Once the risk management Committee has been established, the Board will be able to control risks through this Committee and define types of risks that have to be closely monitored. In addition, the Committee would also responsible for setting up measures to deal with those types of risk, including the process on risk assessment and control. The contingency plan is needed to control risks in timely manner and minimize those risks to be at the acceptable level. This includes the reporting process on risk status to the Committee and Board of Directors with simple and clear message. With such practices, the Board of Directors could fully monitor risk management with appropriate decision, supporting by the Risk Management Committee. On the division of responsibility between the Board and the Risk Management Committee, the Committee should have authority to directly oversee all risks arising from normal course of business, while the Board of Directors should be responsible for approval of the risk management policy framework proposed by the Risk Management Committee, such as approval of aggregate exposure limit to FX risk, and individual limit by transactions and traders; maximum value at risk for interest rate risk; on credit risk, setting aggregate, individual, as well as group large exposure limit to certain types of credits and borrowers, or certain groups, to prevent over concentration. BIS Review 25/2006  3  On top of setting proper risk management framework and risk limits, the directors should also be on guard against situations where normal risk management cannot fully cover.
They are detrimental to financial integration and, therefore, curb the Banking Union’s aspirations to act as a single jurisdiction. It does not seem reasonable that the implications, in terms of capital and liquidity, for a banking group that has a subsidiary in a Latin American country should be very similar to those that would prevail were the subsidiary located in another euro area country. 8/10  Naturally, the introduction of a genuinely European deposit guarantee scheme would complement and largely provide for this step forward in integration. Also, from a regulatory perspective, a sufficiently uniform legal basis is notably lacking in the euro area. Just as specific national regulations had to be harmonised, or recognised as equivalent, to enable the creation of the single market, it is necessary to change specific rules that prevent the development of a truly single market for financial services. It may well not be possible to achieve full harmonisation, but this will probably not be necessary. There are some critical areas, such as the prevention of money laundering, fit and proper rules and bank insolvency regulations, where a common, euro area-wide set of rules would boost market integration. And that would also improve the efficiency of supervision and resolution. The question of doing away with these barriers and harmonising regulations is gaining in importance.