In the latest figures from the Operational Risk Exchange (ORX), the not-for-profit industry association, losses resulting from operational risk were down by 10.8% between 2017-2018, with the biggest proportional decreases in internal and external fraud events.1 However, a study conducted in March 2017 found that less than a quarter of the EU’s competent authorities have established dedicated teams or units on conduct risk.2 Only around half include conduct risk in their supervisory examinations, despite the fact that it represents the vast majority of operational risks expected by Europe’s top banks and can lead to significant consumer harm.
Relevant rules and supervisory guidelines have been aggregated in a Scrutiny Paper, commissioned by the European Parliament,3 with a number of authorities relevant to the supervision of banking-sector misconduct, including the European Banking Authority, the EEA Joint Committee, and the European Securities and Markets Authority (ESMA).4 Andrea Resti, author of the Paper, comments that “large portions of the rules used to address banking misconduct are country specific, and addressed by domestic law.” She finds also that “misconduct rules and principles are implemented by individual EU countries in a heterogeneous manner,” to include the functioning of regulatory and judiciary systems.
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