Crisis Wasted? Leading Risk Managers on Risk Culture

4 John Breit

New York, 19 November 2014

Be curious, gain the confidence of traders and make them explain why their risks will pay off.

Before he retired, John Breit managed risk at Merrill Lynch in New York and at Donaldson, Lufkin & Jenrette.

He tells us why heavy handed regulation may be undermining good risk management practices.

John Breit:

I'm a physicist by training. After my doctorate and post-doctorates at The Institute for Advanced Study in Princeton and Penn, I wanted to work in New York. Most of the faculty positions open to me were in the Mid-West, the South, California, but not NY. So I looked at finance and wound up at Security Pacific (Sec Pac), which had a California bank but was setting up what they called a merchant bank in New York. In the Summer of 1986 I joined what they called the Quant Group, where I came in handy solving lots of partial differential equations, but then moved fairly quickly to the swaps desk, which was one of the few really good trading desks. Despite being very much a commercial bank, they had hired the First Chicago swaps team, who were really good. So I hung out with them.

Frances:

Interest rate swaps?

John:

Yes. There I learned what LIBOR was and about what banks did: it was a great learning experience. After that I helped out with the credit department, mainly to help them understand some of the new products. When they decided we should have a market risk department, not just a credit risk department, I got to do that for a couple ...