Final and translated into the EU official languages
The Guidelines introduce principles and implementation measures for the identification, assessment, control and monitoring of operational risk in market-related activities. In particular, they aims to highlight supervisory expectations relating to specific arrangements, procedures, mechanisms and systems in trading areas that could prevent or mitigate operational risk events.
The Committee of European Banking Supervisors (CEBS) has published today its guidelines on the management of operational risk in market-related activities.
Following the publication of CEBS's high level principles on Internal Governance (CEBS Guidelines on the Application of the Supervisory Review and Evaluation Process- Section 2), its high level principles on risk management and its high level principles on remuneration policies, CEBS now introduces more specific principles and implementation measures for the identification, assessment, control and monitoring of operational risk in market-related activities.
In particular, this paper aims to highlight supervisory expectations relating to specific arrangements, procedures, mechanisms and systems in trading areas that could prevent or mitigate operational risk events. CEBS principles are divided into three different parts, addressing the management of operational risk in market-related activities from three different angles:
• Governance mechanisms - principles 1-5;
• Internal controls - principles 6-15;
• Internal reporting systems - principles 16-17.
While these guidelines are relevant to all institutions, the principle of proportionality should be taken into account in their application.
In developing these guidelines, CEBS benefited from views gathered from market participants. Input was provided through the industry's responses to the two public consultations CP35 and CP35rev, published in December 2009 and June 2010 respectively) and through a public hearing organised in March 2010. CEBS has considered the feedback received and has revised its initial proposals in order to address the main issues raised by market participants (see feedback document).
CEBS expects its members to implement the guidelines on market-related activities by 30 June 2011.
The Committee of European Banking Supervisors (CEBS) today publishes its revised consultation paper (CP35rev) on its draft guidelines on the management of operational risk in market-related activities. The consultation is open to all interested parties, including supervised institutions and other market participants.
In December 2009, CEBS published its draft principles (CP35) for a public consultation that ended on 31 March 2010. CEBS received written contributions from a broad range of market participants, most of which were supportive of the guidelines objective to achieve greater convergence of supervisory practices and enhance the operational risk management in market related activities by strengthening the internal governance, the internal controls and reporting systems of institutions.
Addressing the comments received led to a significant number of changes in the draft principles. In particular, improvements and adjustments have been applied to the requirements regarding the detection and prevention of fraudulent behaviour (Principle 5), the audit trail requirements (Principle 9), the confirmation, settlement and reconciliation processes of the executed transactions (Principle 11), the monitoring of nominal values of the transactions (Principle 14) and, more in general, the interfaces between operational risk and market risk management. Thus, CEBS sees a benefit in a second consultation period so as to ensure that the principles and explanatory note are sufficiently clear.
CEBS submits its revised consultation paper for a second public consultation in line with CEBS consultation practices (published 5 August 2008) which starts today and runs until 23 July 2010. Comments received will be published on CEBS’s website unless respondents request otherwise. Please send your comments to the following email address: cp35@c-ebs.org.
As the publication of the final guidelines would be later than originally planned, CEBS now expects its members to implement the guidelines till June 2011. An implementation study will be done by CEBS secretariat in the fourth quarter 2011.
The Committee of European Banking Supervisors (CEBS) today publishes its consultation paper (CP35) on its draft guidelines on the management of operational risk in market-related activities. The consultation is open to all interested parties, including supervised institutions and other market participants.
Following the publication of CEBS's high level principles on Internal Governance (CEBS Guidelines on the Application of the Supervisory Review and Evaluation Process- Section 2), its high level principles on risk management and its high level principles on remuneration policies, CEBS now introduces more specific principles and implementation measures for the identification, assessment, control and monitoring of operational risk in market-related activities.
CEBS draft principles are divided into three different parts, addressing the management of operational risk in market-related activities from three different angles:
• Governance mechanisms - principles 1-5;
• Internal controls - principles 6-15; and
• Internal reporting systems - principles 16-17.
CEBS expects its members to have implemented the guidelines by December 2010. An implementation review will be undertaken by the CEBS secretariat in the first quarter of 2011.
CEBS submits its initial views for a public consultation which starts today and runs until 31 March 2010. Comments received will be published on CEBS’s website unless respondents request otherwise. Please send your comments to the following email address: cp35@c-ebs.org.
A public hearing will be held on 9 March 2010 at CEBS’s premises in London to allow all interested parties, including supervised institutions and other market participants, to put forward their views on the consultation paper. More details regarding this hearing will be provided in due course.