Rui Carvalho

📢 ECB consults on governance and risk culture On 24th July 2024, the ECB published a draft Guide on governance and risk culture, outlining supervisory expectations and good practices for banks’ internal governance. This Guide replaces the 2016 SSM statement on governance and risk appetite. As a follow up of the “ECB Banking Supervision: SSM priorities for 2024-2026”, the Guide focuses on addressing vulnerability: Deficiencies in management bodies’ functioning and steering capabilities. It sets specific expectations for how management bodies and committees should be composed and operate, spells out the roles and responsibilities of the internal control functions, emphasises the importance of risk culture and outlines expectations regarding the risk appetite frameworks of banks. 🔑 A Closer Look at Risk Culture Risk culture is defined by the EBA Guidelines on internal governance: “Risk culture means an institution’s norms, attitudes and behaviours related to risk awareness, risk-taking and risk management, and the controls that shape decisions on risks. Risk culture influences the decisions of management and employees during the day-to-day activities and has an impact on the risks they assume.” The Guide outlines the ECB’s perspective, relating risk culture to both governance structures and behavioural and cultural patterns. Risk culture is broadly categorised into four dimensions: 🔝 Tone from the Top & Leadership are vital in fostering culture of prudent risk-taking. This includes composition of management bodies, defining clear supervisory roles, ensuring internal controls, and maintaining consistent communication on risk management and compliance matters. 🗣️ Effective Communication, challenge & diversity: Open communication and diversity, with constructive challenge at all levels-especially within management bodies and committees. Ensuring that the management body is diverse in knowledge, skills, gender and experience to ensure its effectiveness and enhance decision making process. Constructive criticism from staff and internal control functions should be encouraged to continuously improve decision-making process. 🛡️ Accountability for Risks: Clear responsibilities for taking, monitoring, managing, and mitigating financial and non-financial risks, both existing and emerging, ensuring every team member  understands their responsibilities within the control framework. All managers and teams across the three lines of defence are well-versed in ethical values, strategic objectives, risk appetite frameworks (RAF), and risk limits. 💼 Incentives as a key dimension of risk culture: Incentive system is expected to promote desired behaviours supporting  bank’s strategic plans and defined risk profile of the bank. Financial and non-financial incentives, such as talent management and promotion processes, should be designed to promote sound and prudent risk management. The ECB invites comments till 16 October 2024.

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Just attended advanced EU Supervisory Digital Finance Academy (#EUSDFA) training held at Florence School of Banking & Finance. Extremely grateful for insightful views on the topics of Markets in crypto-assets Regulation (#MiCAR) and evolving #crypto market delivered by academic lecturers in cooperation with the #EuropeanCommission and experts from other EU authorities (#EBA, #EIOPA, #ESMA, #BaFin, and others). Practical exercises simulating real life case scenarios were aimed at problem solving by simultaneously over 50 participants from other EU national competent authorities which enabled us valuable experience exchange and deeper dive into application of new MICA-R from different perspectives of #cyberrisk, #consumerprotection, #licencing issues and #supervision challenges we will face in the domain of evolving #DigitalFinance area. And how would you define #DigitalFinance in one word )? 💡

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Cash is King ! Liquidity regulation and supervision are increasing, Are you ready for it? My colleagues Carlo Pellerani and Marcel Kikiernicki are reviewing what bank supervisors have already done, what regulators are doing and planning, and how banks should react. Read their analysis here > https://owy.mn/4cNRqwJ

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Some nuggets from the recent EBA & ECB report on payment fraud across Europe: 🔐 SCA has been a force for good and is effective at preventing fraud 💳 card payments have by far the highest fraud rates both in value and volume: 📈 0.031% in H1 2023, increasing from 0.026% in H1 2022 or 7.31 million fraudulent transactions out of a total of 48.77 bn total card payments 📱 credit transfer fraud rate by comparison is significantly lower at 0.003% (or 616k fraudulent transfers out of total of 21.81 bn) 💰 credit transfers are often used for high-value payments (AOV €6485), which means that the average value of of a fraudulent credit transfer is higher for credit transfers vs other types of payments, but still significantly lower than the AOV, at €1835 #payments #fraud #cardpayments #report #openbanking https://lnkd.in/dwFMUKUe

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