What keeps them awake at night
It's the job of senior managers in banks to identify, worry about and make contingency plans for future shocks. Brian Caplen asks two of them how they do it
Fears of the next Chernobyl
Derek Wanless, group chief executive of Britain's NatWest Bank, is concerned about environmental risk
What is the biggest risk for your bank?
Credit risk is still the most significant risk to NatWest, alongside systemic risk. Credit risk is about looking after NatWest. Systemic risk is about the ability to do business with all the major financial institutions in the world, conscious that our exposures to some of these would massively outweigh our exposure to any corporate. If one of the world's major banks went down, that would have unpredictable, knock-on effects right through the system. If there was any hint of systemic risk, you couldn't be sure how counterparties would be affected.
Do you have a contingency plan for a failure of a major world bank?
We've been through a number of the "what ifs" and how we would cope. A lot would depend on the actions of the regulators in the home jurisdiction. The regulators have avoided systemic risk so far. But still we must consider the worst outcomes. What if a major bank went down? What knock-on effects would that have, first of all on the home country's banking system, then on the world system? Or if one of the Japanese banks went down who knows in western accounting terms what the balance sheets would have looked like.