MSRM Alumni Profile – Konstantin Makarov, A Pioneer Risk Professional in Kenya

con_045865In 2008, Konstantin Makarov became, for the second time in his life, a pioneer of sorts. He left a secure job at Morgan Stanley in New York to found StratLink-Africa, Ltd., a financial advisory firm based in Nairobi, Kenya, with the mission of originating financing transactions in emerging and frontier markets, with a focus on Sub Saharan Africa (SSA) for investment banks, private equity firms and family offices.

Konstantin is an old hand at starting a new life. His family emigrated to New York from Belarus in the early 1990s, when he was in middle school. “Like children of most immigrants,” he recalls, “I started working as soon as possible to have spending money. My high school jobs varied from working at a fish store, telemarketing, the production department of a newspaper, and even at the Gap.”

After graduating early from an experimental inner-city high school, Konstantin majored in marketing at the University of Massachusetts, Amherst. He went right to work on Wall Street after college, first for Lebenthal & Co. and then for Morgan Stanley’s wealth management division. Finance turned out to be the right niche, he says: “I understood that some of my natural skills were being put to good use and I never looked back.”

Read more about Konstantin’s profile.

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Falling Short of Expectations? Stress-Testing the European Banking System

The following is a study written by Professor Viral Acharya:

Viral Acharya, NYU SternThe Single Supervisory Mechanism – a key pillar of the Eurozone banking union – will transfer supervision of Europe’s largest banks to the ECB. Before taking over this role, the ECB will conduct an Asset Quality Review to identify these banks’ capital shortfalls. This column discusses recent estimates of these shortfalls based on publicly available data. Estimates such as these can defend against political efforts to blunt the AQR’s effectiveness. The results suggest that many banks’ capital needs can be met with common equity issuance and bail-ins, but that public backstops might still be necessary in some cases.

The Eurozone is mired in a recession. In 2013, the GDP of the 17 Eurozone countries fell by an average of 0.5%, and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a Eurozone banking union is being established. An important part of the banking union is the Single Supervisory Mechanism, which will transfer the oversight of Europe’s largest banks to the ECB (Beck 2013). Before the ECB takes over this responsibility, it plans to conduct an Asset Quality Review (AQR) in 2014, which will identify the capital shortfalls of these banks.

The banking systems in the Eurozone have been severely under-capitalised since the 2007–2009 financial crisis. As a result, some banks loaded up on risky assets (and risky sovereign debt in particular). The worsening risk profile of these assets destabilised banks even further and resulted in substantial liquidity and solvency problems by the third quarter of 2011 (Acharya and Steffen 2013). Too little capital in the banking system appears to have also caused a misallocation of credit in the Eurozone, especially for small- and medium-sized enterprises, preventing a widespread economic recovery.

Read the full article published in VoxEU

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NYU Stern Profs. Cooley and Schoenholtz on a European Deflation Strategy

Professor Tom Cooley, former NYU Stern Dean, and Professor Kim Schoenholtz co-authored the op-ed below on CNBC titled “Europe needs a credible deflation strategy.”

The great promise of the European common currency was that a single disciplined central bank could end the persistent inflationary bias in much of Europe and foster greater integration. How things have changed! The latest data show inflation in the euro area has slowed well below the European Central Bank’s stated goal, and many of the economies risk a renewed contraction. Downward pressure on prices is likely to persist. It is not out of the question that the region could sink into a sustained deflation that would further cripple the economy. The ECB needs to take this threat seriously and demonstrate now that it has the policy tools (and is prepared to use them) in the event of a new deflationary shock.

Deflation is incredibly costly and dangerous. Ben Bernanke gave a speech in 2002, shortly after he became a central bank governor, called “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” in which he expressed confidence that “the Fed would take whatever means necessary to prevent significant deflation.” To sustain expectations of rising prices, the ECB needs to do the same.

The best strategy is to prevent deflation from getting started in the first place. But what can a central bank do if deflation has set in and the policy interest rate has sunk to zero? Bernanke cited four approaches: (1) expand the balance sheet through loans or open-market purchases of assets; (2) lower long-term yields by committing to keep short-term interest rates low or by announcing a cap on government bond yields backed by unlimited willingness to purchase securities; (3) pursue monetary expansion in cooperation with fiscal stimulus; and (4) currency devaluation.

Read the entire article on CNBC here.

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Prof. Richard Sylla on Janet Yellen’s appointment to the Federal Reserve

The following is an excerpt from CNC News: rsylla

U.S. Senate on Monday confirmed Janet Yellen as the next head of the Federal Reserve, to replace the outgoing Fed chairman Ben Bernanke whose term ends at the end of this month.

The Senate voted 56-26 to approve the confirmation, with 11 Republicans joining Democrats in voting for Yellen.She will take the reins of the world’s largest economy and become the most powerful person in the world of finance.

Yellen, currently the Fed’s vice chair, will also become the first woman to take the helm of the U.S. central bank in its 100-year history.

She was nominated by U.S. President Barack Obama for the post in October and will be the first Democrat to serve as chair person since 1987.

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Richard Sylla,  Financial Historian of NYU Stern School of Business, says Yellen is expected to continue the policy until concrete signs emerge of sustained improvement of the economy and job market.

SOUNDBITE (ENGLISH): RICHARD SYLLA, NYU Stern School of Business

“Janet Yellen’s strength is, I think, she would continue Bernanke’s policies and she’s been at the Fed, she knows what the policise are and she would be, I think she would give more continuity to what the Federal Reserve has been doing..”

Read the entire article and watch the video here.

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Professor Nouriel Roubini on the global growth in 2014

roubiniNEW YORK – The global economy had another difficult year in 2013. The advanced economies’ below-trend growth continued, with output rising at an average annual rate of about 1%, while many emerging markets experienced a slowdown to below-trend 4.8% growth. After a year of subpar 2.9% global growth, what does 2014 hold in store for the world economy?

The good news is that economic performance will pick up modestly in both advanced economies and emerging markets. The advanced economies, benefiting from a half-decade of painful private-sector deleveraging (households, banks, and non-financial firms), a smaller fiscal drag (with the exception of Japan), and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9%.

Moreover, so-called tail risks (low-probability, high-impact shocks) will be less salient in 2014. The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the United States, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued.

Still, most advanced economies (the US, the eurozone, Japan, the United Kingdom, Australia, and Canada) will barely reach potential growth, or will remain below it. Households, banks, and some non-financial firms in most advanced economies remain saddled with high debt ratios, implying continued deleveraging. High budget deficits and public-debt burdens will force governments to continue painful fiscal adjustment. And an abundance of policy and regulatory uncertainties will keep private investment spending in check.

Read the entire Project Syndicate article here.

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Professor and Nobel Laureate Robert Engle Warns of Chinese Financial Risk

The following is an excerpt from the Australian Broadcasting Corporation:

Robert Engle NYU SternA leading analyst of financial risk warns that the Chinese banking system has become the second most risky in the world after a big run-up in bad lending over the past couple of years. Nobel Prize winning finance Professor Robert Engle from New York University’s Stern Business School says the Chinese government could get itself into soverign debt problems bailing out the likely massive bad debts of its state-owned banks.

Listen to the ABC radio broadcast or view the transcript here.

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Professor William Silber’s book, “Volcker: The Triumph of Persistence,” is awarded the China Business News 2013 Financial Book of the Year

The following is an excerpt from China Business News:

BEIJING, December 7, 2013 –China Business News (CBN),a leading business daily in China, announced Financial Books of the Year 2013 during CBN Annual Meeting held on December 7, 2013.

The 24 Financial Books of the Year are recognized with great financial value and unique contributions. The authors, ranging from financial leaders, regulators to economists, attended this event, with a hope that their works could shed some light on China’s economic and financial reforms and pump vitality into the global financial system.

2013 CBN Financial Books of the Year “Big Winner” goes to:

Volcker: The Triumph of Persistence, by William L. Silber

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CBN Financial Book Awards Ceremony boasted a star-studded lineup. Liu Shijin, Deputy Director of Development Research Center of the State Council, and Yang Kaisheng, former President of Industrial and Commercial Bank, delivered the keynote speeches.

Among the guests who shared their views on the books were Zhu Min, Deputy Managing Director of the International Monetary Fund, Wan Jianhua, Chairman of Guotai Junan Securities, Nie Qingping, General Manager of China Securities Finance Corporation Limited, Peng Wensheng, Chief Economist of China International Capital Corporation limited, Jia Kang, Director of Research Institute for Fiscal Science, Ministry of Finance, Wang Xiaolu, Deputy Director of National Economic Research Institute, etc.

Other award-winning authors shared their viewpoints through videos, including Paul Volcker, former Chairman of the Federal Reserve, William L. Silber, Marcus Nadler Professor of Finance and Economics at NYU Stern School of Business, Alan S. Blinder, Professor of Economics and Public Affairs at Princeton University, Udaibir S. Das, Head of Basel III Implementation Group, Basel Committee on Banking Supervision at Bank for International Settlements, Sun Tao, Economist of Asia Pacific Department of the International Monetary Fund, Benn Steil, Director of International Economics of Council on Foreign Relations, Wu Jinglian, Research Fellow of Development Research Center of the State Council, Xie Ping, Executive Vice President of Chinese Investment Corporation, and Chen Dongsheng, Taikang Life Insurance Co., etc.

Read the entire article here.

Watch the video of Professor Silber’s speech here.  Watch the video of Paul Volcker discussing the book here.

For more information on Professor Silber’s book, please visit Stern’s Website.

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MSRM Alumna, Yvette Connor, Named One of the Twenty Five “Women to Watch” by Business Insurance Magazine

yvette connorNYU Stern Master of Science in Risk Management Class of 2013 student, Yvette Connor, was named one of the twenty five “Women to Watch” by this year’s Business Insurance magazine.  This award recognizes women who are doing outstanding work in commercial insurance, risk and benefits management, and related fields, including consulting and law.

Yvette Connor is managing director of risk management advisory and insurance services at New York-based international consultant Alvarez & Marsal, a position she assumed in November. Before that, Ms. Connor served as managing director-director of client engagement at Marsh Inc. in Denver, a position she held for three years. At Marsh, she led the deployment of Marsh 3D to help clients achieve a more strategic, relevant and valued role within their organizations. Before joining Marsh, Ms. Connor was director of risk management at Vulcan Inc. At Vulcan, she was responsible for developing a new risk management department and systemwide functionality within a diverse, private global company. Ms. Connor was charged with implementing effective systemwide best practices for risk identification, quantification, optimization, and execution to address risk factors throughout the various majority-owned profit and nonprofit affiliates.

Business Insurance’s article can be found here.

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Ian Bremmer, President of Eurasia Group, Named NYU Global Research Professor

New York University has named Ian Bremmer – political scientist, expert on foreign policy and political risk, and president of Eurasia Group – as a Global Research Professor.

In this role, Bremmer will teach at the NYU Stern School of Business and will organize public events, including lectures and seminars, at the School of Business and at the NYU School of Continuing and Professional Studies’ (NYU-SCPS) Center for Global Affairs. Bremmer will continue in his role as president of Eurasia Group.

NYU President John Sexton said, “We are pleased to name Ian Bremmer a Global Research Professor. His participation in campus life and discourse will powerfully contribute to NYU’s intellectual vibrancy, and both his global outlook and experience are a good fit for a university whose unmatched global presence in major cities throughout the world is one of its defining characteristics. We proudly welcome him to the NYU community.”

Peter Henry, dean of NYU Stern, commented, “Ian Bremmer and the Eurasia Group set the standard of excellence for political risk analysis in business. In coming to teach at Stern, Ian brings significant experience to our classroom on the interplay between political risk, economic policy and growth, and helps us in our mission to prepare students for effective global engagement.”

Read the entire New York University press release.

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