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CEBS Consultation Paper on High-Level Principles for Risk Management: Summary

Core Content

This document is a response from the Bank and Insurance Division of the Austrian Federal Economic Chamber to the CEBS consultation paper on high-level principles for risk management. The response is submitted by Dr. Herbert Pichler, Managing Director of the Division, and outlines the Austrian banking industry's position on the proposed recommendations.

The document highlights that while the Austrian banking industry largely agrees with the proposed recommendations, there are several areas where further clarification or development is needed. These areas include risk culture, risk appetite, risk organisation, risk completeness, and risks associated with new products.

Main Views

1. Scope of the Principles

• The Austrian Federal Economic Chamber supports the focus of the consultation paper on large and complex banks, as these institutions require more specific control mechanisms.
• However, they argue that smaller, locally operating banks may not need such detailed guidelines, as they can rely on existing rules and general frameworks.

2. Role of the Chief Risk Officer (CRO) and Risk Management Function

• The industry supports the strengthening of the CRO's independence, ensuring that the risk controller is only accountable to senior management and the supervisory board.
• It is emphasized that the CRO must have a secure position to perform his duties effectively and without bias.

3. Risk Models and Scenarios

• The document recommends that adequate buffers should be included in risk models to ensure a very high safety level.
• Corresponding scenarios should be developed to reflect various risk situations, enhancing the robustness of risk assessment and management.

4. Risk Management of New Products

• The Austrian banking industry identifies a gap in the process of implementing new products.
• It is believed that many risks associated with new products stem from lack of awareness and understanding across all levels of the bank, from executives to the supervisory board.
• Therefore, there is a call for improved communication and training to ensure all stakeholders are adequately informed and prepared.

Key Information

• Document Type: Response to CEBS consultation paper on risk management principles.
• Sender: Austrian Federal Economic Chamber – Bank and Insurance Division.
• Recipient: CEBS.
• Date: June 16, 2009.
• Contact:
  • Email: cp24@c-ecs.org
  • Website: http://wko.at/bsbv
• Signatory: Dr. Herbert Pichler, Managing Director of the Division.
• Reference: BSBV 115/Dr.Ru/Br.

Conclusion

The Austrian banking industry recognizes the importance of the CEBS consultation paper in setting high-level risk management principles, particularly for large and complex institutions. However, they advocate for a more nuanced approach that accounts for the diverse size and complexity of banks within the country. The industry emphasizes the need for a strong risk culture, independent risk management functions, adequate risk modeling with safety buffers, and improved processes for managing risks of new products. These points reflect a broader call for comprehensive and practical risk management frameworks that are adaptable to different institutional contexts.