Risk in Financial Institutions - Is It Managed?

Ghent University, Financial Law Institute Working Paper No. 2012-04

13 Pages Posted: 22 Jan 2012

See all articles by Eddy Wymeersch

Eddy Wymeersch

Ghent University - Financial Law Institute; ECGI

Date Written: January 20, 2012

Abstract

Adequate Risk management has become the central pre-occupation of financial regulators, central banks, and banks as well. Awareness about the risk issue has increased considerably, partly spontaneously, partly under the pressure of new regulations, esp. the Basel III standards. Risk measurement – “risk appetite” is a management tool, a process and a learning curve, more than a fixed formula. Risk inspired restrictive measures abound, but may overly reduce the credit flow to the economies, making it difficult to strike the right balance between risk stability and liquidity provision.

The Basel II- CRD IV call special attention to risk management by introducing some very clear cut rules, leaving the traditional comply and explain approach to a stricter supervisory intervention. Should a bank adopt its behavior if this may potentially trigger macro-risk? What is the role of the auditors and of the shareholders dealing-opposing strict risk management. More work has to be undertaken, but banks obviously are investing considerably in better risk controls.

Keywords: risk management, CRD IV Basel III, corporate governance, macro-risk, auditors, shareholders

JEL Classification: K22

Suggested Citation

Wymeersch, Eddy O., Risk in Financial Institutions - Is It Managed? (January 20, 2012). Ghent University, Financial Law Institute Working Paper No. 2012-04, Available at SSRN: https://ssrn.com/abstract=1988926 or http://dx.doi.org/10.2139/ssrn.1988926

Eddy O. Wymeersch (Contact Author)

Ghent University - Financial Law Institute ( email )

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Gent, B-9000
Belgium
+32 9 264 68 27 (Phone)
+32 9 264 68 55 (Fax)

HOME PAGE: http://www.law.ugent.be/fli

ECGI ( email )

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