Starling Comments on the ECB Draft Guide on Governance and Risk Culture

In July, the European Central Bank (ECB) published a Draft Guide on Governance and Risk Culture, which represents a significant update relative to its 2016 Supervisory Statement on Governance and Risk Appetite.

The draft Guide adds new expectations and suggested best practices for implementing effective systems of governance and risk culture. Yesterday, we at Starling Insights submitted comments to the ECB on how the regulator can deliver clearer guidance on these matters to both bank management teams and to supervisors themselves. Among the key points raised in our comments are calls for the ECB to:

• Recognize that "risk culture" is but one component of a firm's culture and that narrowly focusing on risk culture will likely lead to blind spots;
• Take care that process-driven mechanisms like incentive programs are not viewed as stand-ins for behavior and culture change, lest they encourage more 'box-ticking' exercises;
• Encourage explicit links between Culture (informal structures) and Governance (formal structures) rather than treating them as separate; and,
• Challenge industry to invest in better metrics and tools to assess culture more effectively to support boards in meeting these new expectations.

 

To download a copy of the comments submitted by Starling Insights, click the link below: