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EBF Comments on Proposed High-Level Principles for Risk Management (CEBS Consultation Paper 24)

Core Content

The European Banking Federation (EBF) has provided feedback on the CEBS Consultation Paper 24, which outlines high-level principles for risk management in the banking sector. The EBF generally supports the paper, recognizing it as a strong foundation for developing a comprehensive and cohesive set of risk management principles. The document also aligns with the industry's current best practices.

Main Views

• Support for High-Level Principles:
  The EBF welcomes the proposed high-level principles for risk management, viewing them as a solid starting point for further development. These principles are expected to form the basis of a comprehensive guidebook that consolidates all risk management standards.

• Proportionality as an Overarching Principle:
  The EBF specifically appreciates the inclusion of the principle of proportionality, which emphasizes that the application of risk management principles should take into account the size, nature, and complexity of an institution. This approach is seen as essential for ensuring flexibility and practicality in implementation.

• Need for Implementation Clarity:
  While the principles are well-intentioned, the EBF notes that high-level principles inherently require further clarification. They anticipate that CEBS will provide more detailed guidance in the future, particularly when developing specific guidelines on risk management topics. This guidance will be subject to prior consultation.

• Amendments Suggested for Clarity and Practicality:
  The EBF proposes two key amendments to enhance clarity and practicality:

  • Paragraph 10:
    The phrase "full understanding" should be replaced with "level of understanding commensurate with their responsibilities." This change acknowledges that different members of the management body may require varying degrees of knowledge depending on their roles.

  • Paragraph 32:
    The EBF highlights the operational challenges in implementing risk management on a consolidated basis due to differences in national legislation and data definitions across Member States. They suggest that greater convergence in banking regulation across Europe will help resolve these issues, allowing banks to focus more on their core risk management activities.

  • Paragraph 11:
    The EBF recommends amending the statement that "Every member of the organisation must be constantly aware of his responsibilities relating to the identification and reporting of risks" to clarify that only "every relevant member" of the organisation needs to be aware of these responsibilities. This adjustment would avoid unnecessary burdens on all employees.

Key Information

• Document Reference: EBF ref. 0284-2009
• Sender: Guido Ravoet, EBF
• Recipient: Mr. Arnoud Vossen, Secretary General, CEBS
• Date: 3 July 2009
• Subject: EBF Comments on proposed high-level principles for risk management
• Key Themes: Proportionality, implementation challenges, clarity in responsibilities, convergence in regulation.

Conclusion

The EBF supports the CEBS Consultation Paper 24 as a valuable initiative but emphasizes the need for further clarification and practical implementation guidance. Their suggestions aim to improve the document's applicability and effectiveness in real-world banking environments.