The wealth management unit of Denmark’s biggest bank, Danske Bank Asset Management, has adopted Bloomberg’s Liquidity Assessment Tool (LQA), a solution for risk analysis of trading liquidity that utilizes machine learning, according to a corporate statement.
The LQA tool, which was developed over a six-year period, allows the firms to measure and benchmark the liquidity risk of its fixed income and equity portfolio investments whilst adhering to UCITS and AIFMD’s regulatory reporting requirements. The solution caters to bond risk managers, portfolio managers, traders, compliance officers and other institutional investors since it provides a quantitative approach to calculating liquidity risk consistently across asset classes.
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According to Bloomberg, it’s the first system of its kind to combine financial data and machine learning techniques to calculate the multitude of relevant factors influencing liquidity. Bloomberg’s LQA also enables its users to measure the expected cost of liquidation for a specific volume of securities, and a desired time horizon.
Danske Bank Asset Management is one of the largest asset managers in the Nordic region with more than $110 billion in assets under management. Copenhagen-based Danske Bank introduced its new wealth management unit back in 2015 in a bid to benefit from the considerable growth in the Nordic market and as lenders across Scandinavia looked for ways beyond traditional lending to generate more revenue.
Scandinavian banks have been suffering from a prolonged era of negative interest rates which have eroded their fortunes in the last few years. Most analysts expect rates won’t turn positive until the start of 2018 at the earliest.
Commenting on this, Chris Casey, Global Head of Bloomberg’s Reference and Regulatory Data group, said: “Regulators are now more prescriptive about compliance requirements, urging financial firms to measure and report liquidity risk in a systematic way across their firm. We’re committed to helping Danske standardize its compliance workflow using Bloomberg LQA.”