Risk appetite framework as a chance to improve bank’s risk governance

Published: 2018-05-10

How to valuably implement regulatory requirements

Initial situation

  • “Total risk situation is unknown to decision makers.”
  • “Decisions are not based on the overall risk situation.”
  • “Management stimuli are not derived correctly.”
  • “Total bank limitation is not consistent to the strategy.”
  • “Risk culture is not shaped adequately.”

These are only some examples of the reproaches of supervisory authorities to credit institutions. Thus, the Financial Stability Board (FSB) elaborated the “Principles for an Effective Risk Appetite Framework” in November 2013 to specify requirements, which should counteract these deficiencies. However, many credit institutions have not yet efficiently eliminated these deficiencies.

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