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Governance and risk culture remain insufficient at European banks, even though progress has been made in these important areas. As Marco Folpmers highlights here, in its new guidelines, the European Central Bank (ECB) introduces an important additional layer of criteria that financial risk managers (FRMs) can use to evaluate a bank’s risk culture. However, as Marco further comments, whilst it doesn’t provide a comprehensive description of a "bad bank," it does offers insight on potential red flags, enabling FRMs to incorporate a valuable new tool: the negative checklist.

Governance and risk culture remain insufficient at European banks, even though progress has been made in these important areas. As Marco Folpmers highlights here, in its new guidelines, the European Central Bank (ECB) introduces an important additional layer of criteria that financial risk managers (FRMs) can use to evaluate a bank’s risk culture. However, as Marco further comments, whilst it doesn’t provide a comprehensive description of a "bad bank," it does offers insight on potential red flags, enabling FRMs to incorporate a valuable new tool: the negative checklist. …more

Governance and risk culture remain insufficient at European banks, even though progress has been made in these important areas. As Marco Folpmers highlights here, in its new guidelines, the European Central Bank (ECB) introduces an important additional layer of criteria that financial risk managers (FRMs) can use to evaluate a bank’s risk culture. However, as Marco further comments, whilst it doesn’t provide a comprehensive description of a "bad bank," it does offers insight on potential red flags, enabling FRMs to incorporate a valuable new tool: the negative checklist. …more

ECB Launches Consultation on Governance and Risk Culture On July 24, 2024, the European Central Bank (ECB) unveiled a draft Guide on governance and risk culture, inviting feedback from banks and stakeholders. This new Guide supersedes the 2016 supervisory statement, aiming to enhance internal governance and risk culture within banks. The Guide underscores the ECB's commitment to diverse, effective management bodies as a core priority of the Single Supervisory Mechanism (SSM). It details supervisory expectations, offering banks a clear roadmap for strengthening governance and risk management. Key points: - Management Composition and Function: Clarifying roles and responsibilities of internal control functions and management bodies. - Risk Culture Importance: Emphasizing robust risk appetite frameworks and decision-making processes. - Adherence to Updated Standards: Reflecting recent updates from the European Banking Authority (EBA) and showcasing good practices observed by the ECB. Past financial crises have highlighted the critical need for sound internal governance and risk culture. The ECB expects continuous improvement from banks, ensuring a balance between risk-taking and control to safeguard capital and operational resilience. #BankingSupervision #Governance #RiskManagement #FinancialStability #ECB #RiskCulture #BankingSector #Compliance #FinancialServices https://lnkd.in/etYrAWfd

Traditionally, when providing guidance on risks related to culture and governance, regulators have emphasized positive attributes that banks should adopt. But in a recent paper, the European Central Bank highlighted the red flags that firms should be wary of, demonstrating the value of a so-called negative checklist. https://lnkd.in/eKvPX85r #creditrisk #riskmanagement #riskculture #financialrisk #ECB

The Evolving Role of G-SIBs: Is Big Beautiful Again? There is a growing appreciation for global systemically important banks. But G-SIBs still face tough risk management standards and high capital requirements, and there is evidence that some extremely large banks are attempting to game the system, potentially increasing systemic risk.

As the financial crisis and subsequent financial failings have shown, cohesive corporate governance and strong #Risk culture are at the heart of effective business practices and the top of the #Regulatory agenda. To emphasise this, on 24 July 2024, the European Central Bank (ECB) issued their draft guidance on governance and risk culture. This guidance sets out expectations of supervised banks in the form of a practical tool, inviting feedback from the industry by 16th October 2024. The ECB guidance outlines four key areas: 1. Governance and risk culture: importance for banks 2. Functioning and effectiveness of the management bodies 3. Internal control functions 4. Risk Appetite Framework Find out more 👉 https://lnkd.in/eKRZWvGM Kevin Coleman Amanda Ward Claire Miller Dwayne Price

New ECB Guide on Governance and Risk Culture out for consultation. The Guide will replace 2016 version on how management bodies and committees should be composed and function, spells out the roles and responsibilities of the internal control functions, emphasises the importance of risk culture and outlines expectations regarding the risk appetite frameworks of banks.

📢 **Public Consultation by the ECB on the New Draft Guide on Governance and Risk Culture!** 📢 📌 **Announcement:** The European Central Bank (ECB) has launched a public consultation on its new draft guide concerning governance and risk culture. The consultation ends on October 16, 2024. 🌟 **Objectives of the Guide:** - **Strengthen Governance:** Clarify the expectations of supervisory authorities regarding internal governance and risk culture. - **Promote Diversity and Efficiency:** Highlight the importance of diversity and efficiency in management bodies, a priority of the Single Supervisory Mechanism (SSM). - **Provide Best Practices:** Replace the 2016 supervisory statement and share examples of best practices collected by the ECB. 🔍 **Content of the Guide:** 1. **Composition and Functioning of Management Bodies:** Details expectations regarding the composition and functions of management bodies and committees. 2. **Internal Control Functions:** Defines the roles and responsibilities of internal control functions. 3. **Risk Culture:** Emphasizes the importance of a robust risk culture and sets expectations regarding banks' risk appetite frameworks. 📈 **Importance of Governance and Risk Culture:** - Financial crises and bank failures have demonstrated that deficiencies in internal governance and risk culture can lead to difficulties for banks. - Ineffective decision-making processes can create imbalances between risk-taking and risk control, posing risks to capital and compromising the operational resilience of banks. 📊 **Next Steps:** - **End of Consultation:** October 16, 2024 - **Publication of Comments:** The ECB will publish the comments received, along with a feedback statement and the final guide. - **Stakeholder Meeting:** On September 26, 2024, the ECB will organize a meeting with experts from supervised institutions and other interested parties. 🌐 **For more information and to participate:** [Details on the ECB's website](https://lnkd.in/eYwjHPw3) #Governance #Risk #ECB #Banks #Supervision #PublicConsultation #RiskManagement #Diversity #SSM

Today the European Central Bank reiterated that a comprehensive materiality assessment is a key prerequisite for managing climate-related and environmental risks in the banking sector. It also highlighted common shortcomings, including overlooking certain risk types, performing “net” rather than “gross” risk assessment, and relying on historical data without adequate forward-looking analysis. Banks are expected to address these gaps to align with regulatory expectations and ensure sound risk management. #ECB #ClimateRisk #EnvironmentalRisk