Trésorier/Treasurer magazine - N°92 - Jan/Fev/Mar 2016 - (Page 26)

FEB / MAR 2016 LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°92 - JAN / 26 Kurt Salmon Kurt Salmon Vincent Jeunet Vincenzo Di Patre Partner, CFO Advisory Practice, Kurt Salmon Senior Consultant, CFOA Advisory, Kurt Salmon He is partner in charge of the CFO advisory practice for the Luxembourg and Switzerland offices He is specialized in the financial services industry and has been working on complex post-merger projects for Banks The adoption of these new rules and new limits will produce strong adjustments in the internal organization and a significant increase in procedures to be applied in parallel with new regulatory changes. It introduces also a legislative proposal to regulate, by 31 December 2016, long-term bank deposits in addition to the introduction of the "leverage ratio", limiting the bank leverage and consequently the excessive risk-taking. The Directive also updates prudential rates that a bank must hold as a reserve asset for every single loan. CRD4 interventions do not only focus on capital regulation but also on the internal organization of banks. In particular, bonuses for management and banking transparency. Bonuses of managers will be defined on a salary basis and cannot exceed the value of salaries themselves. These bonuses need to be deliberated by the shareholders. Regarding the transparency, new information to be provided by banks will be introduced related to competitiveness, internal organization, credit trends and to the potential risks assumed. In addition to shared procedures, internal re-organization must separate the AML (Anti Money Laundering) from the Compliance and consider it as a single unit. Currently the major Banks include the AML into the Compliance Department however due to the characteristics of its activities and controls linked to a dedicated regulation it should be considered as a single unit. This separation gives the function more efficiency. The adoption of these new rules and new limits will produce strong adjustments in the internal organization and a significant increase in procedures to be applied in parallel with new regulatory changes. In addition to the pressure from outside much has been done within the banks themselves in terms of governance, ability to measure risks and on the internal controls. The organization of banks, as it is currently in the major banking groups, confirms the trend towards the establishment of a Board with strategic supervision aimed at identifying a RAF (Risk Appetite Framework). This Board is independent and separated from all the other banking departments that normally are dedicated to managing internal controls (Risk Department, Compliance and Internal Audit). Vice versa these departments are more and more interconnected, complementary and independent from the Governance, reporting directly to it via the Board. Finally, an aspect not to be underestimated is that the skills of employees working in Compliance and Risk, such as tax law and legal are often too limited and prevent a widening of duties intervention. In this context, the communication assumes relevant importance. It is necessary to make the language and communication more homogeneous in order to be more efficient on the relationship with Governance. This can be reflected in the creation and validation of shared and complementary dashboards, summarizing impacts through Key Risk Indicator (KRI) and the creation of uniform procedures between the three functions. The uniformity of procedures is one of the next steps to be planned by banks to make control systems more efficient. In the light of changes occurred in recent years, there are still deficiencies within the banks. In particular, from an employee point of view departments are still undersized. In term of complementarity, the Compliance is still too unhinged from the Risk Management and the participation of the Head of compliance to the board and supervisory bodies is still too low. To conclude the analysis on the scenarios and strategic organization, banks should separate the Anti-Money Laundering from the Compliance function by creating a separated unit with its manager. At the same time they have to connect all Risk, Compliance, Internal Audit and Anti-Money Laundering to be interfaced as unit mode to the strategic board. This should be achieved through the creation of integrated procedures and checklists. In the short-term, resources have to be allocated to increase skills and to assist in the development of regulations and at the same time enable an active participation of the Head of Compliance in the activities of the strategic board. For small to medium-sized banks it is also appropriate to create the role of what is currently found in many larger banking groups, the Chief Risk Officer, who is able to communicate directly with the top management and determine the organization of both Risk and Compliance Departments.

Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°92 - Jan/Fev/Mar 2016

Cover
Table of contents
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW Anni Mykkanen, Policy Advisor EACT
FOCUS
Trésorier d'entreprise : homme- orchestre ou nouveau Business Partner?
IFRS 9: Time to prepare
Uberization' of the economy
What if the new regulations were a new source of risk?
FORUM
Risk and compliance
Is it really your CEO asking for that offshore transfer?
Navigation par gros temps : budgétez vos risques
Commodities hedging
Commodity risk management
Identity and access management
Enabling treasury transformation
CORPORATE FINANCE
Treasury survey: the dynamics of change in treasury
The perfect solution for portfolio management
Meeting market liquidity needs
Automatiser la gestion des comptes bancaires
The age of business simplification is upon us
15 MINUTES WITH Vallstein
THE FINANCIAL RISK OBSERVATORY
NEWS
LIFE BEYOND NUMBERS

Trésorier/Treasurer magazine - N°92 - Jan/Fev/Mar 2016