The portfolio revolution: the end of classic portfolio theory by Dr. Jochen Felsenheimer, Managing Director of XAIA Investment GmbH
Professional Articles
Make Peace with Your Front Office
By Dominik Käfer, Dr. Lue Wu, Jens-Peter Nees
Navigating compliance can be a challenging journey for a bank’s front office. Relationship managers often voice frustrations about the escalating demand from compliance tasks such as Know Your Customer (KYC), transaction monitoring or anti-fraud measures. These tasks not only heighten workloads but can strain relationships with clients. Fortunately, it doesn’t have to be this way. By harnessing artificial intelligence (AI), leading banks have shown that compliance and control protocols can be seamlessly integrated into front office’s daily operations and products and a harmonious and productive partnership between the front office and the compliance function is indeed achievable.
Credit rating migration conditional on economic states
By Dr. Michael Kalkbrener, Prof. Dr. Natalie Packham
Point-in-time (PIT) and through-the-cycle (TTC) rating philosophies are both firmly established in credit risk management, yet their conceptual differences are often handled without a unified modelling framework. Based on the recent work by Kalkbrener and Packham [2026], this article provides a formal characterization of PIT and TTC properties in terms of rating migrations and default behaviour, clarifying where cyclicality enters a rating system and how this affects default probabilities over different time horizons. The underlying mathematical model of rating migration processes explicitly conditions credit ratings on economic states to reflect the impact of macroeconomic developments on default rates. A stylised example illustrates how PIT and TTC ratings coexist within a single framework and how their long-run behaviour can be aligned.
Transition Plans in Banking: From Compliance to Strategic Advantage
By Dr. Lukas Figge-Muschalik, Luca Steinhauer, Matthias Hübner
As the shift toward a net-zero economy accelerates, banks face mounting pressure to realign their business models and credit portfolios with the 1.5°C pathway while maintaining financial resilience. Strategic transition planning has therefore become a strategic management task rather than a compliance exercise. Its effectiveness determines whether institutions can translate climate ambition into actionable steering, manage emerging risks and retain credibility with regulators, clients, and investors. At the same time, banks must navigate heterogeneous sectoral pathways, data limitations and the trade-off between long-term resilience and short-term profitability. This article is based on the cluster initiative on transition plans and outlines the key strategic trade-offs, investor expectations and organisational building blocks that banks need to turn transition plans into a strategic management tool [see Sustainable Finance Cluster 2025].
Achieving Artificial Intelligence Return on Investment (ROI) through Value Co-Creation
By Cristina Has
Generative Artificial Intelligence (GenAI) has moved rapidly from technological curiosity to strategic priority in banking. Since 2023, institutions have launched numerous pilots, from internal chat assistants to automated document analysis. While these projects show impressive capabilities, many struggle to turn experimentation into measurable economic value. This gap reflects not technological immaturity, but misalignment with regulatory, organisational, and contextual realities. As hype fades, pressure grows to justify investments with tangible returns.
Ratings under the microscope: how ECAIs shape Banks’ Capital Requirements
By Luca D’Amico, Marco Bonsanto, Dirk Burdorf
Basel III was conceived in response to the weaknesses exposed by the 2008 financial crisis, with the aim of strengthening the resilience of the global banking sector. By introducing stricter capital requirements (coupled also with the EU Capital Requirements Regulation), liquidity standards, and leverage ratios, it seeks to reduce systemic risk and restore confidence in international markets.
In an increasingly globalized and complex world, characterized by exogenous risks, the calculation of capital requirements is not merely a technical exercise but it influences and supports banks in managing and mitigating these risks.
Professional Articles
Make Peace with Your Front Office
By Dominik Käfer, Dr. Lue Wu, Jens-Peter Nees
Navigating compliance can be a challenging journey for a bank’s front office. Relationship managers often voice frustrations about the escalating demand from compliance tasks such as Know Your Customer (KYC), transaction monitoring or anti-fraud measures. These tasks not only heighten workloads but can strain relationships with clients. Fortunately, it doesn’t have to be this way. By harnessing artificial intelligence (AI), leading banks have shown that compliance and control protocols can be seamlessly integrated into front office’s daily operations and products and a harmonious and productive partnership between the front office and the compliance function is indeed achievable.
Credit rating migration conditional on economic states
By Dr. Michael Kalkbrener, Prof. Dr. Natalie Packham
Point-in-time (PIT) and through-the-cycle (TTC) rating philosophies are both firmly established in credit risk management, yet their conceptual differences are often handled without a unified modelling framework. Based on the recent work by Kalkbrener and Packham [2026], this article provides a formal characterization of PIT and TTC properties in terms of rating migrations and default behaviour, clarifying where cyclicality enters a rating system and how this affects default probabilities over different time horizons. The underlying mathematical model of rating migration processes explicitly conditions credit ratings on economic states to reflect the impact of macroeconomic developments on default rates. A stylised example illustrates how PIT and TTC ratings coexist within a single framework and how their long-run behaviour can be aligned.
Transition Plans in Banking: From Compliance to Strategic Advantage
By Dr. Lukas Figge-Muschalik, Luca Steinhauer, Matthias Hübner
As the shift toward a net-zero economy accelerates, banks face mounting pressure to realign their business models and credit portfolios with the 1.5°C pathway while maintaining financial resilience. Strategic transition planning has therefore become a strategic management task rather than a compliance exercise. Its effectiveness determines whether institutions can translate climate ambition into actionable steering, manage emerging risks and retain credibility with regulators, clients, and investors. At the same time, banks must navigate heterogeneous sectoral pathways, data limitations and the trade-off between long-term resilience and short-term profitability. This article is based on the cluster initiative on transition plans and outlines the key strategic trade-offs, investor expectations and organisational building blocks that banks need to turn transition plans into a strategic management tool [see Sustainable Finance Cluster 2025].
Achieving Artificial Intelligence Return on Investment (ROI) through Value Co-Creation
By Cristina Has
Generative Artificial Intelligence (GenAI) has moved rapidly from technological curiosity to strategic priority in banking. Since 2023, institutions have launched numerous pilots, from internal chat assistants to automated document analysis. While these projects show impressive capabilities, many struggle to turn experimentation into measurable economic value. This gap reflects not technological immaturity, but misalignment with regulatory, organisational, and contextual realities. As hype fades, pressure grows to justify investments with tangible returns.
Ratings under the microscope: how ECAIs shape Banks’ Capital Requirements
By Luca D’Amico, Marco Bonsanto, Dirk Burdorf
Basel III was conceived in response to the weaknesses exposed by the 2008 financial crisis, with the aim of strengthening the resilience of the global banking sector. By introducing stricter capital requirements (coupled also with the EU Capital Requirements Regulation), liquidity standards, and leverage ratios, it seeks to reduce systemic risk and restore confidence in international markets.
In an increasingly globalized and complex world, characterized by exogenous risks, the calculation of capital requirements is not merely a technical exercise but it influences and supports banks in managing and mitigating these risks.