Journal Of Risk Management Research Articles

Special Issue of the `Journal of Risk Management in Financial Institutions`

Special Issue of the `Journal of Risk Management in Financial Institutions`

CRD V/CRR II: A comprehensive synopsis of the first European step towards implementing Basel IV (Part II)

Two banking packages are needed in Europe to implement the Basel recommendations of the standard ‘Basel III: Finalising post-crisis reforms’ into European supervisory regulation. The Basel Committee on Banking Supervision (BCBS) and European supervision use the abbreviation ‘Basel III’ for the reforms. They thus give the impression to those unfamiliar with the subject that the supervisory authority is merely updating and expanding the approaches and ideas published in the Basel III papers of 2010 in response to the financial crisis of 2007/2008. In the overall picture, however, this is not the case. In addition to the usual updating of known standards, the supervisory authority is introducing a large number of entirely new approaches and regulations that did not exist in this form previously. Banking sector is rightly using the term ‘Basel IV’ instead of ‘Basel III’ for this regulatory change package, which is the most comprehensive ever at both the international and European levels. The first European banking package was adopted in June 2019 and is currently being implemented. It is also known as the ‘CRD-V-CRR-II package’, as it makes significant changes to the capital requirements directive (CRD) and capital requirements regulation (CRR) in particular. This paper — like Part I which appeared in Journal of Risk Management in Financial Institutions Vol. 13, 2 — analyses the remarkable changes that will pose notable challenges for many banks. We use a four-pillar concept to differentiate the most critical issues. The publication of the second European banking package for the full implementation of Basel IV is still pending. The contents of the ‘CRD-VI-CRR-III package’ will therefore only be analysed at a later date.

Research Trend of Life Insurance - Articles Published in Journal of Risk Management Over the 30-year Period

Research Trend of Life Insurance - Articles Published in Journal of Risk Management Over the 30-year Period

Regulating Fraud in Financial Markets: Can Behavioural Designs Prevent Future Criminal Offences?

This article explores the anatomy of three recent financial scandals and investigates how the legal system has responded to them. Furthermore, it analyses whether behavioural designs can prevent future criminal offenses. The article comes to the conclusion that the social as well as the physical environment can diminish the human propensity to commit a fraud. Moreover, misconduct was often made attractive to fraudsters by means of external rewards. Reforming performance incentives might therefore be an efficient measure to reduce deception in financial markets. Reprint from the Journal of Risk Management in Financial Institutions, 7(2): 192–201. This version has been slightly updated and modified.

Risk accounting - part 2: The risk data aggregation and risk reporting (BCBS 239) foundation of enterprise risk management (ERM) and risk governance

In the period following the global financial crisis, high-profile regulatory breaches and other instances of banks’ misconduct triggered widespread concern that the culture and standards of conduct in banks had declined to a point of unacceptability. The crisis also brought into sharp focus the inability of banks to completely and accurately report the risks they accept in order to create shareholder value. These events and circumstances culminated in a crisis of trust between banks and their stakeholders which include governments, regulators, investors and customers. In this same period, regulators focused on their primary ‘capitalat- risk’ regimes administered through the Basel capital accords, reinforcing additional levels of capital as a bank’s primary protection against unexpected losses. At the same time, Basel introduced ‘firm-at-risk’ mandates that required improvements in banks’ control over risk data and associated technology infrastructure. The most significant game-changing post-crisis regulatory mandate in this regard is the Basel Committee’s principles for effective risk data aggregation and risk reporting, also known as BCBS 239. This new mandate requires banks: to implement controls over risk data that are as robust as those applicable to accounting data; to create accurate and single authoritative sources of risk data; and to ensure the precision, timeliness, comprehensiveness and adaptability of risk reporting. BCBS 239 effectively sets the parameters for enterprise risk management (ERM) and provides the foundation on which risk governance and risk cultures can positively evolve. Whereas BCBS 239 expressly states that a common risk metric for all forms of risk is not required, the authors challenge this thinking and argue that it is only through the adoption of a common risk metric that the objectives of BCBS 239 can be reasonably achieved. Part 1 of this paper, published in Journal of Risk Management in Financial Institutions Volume Nine, Number Two (pp. 130–146), explains why bankers — risk managers and accountants in particular — must view the need for the convergence of finance and risk systems within a common control and reporting framework as an imperative. Part 2 describes the ‘Risk Accounting’ methodology and its introduction of both a common measurement framework for all forms of risk and a common risk metric, the risk unit (RU).

The Single Supervisory Mechanism: Ready to take over banking supervision in the euro area?

With the establishment of the Single Supervisory Mechanism (SSM), the euro area member states have committed themselves to transferring a considerable part of their national sovereignty with regard to banking supervision to the European Central Bank (ECB). This will have a large impact on the future role of national supervisory authorities, the supervised euro area cross-border banks and, last but not least, the ECB itself. Given the ECB's rather limited experience in the day-to-day supervision of credit institutions at the time the SSM Regulation was adopted, and considering different approaches between monetary policy and banking supervision in terms of transparency and banking industry involvement, at first sight one might be tempted to compare the ECB taking up direct banking supervision in November 2014 with a learner driver. The ECB, however, will not substitute for the supervisory work of the national competent authorities, but is intended to act as a complement to it. Moreover, the legal framework under which the SSM will operate, the envisaged organisation of day-to-day supervision, the swift facilitation of the recruitment of qualified personnel and the first experiences with public consultations do alleviate concerns that the ECB might not be able to do its job with the necessary degree of efficiency, transparency and accountability. The (lack of) incentives for non-euro area member countries to join the SSM and the comprehensive assessment, a preparatory exercise to avoid taking over legacy assets from banks supervised directly by the ECB from November 2014, have been highlighted already in this journal and are consequently not part of this paper (see Dietz, T. (2014) ‘Comment on the Single Supervisory Mechanism’, Journal of Risk Management in Financial Institutions, Vol. 7, No. 3, pp. 220–225). This paper, rather, concentrates on the concrete details of the ECB's future supervisory work and its implications for the national supervisory authorities and the institutions affected.

IACPM/Oliver Wyman Survey: Perspectives on the Evolving Role of Enterprise-Wide Stress Testing

Global Credit ReviewVol. 04, No. 01, pp. 99-116 (2014) No AccessIACPM/Oliver Wyman Survey: Perspectives on the Evolving Role of Enterprise-Wide Stress TestingAndy McGee and Ilya KhaykinAndy McGeeOliver Wyman, USA and Ilya KhaykinOliver Wyman, USAhttps://doi.org/10.1142/S2010493614500068Cited by:0 PreviousNext AboutSectionsPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsRecommend to Library ShareShare onFacebookTwitterLinked InRedditEmail References Cope, D. and A. McGee (2012), Improving the Measurement of Capital Adequacy — The Future of Economic Capital and Stress Testing. Oliver Wyman Point of View . Google Scholar M. Duane , T. Schuermann and P. Reynolds , Journal of Risk Management in Financial Institutions 7 , 72 ( 2014 ) . Google Scholar Federal Reserve (2013), Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice, August . Google Scholar FiguresReferencesRelatedDetails Recommended Vol. 04, No. 01 Metrics History PDF download