2012-10-12-奥纬咨询-The_Straight_and_Narrow_15页_403kb

Managing Conduct Risk in Wholesale Banks

Wholesale banks face increased regulatory scrutiny on client and counterparty conduct due to scandals like LIBOR manipulation, moving beyond traditional legal/compliance approaches to emphasize ethical culture and judgment.

Regulatory Changes & Challenges

• Global regulators are imposing stricter standards focusing on "economically useful activity."
• Fines for misconduct reached US$1.5 billion annually, alongside higher litigation, compensation, and reputational costs.
• The UK FCA introduces differentiated supervision based on institutional size, requiring stronger ethical guidelines and new frameworks like the Firm Systematic Framework (FSF).

The Four Aspects of Conduct Framework

• Strategy & Risk Appetite: Businesses need clear values driving their strategy.
• Governance, Culture & Incentives: Requires alignment between formal/ informal structures and a shared commitment, with talent management and communication to embed values.
• Processes: Incorporate conduct into every chain, including pre-trade checks, sales controls, and post-sales monitoring.
• Infrastructure: Develop systems for reliable data and metrics to inform oversight.

Immediate Priorities

1. Governance and Accountability: Define roles across lines of defense (twin peaks model).
2. Conduct Risk Assessment: Review policies, processes, and culture (cultural assessment).
3. Culture Integration: Use communication and incentives to foster a conduct-first environment.
4. BAU Processes: Reengineer existing controls for conduct to achieve sustainable change.