Banks' Risk Management Framework

The enhancement of the banks’ Risk Management Framework (RMF) is a cornerstone of financial stability since solid risk management cannot be substituted by share capital increases in order to absorb losses. As early as at the time of the first recapitalization of the Greek systemic banks, the HFSF marked the improvement of banks’ risk management as a top priority area.

Relative RFAs provided for the development, for the first time, of Risk and Capital Strategy documents and quantitative Risk Appetite Statements (RAS) in Greek banks, with the approval of said documents being subject to the Fund’s consent at least on an annual basis. Long before this become an area of SSM’s particular focus, the HFSF provided guidelines to banks for the drafting of the Risk and Capital Strategies as well as risk appetite statements. The in-depth understanding of the relationship among RAS and the banks’ Business Plans, is of outmost importance in order for Greek banks to be able to create a viable business model going forward.    

The HFSF continuous working on the further enhancement of the banks’ RMF, utilizing relative provisions of the RFA, that prescribe banks’ risk governance, as well as the strengthening of the role and the status of the Chief Risk Officer (CRO) (e.g. CRO being a member of the Executive Committee) .

In addition, capitalizing on the knowledge obtained through the detailed review of the bank’s Boards’ and Board Risk Committees’ materials, as well as on the areas of improvement identified during the second Corporate Governance review of the banks’ Boards of Directors, the HFSF provided Greek systemic banks with detailed recommendations, relating among others, to the enhancement of risk culture and risk governance in banks and to the improvement of the performance and functioning of the Board Risk Committee by including experienced and skilled independent non-executive members and enhancing reporting requirements and improving the quality of the Committee material.