The importance of transparency in bank reporting was the subject of an extended article in Gulf News. http://gulfnews.com/business/banking/understanding-bank-performance-reporting-1.1384891. “In a recent discussion paper, it is appropriate and long overdue that the Basel Committee on Banking Supervision recognised the need to incorporate the accounting, non-risk weighted leverage into the framework of assessing capital adequacy. “
Dr. R. Seetharaman, Group CEO, Doha Bank spoke at the fifth US- MENA Private Sector Dialogue on correspondent banking, which was hosted by the Union of Arab Banks at BNY Mellon, New York on 14th and 15th October 2014
I the session “Customer risk ratings and evolving nature of financial crime” he said that Banks should strengthen their fight against financial crime to protect against reputation risks. Dr. Seetharaman also gave insights on current trends in Correspondent Banking. “Banks have looked forward to scale their vast Correspondent Banking networks to reduce risks and strengthen controls, expand their client coverage and geographic reach by striking up new banking partnerships. However with the onslaught of new financial regulation banks need to reassess and redefine this business. With banking revenues under pressure, many banks are questioning whether they can continue to try to offer all services to clients in all markets, combined with rising costs related to new regulations. Banks are selectively increasing the global banking partnerships. … After crisis, letters of credit re-emerged as the key solution for alleviating the spike in credit risk concerns. During the financial crisis, it was correspondent banking, which played a pivotal role as many global banks retreated towards their home market, leaving constraints in trade funding and risk mitigation. Local banks became vital, both for local corporates and their international trading partners. When it came to securing the handling of trade flows despite a spike in perceived risks during the crisis, local banks proved that their knowledge of local companies was critical to keep trades flowing.”
Dr. Seetharaman also gave his views on the regulatory focus on correspondent banking. He said “Regulators continue to scrutinise due diligence and risk management practices in the Correspondent Banking arena due to the inherent risks associated with processing transactions as well as cases in which Correspondent Banking accounts have been used to move illicit funds. Recent regulatory actions have resulted in record-breaking financial penalties and have highlighted the vulnerabilities which financial institutions are exposed to when there are failures in in the areas of governance, client due diligence, risk assessment and transaction monitoring.“
Dr. Seetharaman further highlighted recent Financial Crimes, and AML lawsuits faced by financial institutions. “Certain banks failed to conduct basic due diligence on some of its account holders, assign the appropriate risk categories and ignored warnings that monitoring systems are not adequate. Violation of Know Your Customer (KYC) norms also exposed them to fraud risks. Certain banks failed to check and monitor the relationships its corporate customers had with politically exposed people. Some banks failed to identify high risk transactions. Financial crimes have increased the penalties for banks and also affected the reputation risks.”
Islamic Banking continues to grow in the region but what exactly is it?
You will find a lot of useful information on this portal. Islamic Finance News Portal – Bringing you the latest updates in global Shariah finance
The 4th Annual World Islamic Retail Banking Conference was officially inaugurated this month with more than 150 delegates – The conference started with a panel discussion outlining regulatory changes and the impact those will have on retail banking.
In the USA On October 17th the Federal Reserve Board (FRB) released instructions and guidance (Guidance) for CCAR 2015 and finalized amendments to the Capital Plan rule, providing more clarity . Modifications to the Capital Plan rule are consistent with the June proposal, and the Guidance provides additional information on content and the organization of capital plan submissions. The Guidance’s focuses on: internal controls, model inventory, risk identification, and organization
This indicates both that the FRB’s emphasis is now moving from quantitative to qualitative judgments and that the regulators’ expectations continue to rise and this is likely to reflected in this region’s regulatory authority focus. Some key points
Completeness in risk identification is key.
Documentation for internal controls -increased expectation.
Methodology and model inventory must be mapped to FR Y-14 and be subject to internal audit.
This follows on form September when, the Office of the Comptroller of the Currency (“OCC”) finalized its risk governance framework for large banks and thrifts (“Guidelines”) that was proposed in January 2014.
The responsibility to oversee risk management in the USA clearly remains squarely with the Board of Directors, which retains the ultimate risk governance oversight role. The Guidelines clarify that the Board need not take on responsibility for day-to-day managerial duties. This however require consideration of risk appetite and risk profile, lines of reporting, talent management training and retention, regulatory reporting systems – robustness, ease of use, auditability, adaptability and scalability etc..
You can register now for our next free seminar on Bank Regulatory Reporting to be held at Microsoft Gulf, Offices, DIC during the morning of 17 November 2014