Banks Risk Management: Basel Committee

Highlights from the BCBS evaluation reveal key trends in Banks Risk Management. The report focuses on operational resilience and risk management practices globally, expanding the need for enhanced frameworks and strategies.

Banks Risk Management: Basel Committee
EU Operational Resilience and Risk Management

Besel Committee Governance: Operational Resilience and Banks Risk Management

Bank for International Settlements keywords Banks Risk Management
  • Evaluation Overview:
    • The updated Principles for the Sound Management of Operational Risk (PSMOR) and the Principles for Operational Resilience (POR) have different degrees of implementation, according to the Basel Committee on Banking Supervision's (BCBS) most current study.
    • These regulations, which went into effect in March 2021, are intended to improve banks' overall risk management in this area and strengthen their capacity to manage operational interruptions.
  • Identified Challenges:
    • The evaluation highlights differences in the application of these concepts, exposing obstacles, particularly in:
      • Identifying interconnections within operational frameworks.
      • Establishing tolerance levels for disruptions in critical operations.
  • Optimism Amid Challenges:
    • The Committee remains optimistic despite the challenges that have been identified and highlights the continued support for banks to fully adopt these principles.
    • A promise is made to support banks continuously as they move toward full adoption.
  • Crucial Importance:
    • The Committee emphasizes how important it is to put these concepts into practice in an efficient manner.
    • This efficacy is considered essential for strengthening banks' ability to withstand the increasing frequency of operational risks and disturbances caused by things like cyberattacks, technical malfunctions, and international health emergencies.
  • Focus on Stability:
    • Maintaining financial sector stability is determined to depend on banks' risk management procedures.
    • Adherence to these standards is consistent with the overarching objective of strengthening the industry against changing operational difficulties.

The present assessment not only provides an overview of the state of affairs but also emphasizes the significance of continuous endeavors to enhance operational resilience in guaranteeing the steadiness and resilience of the international banking sector.

Enhancing Banks Risk Management: BCBS's Operational Resilience Evaluation

The most current examination by the Basel Committee on Banking Supervision (BCBS) offers important new information about risk management procedures used by banks worldwide. The results of this thorough analysis, which concentrated on the Principles for Operational Resilience (POR) and the Principles for the Sound Management of Operational Risk (PSMOR), show that financial institutions have different adoption patterns.

  • Main Aims: Central banks and commercial and investment banks are the main targets of the review.
  • Global Impact: These ideas are universally important, as evidenced by their consequences spanning Europe, North America, and Asia-Pacific.

Enhancing operational resilience in banks is the main goal of the BCBS, which aims to maintain stability in the face of risks like cyberattacks and major world crises.

  • Increased Scrutiny: Banks are now being more rigorously evaluated for their operational resilience.
  • Strategic Frameworks: The need for robust risk management frameworks is paramount
  • Timely Implementation: A 1-2 year timeline is anticipated for significant improvements in risk management practices.

Banks Risk Management Strategies Post-BCBS Assessment

The evaluation by the BCBS represents a significant change in the way that banks handle risk. Operational resilience is becoming a top priority for banks, given the wider effects of disruptions and the requirement for all-encompassing risk management plans.

  • Operational Resilience: A focus on the overall impact of disruptions, third-party resilience, and critical operations.
  • Immediate Action Required: The urgency for adopting and implementing these principles cannot be overstated.

Reluctance to adjust could lead to more frequent malfunctions or significant disturbances, emphasizing the need for proactive involvement in risk control procedures.

  • Potential Regulatory Interventions: Banks that lag in implementation may face regulatory actions.
  • Proactive Measures: Active enhancement of operational resilience is essential for compliance and stability.

The assessment by BCBS highlights how banks' risk management is changing. Banks are urged to improve and harmonize their operational resilience plans with international norms. This proactive strategy is essential for maintaining the overall stability and resilience of the banking system in addition to compliance.

Read More

Supervisory newsletter on the adoption of POR and PSMOR
The Committee assessed the adoption of the Principles for Operational Resilience (POR) and the revised Principles for the Sound Management of Operational Risk (PSMOR, or collectively, “the Principles”) published in March 2021. The assessment is meant to promote the adequate and timely adoption of th…

Grand is Live

Check out our GPT4 powered GRC Platform

Sign up Free

Reduce your
compliance risks