In a recent Speech, Pablo Hernández de Cos, Chair of the Basel Committee on Banking Supervision and Governor of the Bank of Spain, argued that the biggest lesson from this year's bank failures was that governance and risk management are the most significant drivers of banks' financial and operational resilience. As such, he stated, supervisors must improve their ability to assess these matters.
The banking turmoil highlighted a number of shortcomings in the affected banks, including ineffective risk management, unsustainable business models, poor risk cultures, and insufficient oversight by senior management and boards. "Many of these elements may appear obvious and quite basic in nature," de Cos said. "So it is of deep concern to see that, in 2023, some banks' boards and senior management failed in their most elementary responsibilities of overseeing and challenging a bank's strategy and risk tolerance."
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