Risk Management and Compliance in Banks: The United States and Europe
Files
Description
Europe is engaged in an experiment unprecedented in world history: can independent nations—even if linked by significant legal, economic, and social ties—merge their financial systems into a true banking union? Policy-makers in Europe are working diligently to achieve that goal. Spurred by the financial turmoil of 2007-9 and its aftermath, Europe has created a network of powerful regulatory institutions including the Single Supervisory Mechanism (SSM), the European Systemic Risk Board (ESRB), and the European Banking Authority (EBA), the Single Resolution Mechanism, and the European Stability Mechanism. Acting individually and in concert, these bodies are working to enhance the integration of financial markets in the euro area. Important as these institutions are, they are not the only factors at work in what appears to be an irreversible trend towards harmonization. More general trends are at work—changes in best practices in the management of banking institutions. These changed are even more international in scope than the move towards European banking integration. The growth of risk management and compliance is occurring on both sides of the Atlantic—in the United States as well as Europe, in South as well as North America, in parts of Asia, and elsewhere. The trend is not only broad; it is also characterized by an astonishing degree of convergence. Arguably the treatment of risk and compliance at banking firms is one of the most successful international frameworks for regulation—even though the applicable rules are not embodied in any single statute, code, or regulatory action. This chapter identifies key aspects of this enhanced focus on risk and compliance, a focus which is central to European integration. The chapter argues that financial institution regulation is experiencing a risk revolution and identifies some of the important drivers of that development. In particular, the chapter discusses the widespread acceptance of enterprise risk management; dramatic enhancements to the roles and responsibilities of internal and external auditors; the emergence and empowerment of the office of Chief Compliance Officer; and the growth of risk-based approaches to examination and supervision. The chapter conclude by offering some thoughts for why systems both in Europe and elsewhere seem to be converging on risk management and compliance as keys to best practices in financial institution governance.
Source Publication
European Banking Union
Source Editors/Authors
Danny Busch, Guido Ferrarini
Publication Date
2015
Edition
1
Recommended Citation
Miller, Geoffrey P., "Risk Management and Compliance in Banks: The United States and Europe" (2015). Faculty Chapters. 2011.
https://gretchen.law.nyu.edu/fac-chapt/2011
