Guidance on Supervisory Interaction with Financial Institutions on Risk Culture

Submitted on 4th August 2015

Increasing the intensity and effectiveness of supervision is a key component of the Financial Stability Board’s (FSB’s) efforts to reduce the moral hazard posed by systemically important financial institutions (the SIFI Framework), along with requiring added capital loss absorbency and facilitating the orderly resolution of financial institutions. The FSB issued its first recommendations for enhanced supervision of financial institutions, in particular SIFIs, in October 2010, which underscored the key preconditions for effective supervision, including
the need for

(i) strong and unambiguous mandates;
(ii) independence to act;
(iii) sufficient quality and quantity of resources; and
(iv) supervisors having a full suite of powers to execute on their mandate.

Subsequent recommendations in 2011 and 2012 strengthened the supervisory expectations for financial institutions’ risk governance, internal controls and risk management functions, as well as risk data aggregation and risk reporting capabilities. A number of these recommendations have been implemented and, collectively, have raised the bar for both supervisors and SIFIs.

This paper takes forward the recommendation set out in the November 2012 progress report for supervisors to explore ways to assess risk culture at financial institutions, particularly at SIFIs. The paper draws on the collective experience and efforts of supervisory and regulatory authorities across the FSB membership and insights garnered from market participants through roundtables and bilateral discussions.

Length of Resource
14 pages
Date Published
Publication Type
Resource Type