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Product control sits within the finance department and is aligned to support the business. Product control's most senior appointment is the global head who, in addition to setting the agenda for the work performed by their team, will interact directly with the bank's markets CEO, who is the head of the trading floor.

In addition to the overall global head of product control, the division has global heads responsible for each line of business and it is their responsibility to represent product control to the respective heads of those businesses.

Using Figure 1.3 as an example, there are heads of product control for credit, foreign exchange, rates, commodities and equities. These heads are responsible for supporting and controlling the business they are aligned to.

Figure 1.3 Finance and product control organizational structure

The teams of product controllers supporting and controlling the sales and trading desks for their business are usually consolidated into regional hubs where the traders are located. Sales staff, however, will be dotted all around the world as they are not limited to the regional hubs that exist for traders. The sales trades will be booked from the local offices and then risk managed in the regional hub by the trading desk.

In Figure 1.3 the regional hubs are Europe, the Middle East and Africa (EMEA), the Americas (both North and South America) and Asia.

The regional product control hubs will typically have managers for each line of business (e.g. credit, rates, etc.) in addition to a manager for the country (e.g. head of product control Singapore). The product control country manager will typically report directly into the country CFO (e.g. Singapore CFO) and will have an indirect reporting line to the global head of product control. They can also have indirect reporting lines to the heads of product control for each line of business.

There are exceptions to every rule and, in some cases, product control will not be based in the same location as their traders. For example, a small rates desk operating out of Sydney could be controlled by a regional product control team located in Singapore.

In addition to these teams, there is usually a separate product control team that is responsible for valuations. In rare cases, this team sits within market risk or alternatively may still sit within finance but report directly to the CFO or financial controller.

Valuations, or valuations control as they are also known, are responsible for a range of activities related to the valuation of financial instruments. Some of the common responsibilities for this team are illustrated in Figure 1.4 and they are outlined here:

• Rate capture: Rate capture is the sourcing of end of day rates which are used to revalue the desk's open positions. This doesn't always sit with valuations and can reside within the business, operations or in market risk.

• Bid offer and XVA (comprehensive valuation adjustments): Bid offer and XVA are the valuation adjustments required to bring the desk's portfolio to its fair value. We will look at valuation adjustments in more detail in Chapter 16.

• Independent price verification (IPV): IPV checks that the end of day prices align to fair value. We will look at IPV in Chapter 15.

• Prudential valuation: Prudential valuation is relatively new and isn't applicable in all jurisdictions. This work requires the valuations team to quantify additional valuation adjustments stipulated by the prudential supervisor, such as illiquidity and concentration risk.

• Fair value hierarchy (FVH): FVH allocates the bank's financial assets and liabilities into three levels depending upon price observability and market activity.

Figure 1.4 Remit of valuation control

In addition to these activities, valuations will work with the line product controllers to review and validate the day 1 P&L for significant or exotic new trades. And when a new product is proposed by the business, valuations will assess the product from a valuations perspective.