Commentary: Internal audits help bank boards evaluate "conduct risk" | Research: Too-big-to-fail's impact on risk appetite within banks | Fed guidance aims to refocus bank boards' risk-management duties
January 17, 2018
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Serving on a US bank board requires a greater focus on cultural factors such as "conduct risk," and guidance from the Office of the Comptroller of the Currency calls for boards to provide a "credible challenge" to bank executives' actions, write John Carey and Kathlyn Farrell of Treliant Risk Advisors. "Should the board have concerns about areas of the bank that are not highlighted by management, commissioning either an internal audit or external review of those areas will help ensure that appropriate light is cast on potential areas of risk," they write.
Researchers explore the effect of bank size and the presumption of government bailouts on decision making, noting the large banks have an incentive to be more aggressive when they are operating with a governmental safety net.
Proposed guidance from the Federal Reserve is intended to pull back on expanding governance responsibilities for bank boards since the financial crisis. A key point in the Fed proposal concerns communication among the risk committee, audit committee and compensation committees, the Deloitte Center for Financial Services says.
The Commodity Futures Trading Commission, the Securities and Exchange Commission and international regulators continue to scramble to determine how to handle bitcoin trading, futures contracts and exchange-traded funds. The Financial Stability Oversight Council is reviewing whether digital currencies pose systemic risk, Treasury Secretary Steven Mnuchin says.
The UK Financial Reporting Council has revised an accounting standard to decrease the number of entities that are deemed financial institutions. The regulator said it "expects there to be an overall cost saving to preparers as a result of these changes when measured over the lifetime of their implementation, without impacting significantly on the usefulness of the resulting information for users of the financial statements."
The European Banking Authority has issued final guidance for companies to report changes in regulatory capital because of implementation of International Financial Reporting Standard 9. The standard requires firms to earmark funds for expected credit losses, but banks can phase in compliance.
The Securities and Exchange Commission reportedly asked several fund companies to withdraw applications for bitcoin exchange-traded funds and cryptocurrency mutual funds, surprising financial firms. The regulator is concerned about investor protection and proper valuation of funds, given cryptocurrency's price volatility, sources say.
The financial industry stands behind a measure that would require corporations to register with the Treasury Department's Financial Crimes Enforcement Network, a rule that would help banks comply with an anti-money-laundering law that goes into effect in May. That law requires banks to identify the owners of companies they serve, a task they say the proposed Treasury database would make easier.
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Infographic: Implementation of internal audit recommendations
A recent survey of chief audit executives reveals the importance of monitoring the implementation of internal audit recommendations. CAEs in the financial-services industry provide their insights. Download the infographic.
FSAC membership: Your New Year's resolution
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George Bernard Shaw, playwright
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