But RBS had a hefty risk management department back then, with
some of the most sophisticated financial risk modelling in the
industry and numerous risk analysts running around the firm
"measuring" risk. The head of the market risk group (as well as
quantitative analysis) at the time was Riccardo Rebonato (
see
bio on Wikipedia). So how is it that the exposures
(particularly in mortgage portfolios at the subsidiary called
Greenwich Capital) as well as trading practices at the firm were
allowed to spin out of control under the watchful eye of Dr.
Rebonato? It so happens that Dr. Rebonato did not seem to be too
concerned with how to keep the bank from collapsing and instead
was focused on writing his new (at the time) book called
Plight
of the Fortune Tellers. In fact the book was published while
Dr. Rebonato was still at RBS (in 2009).
So "who cares?", one may ask. If Dr. Rebonato has done such a
stellar job at RBS during the housing bubble, one should be
asking "where is he now?" It turns out that he has a new role,
this time at PIMCO. And it is likely that he is working on his
new book - to be released after the next financial correction.
This and similar hires at the large fixed income asset managers
(such as Blackrock, who is actively hiring quants in the risk
management area) may be pointing to the next financial bubble (
see
discussion).
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