Chase Manhattan Bank may be a provider of financial services on a global basis, but its risk management function has its roots firmly planted at home in New York.
In an effort to integrate its services and rein in risks, the bank has consolidated its capital markets and risk management groups into a single entity, called Chase Global Markets. Mark B. Grier, executive vice president and co-head of the new unit with Kathylynn O'Donnell, said Chase plans to integrate its services to clients more than it has in the past. Ms. O'Donnell was the head of capital markets and Mr. Grier headed up the risk management sector when they were separate entities.
Within the new global markets group, Mr. Grier will focus on foreign exchange, commodity risk, equity derivatives, and managed funds. He is charged with overseeing the bank's risk management procedures, and products as well.
Ms. O'Donnell will focus on capital markets, including emerging markets products and interest rate and currency derivatives.
Chase, which has more than $95 billion in assets and the fifth-largest derivatives portfolio among U.S. banks, likes to think of itself as a customer-driven, conservative institution.
And conservative is how Wall Street sees the bank as well.
According to Sanford C. Bernstein & Co., Chase "is about average among banks" in terms of its derivatives holdings. Its portfolio accounted for only about 25% of trading profits in 1993 and about 8% of total profits.
According to federal call report data, in the second quarter of 1994, Chase held $1.3 trillion in notional amount of total derivatives, making it No. 5 among the top 25 U.S. banks.
At the end of the second quarter of this year, Chase held $8.2 billion in futures and forwards, $2.9 billion in swaps, and $2.2 billion in options.
The conservative approach suits Mr. Grier just fine.
Chase's wholesale banking business is aimed mainly at large corporations, institutional investors, governments, financial institutions, and wealthy individuals and tries to provide one-stop shopping for all of their financial needs.
"At Chase we are concerned with the integration of the wholesale business on the client side for 1995," Mr. Grier said recently.
The formation of the global markets group will go a long way toward that integration. Products offered include commodity swaps, foreign exchange options, interest rate derivatives, and structured notes.
Mr. Grier said the highly publicized problems that some companies had with derivatives will not slow down their use. He went so far as to argue that all the publicity has had a positive effect on the market.
"Most of the users of derivatives have a good sense of what they are doing," he said. "But there is nothing wrong with a wake-up call. The comfort level with these products has increased."
Indeed, Lehman Brothers expects Chase's trading revenues to increase to 10% of total revenue this year and rise to about 11.4% of revenue for 1995.
One area that is expected to see growth is Eastern Europe, according to Mr. Grier. He said the bank is beginning to make its presence known in that emerging market.
In keeping with the bank's conservative approach, Mr. Grier said that Chase only deals in markets where it already has a presence.
"In the exotic markets we only deal in the ones in which we are extremely familiar," he said. "It's a matter of knowing the market. We take advantage of the fact that we have a presence there and know what's going on in the country."
To help customers quantify their market risk, Chase uses a technique called "value-sensitizing factors," which takes a value-at-risk approach to each customer's portfolio and tells the customer how much money it could potentially lose if a particular position is held for a specific period.
