Henning Dankenbring’s Post

📢 **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

The European Central Bank (ECB) has launched a public consultation on its new draft Guide on governance and risk culture as a response to financial geopolitical instabilities. This guide replaces 2016 supervisory statement, clarifies supervisory expectations and shares good practices for banks’ internal governance. Furthermore, it clarifies supervisors’ expectations regarding how management bodies and committees should be composed and function, ECB 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. ECB encourages banks to enhance their governance structures and risk management processes. It stresses the importance of transparent leadership, comprehensive risk management in line with the Risk Appetite Framework (RAF), and the promotion of a risk-aware corporate culture. Internal audits should follow a risk-based approach, be thorough and regular, and cover all banking activities, including third-party operations, within a maximum of five years. The RAF should be updated for new risks such as cybersecurity and climate change, and should be integrated with the bank's business model and risk monitoring systems. The ECB expects banks to actively engage in the implementation and monitoring of the RAF, ensuring it aligns with their business strategy and to scrutinize any breaches. Internal control functions should confirm the suitability of risk limits, and the internal audit's independence and capability are vital for assessing the RAF's effectiveness. The ECB's supervisory approach includes both on-site and off-site assessments of governance and risk culture, examining documents, meetings, and the function of the management body, as well as governance documentation and policies. Reviews and targeted analyses help benchmark and identify best practices. If deficiencies are found, the ECB may use its supervisory tools, including administrative penalties, to ensure banks meet the expected standards. The ECB plans to continuously refine its supervisory approach to address governance and risk culture-related risks, considering the changing industry and regulatory environments. The ECB recommends diverse management bodies for better risk oversight and the independence of Chief Risk Officers for unbiased risk evaluation. The guide aligns with Basel Committee and EU regulations, advocating for effective internal controls and competent management of personnel, especially in IT systems. The consultation ends on 16 October 2024. #riskculture #riskgovernance #riskcontrols #riskappetiteframework #riskappetite #banking #cro #rolesandresponsibilities #regulatorychange #regulatoryaffairs #riskcommittee #internalaudit #independentaudit #ecb #bankingsupervision

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

📍The European Central Bank are taking a proactive approach to enhancing risk data aggregation and reporting (RDARR) processes. 💡 In today's ever-evolving financial landscape, robust risk management practices are non-negotiable. Despite advancements, many banks still grapple with addressing weaknesses in RDARR, prompting the ECB to take action. 🎯 Key among the ECB's priorities is the integration of internal risk reporting mechanisms throughout banking institutions. 🔄 This entails not only fortifying internal risk management systems but also harmonising them with regulatory reporting processes, leveraging digital, XBRL-based formats for enhanced efficiency and accuracy. 🚀 By bridging the gap between internal and regulatory risk reporting, the ECB aims to ensure seamless data flow, empowering both banks and supervisors with comprehensive insights into the sector's risk landscape. 👉 Read more here: https://zurl.co/RlCu #ECB #riskmanagement #banking #supervision #riskdata #regulatoryreporting #finance #leadership #innovation #bankingregulation #financeindustry

📢 Much of the same... but differently 📢 💡 Credit risk, operational resilience, climate risk, risk data aggregation and digital transformation remain areas of supervisory priorities for the ECB in the next three years. They were already raised last year and are joined by a special focus on geopolitical risks in ECB's supervisory priorities for 2025-2027. 🔎 While sounding familiar at first, a closer look at it reveals an evolving focus by the ECB, with strong expectations on timely remediation of identified deficiencies in data aggregation and climate risk, for instance. ☎️ Contact us if you want to further explore how best to prepare for future SREP exercises. Johan Dzeprailidis, FRM | Arnaud Duchesne | Josefin Johansson-Juup, SCR | June (Xuejun) LI | Marc Abou Jaoude | Kamil El Horr | Ralph Haddad #deloittelu #riskadvisory #prudentialregulation #SREP #bankingsupervision #SSM

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.

🏦 ECB consults on governance and risk culture The European Central Bank (ECB) has launched a public consultation on its new draft Guide on governance and risk culture, inviting feedback from banks and stakeholders until October 16, 2024. This initiative aims to replace the 2016 supervisory statement and outlines updated expectations for banks' internal governance. Key highlights include: - Focus on Diversity and Effectiveness: The Guide emphasizes the need for diverse and effective management bodies, a priority for the Single Supervisory Mechanism (SSM). - Clarified Expectations: It details how management bodies should operate, the roles of internal control functions, and the importance of a robust risk culture. - Practical Reference: The Guide serves as a roadmap for banks, incorporating recent updates from the European Banking Authority and examples of best practices. - Ongoing Scrutiny: The ECB will intensify its oversight to ensure banks implement necessary governance improvements, particularly in light of past financial crises. A stakeholder meeting is scheduled for September 26, 2024, to discuss these developments further. This consultation marks a significant step towards strengthening governance standards in the European banking sector. Link - https://lnkd.in/gbZfJe4u #riskspotlight #operationalrisk #operationalriskmanagement #riskculture #riskgovernance #riskmanagement

Bank governance and risk culture The European Central Bank launched a public consultation, on 24 July 2024, on its new draft Guide on governance and risk culture, which replaces the 2016 #SSM supervisory statement on governance and risk appetite, where outlines its supervisory expectations on #governance and #risk culture. This draft Guide takes into account the different governance structures and various national laws across Europe and also explicitly includes risk culture encompassing dimensions such as: 🖋 the tone from the top and leadership, 🖋 culture of effective communication, 🖋 challenge and diversity, 🖋 incentives, and 🖋 accountability for risks. The role of supervisors is to assess whether banks’ culture is aligned with prudent risk-taking. Sound risk culture means a culture where the risk perspective is well reflected in key strategic processes of the bank, such as strategy, decision-making and remuneration. Effective management bodies and sound risk culture are more important than ever, especially in the current risk environment, in which banks are facing economic, competitive, and geopolitical headwinds. The deadline for submitting comments is 24:00 CET on 16 October 2024. Please consult the following link for further details https://lnkd.in/gMiFajfC #ECB #SSM #Governance #Risk

My new paper, "Systemic Risk Modelling System (SRMS): A Macroprudential Stress Testing Model," co-authored with Laurynas Naruševičius, is now available online! This paper introduces the Systemic Risk Modelling System (SRMS), a new macroprudential stress testing model for the Lithuanian banking sector. The SRMS enhances traditional stress testing by incorporating dynamic balance sheet assumptions and capturing second-round effects, providing a more comprehensive assessment of systemic risks. Read the paper below 👇 https://lnkd.in/ddsXekrc #MacroprudentialPolicy #SystemicRisk #StressTesting #FinancialStability

The ECB SSM has published its updated Supervisory Priorities for 2025-2027, and the results of its 2024 SREP exercise. In 2025, banks will face an environment with increased headwinds stemming from heightened geopolitical risk, structural economic changes, C&E, and a general risk of macroeconomic downturn. 📌 The new Supervisory Priorities reflect this environment by upgrading geopolitical risk to a prioritised vulnerability and increasing pressure on firms to remediate long-standing risks in the C&E and operational/cyber resilience. 📈 A theme in recent speeches from ECB policymakers has been the need for banks to translate recent profitability into investment in more effective remediation of weaknesses: credit risk and counterparty credit risk management, risk data aggregation, digital transformation and climate and environmental risk management. ⏱️ The elevation of ‘remediation of material deficiencies’ to a key priority reflects the fact that in some areas – in particular risk data aggregation and climate and environmental risk management - the ECB’s patience is wearing thin. The ECB has signalled its increased willingness to use the full scope of its supervisory toolkit and moving faster up the escalation ladder, in particular in more qualitative areas through use of binding decisions and periodic penalty payments. ❗ The most notable difference from previous years is the increase in prominence of geopolitical risk, which is both a standalone priority and a cross-cutting theme in the other priorities. While supervisors are clearly only in the early stages of setting out their expectations and looking at geopolitical risk through the prism of their recently published conceptual framework, this is an area where considerable follow-up is coming in 2025, through exercises evaluating banks’ risk appetites and risk culture, and in the course of discussions on cyber and operational resilience. #ECB #ECBSSM #SREP #SupervisoryPriorities #ECRS #Deloitte #ClimateRisk #GeopoliticalRisk #Supervision #EU #EUbanks #BankingSupervision #Banks Alex Spooner, David Strachan, Rod Hardcastle, Liam Girvan, Stephan Thouet