Alert October 27, 2009

Senior Supervisors for Seven Countries Issue Report on Risk Management Practices in the Aftermath of the Banking Crises of 2008

The Senior Supervisors Group, senior financial services supervisors from seven countries (Canada, France, Germany, Japan, Switzerland, the United Kingdom and the United States) issued a report (the “SSG Report”) entitled “Risk Management Lessons from the Global Banking Crisis of 2008.”  The SSG Report first discusses the funding and liquidity issues that were key elements of the banking crisis.  The balance of the SSG Report, based in part upon self-assessments of their risk management practices performed by 20 major global financial services companies, discusses important areas in which global financial institutions’ risk management requires continued improvement: (1) board director and senior management oversight; (2) articulating risk appetite; (3) compensation practices, (4) information technology infrastructure; (5) risk aggregation and concentration identification; (6) stress testing; (7) counterparty risk management; (8) valuation practices and loss recognition; (9) operations and market infrastructure; and (10) liquidity risk management.