A global joint survey by the Professional Risk Managers’ International Association (PRMIA) and SunGard reveals an attitudinal shift among risk managers, who increasingly view risk management as a strategic core competency rather than just a regulatory obligation.
The survey polled more than 200 banking risk managers across the world about their collateral and exposure management priorities. Key findings include:
- Stress testing capabilities ranked as a lower than expected priority, behind collateral consolidation and asset and exposure valuation. “This is particularly surprising in light of the impending European Central Bank [ECB] comprehensive assessment, due to be published in November 2014, which will disclose those under the baseline and adverse scenarios of stress tests,” SunGard comments. “This could suggest that while regulatory requirements remain important, banks are beginning to focus more on longer term risk management capabilities.
- In addition to stress testing, the calculation of regulatory limits exposures also ranked as a lower than expected priority.
- Over 96% of respondents confirmed that combined credit risk and collateral management capabilities were important, further highlighting how firms are increasingly taking a more longer term view of risk management rather than a short-term, tick box exercise.
- Other priorities for risk managers included centralization of customer information to drive increased accuracy, improved monitoring of counterparty risk, enhanced reliability of risk data and better single borrower exposure and monitoring internal limits.
“These key findings highlight an important step change for the industry,” said Sven Ludwig, regional director of PRMIA and senior vice president (SVP), risk management and analytics, SunGard.
“While it is surprising that regulatory requirements such as stress testing rank as a lower than expected priority, this also suggests that the practice of risk management is evolving to become more strategic and operational. This is particularly evident when looking at today’s collateral and exposure management priorities.
“Taking a longer-term view towards risk will undoubtedly enable banks to successfully navigate the more complex regulatory landscape, but also lay the foundations for an effective risk strategy which drives competitiveness from compliance”
Jochen Schneider, chief operating officer (COO), SunGard’s retail banking business, added: “Collateral is one of the key focal areas to mitigate systemic risk. Strategic investments here can improve all three levels of shareholder value: revenue enhancement, cost containment and capital efficiency.
“More specifically, banks that improve their collateral and exposure management capabilities can more effectively manage lower interest rate risk and therefore enjoy higher equity leverage. We see a continued focus among banks on enhancing these capabilities, as they increasingly recognise their importance in helping to better manage risk in the long-term.”
A full copy of the research report can be obtained from Petra Shuttlewood – contact firstname.lastname@example.org or +44 (0)7702 915043.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
Using data for predictive analytics is the future of banking success, argued Jean-Laurent Bonnafé, CEO of BNP Paribas, in his session on how the bank is reinventing its approach to innovate with and for corporates.
The EU and US’ shift in accounting standards may bring balance sheet losses and increase credit risk, according to James Elder, director of risk services at Standard & Poor’s (S&P) Global.
Sibos 2017 day two highlights: Brexit and banking, and why ‘data is the new oil’ in financial services
How nation first politics can impact global financial organisations It’s clear that data and regulation are the two key topics that are ... read more