The regulators allow mark-to-maturity on underwater bonds. When do the regulators wake up and set more reasonable rules?
- Spooky23 4y ago
  It’s not particularly relevant. Regulators aren’t there to ensure that soft bumpers are in place for companies like a kiddie bowling alley.

blackoil 4y ago

LOL. You want same person to be responsible for quarterly profits, long term investments and risks assessment. And than will act surprised when it crashes.

LudwigNagasena 4y ago

No such thing as a cost center in business. It is an idea that comes from “C-suite nonsense”. Either someone provides marginal value above their marginal cost or they don’t.