Within national jurisdictions, regulators/supervisors and financial sector entities have realized the significance of the compliance function in ensuring good conduct of business at the entity level and facilitating a safe and sound banking system at the systemic level. Consequently, assessment of compliance is increasingly being focused on in supervisory oversight. Is compliance a specific risk area? 8.
The Basel Committee on Banking Supervision, in its guidance “Compliance and the Compliance function in banks”, issued in April 2005 states “the compliance function is an independent function that identifies, assesses, advises on, monitors and reports on the bank’s compliance risk, that is, the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to its banking activities”.