Bank Governance – Taming the Beast

While the Three-Lines-of-Defense model is not yet required of banks, it is edging toward conform-or-explain status. Interestingly, supervisors are troubled not only when the risk management function is too weak, but also when it is too strong, and has taken over too much of the decision-making. Supervisors want the front line to “own the risk,” as the saying goes – with risk management in a position to challenge. Good governance must be replete with checks and balances.

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