Enhancements to Oversight of Risk for Bank Boards Introduced

The Basel Committee on Banking Supervision at the BIS has recently issued consultative 2014 Guidelines on Corporate Governance Principles for Banks, updating its 2010 principles.  The new proposed guidelines includes additions proposed by global regulators including those presented by the FSB 2013 Peer Review recommendations.  The comment period for this paper ends on January 9th 2015.   Extended coverage of the guidelines was presented in the Harvard Law School Forum on Corporate Governance and Financial Regulation blog in a post by Holly J. Gregory of Sidley Austin LLP on December 6th, 2014.

The new Basel guidelines extend the 2010 guidelines by requiring enhanced board oversight of risk as noted below:
  1. Development by the board and senior management of the bank's risk appetite/statements and policies, including the nature of risks to be taken and risk management capabilities and also monitoring of the bank's risk statements, policies and limits, 
  2. Board oversight and approval of capital and liquidity requirements and control procedures, 
  3. Evaluation and approval of the selection of senior management, 
  4. Alignment of renumeration strategies to risk culture and appetite, 
  5. Review of the risk governance framework given changes in risk profile and strategy,
  6. Development of the "risk culture" at the top, and 
  7. Establishment of an "enterprise risk committee" distinct from the audit committee focused on re-inforcing the risk culture.  The enterprise risk committee interacts with and oversees the CRO.  
There is considerable more to contemplate here in future posts but the above is a brief overview of key changes impacting the future governance of the commercial banking industry. 

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