(22 October 2009 – Global) A report released this week from the Senior Supervisors Group called ‘Risk Management Lessons from the Global Banking Crisis of 2008’ has highlighted a need to focus on risk management and internal controls.The information compiled in the report between March 2008 and last month was put together by regulators from seven countries and has concluded that despite institutions’ recent progress in improving risk management practices, a large amount of work is required on underlying governance.
Incentive structures were targeted in the report and in September, the Group of 20 nations endorsed a statement by its coordinating arm, the Financial Stability Board, recommending new rules for bankers’ pay. The first to be affected will be the size of the bonus pool which should depend in part of the health of the bank’s balance sheet.
Senior Supervisors Group Chairman, William Rutledge, presenting the report, wrote in a letter dated Wednesday to Mario Draghi, Chairman of the Financial Stability Board at the Bank for International Settlements about contributions to the financial crisis.
Mr Rutledge said that the failure of some boards of directors and senior managers to establish, measure, and adhere to a level of risk acceptable to the firm, as well as compensation programs that conflicted with the control objectives of the firm in some financial institution contributed to the global crisis.