Risk appetite: where strategy, risk and decisions come together
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Supervision Newsletter with the results of the 2024-2026 horizontal benchmarking exercise on risk appetite frameworks (RAF) at 47 banks in 14 countries.
Key points
- 27% of banks set no frequency for internal audit's review of the RAF; at 36%, board oversight is weak
- Around half do not cover all material risks with metrics or statements; legal, model and reputational risks are often left out
- At almost half, control functions do not use the RAF (or use it only partly) to challenge management decisions
- The most serious findings will be addressed in the SREP; a report on good practices in governance and risk culture is forthcoming
Who is affected
Significant banks (governance and risk management)
Plain-language version
The ECB, which supervises the big euro area banks, checked the 'risk appetite' of 47 banks in 14 countries, meaning how much risk they choose to take and how they control it. It found weak spots: at 36% the board keeps a poor eye on it, and about half leave important risks unmeasured. The worst cases go into its yearly bank review, since a badly run bank puts customers' savings at risk.
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Summary produced with artificial intelligence from the official publication. It may contain errors: always check the original document.
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