This can, unfortunately, lead a bank to conclude that it has reduced one set of risks and can therefore afford to take on an additional set of risks. But what if the technology was imperfect, and the sophisticated models were flawed? Overconfidence in risk models can itself become a significant risk. Risk and responsibility There is a popular phrase in the United States among risk management professionals who want to be clear about accountability for risk. We often say that a person, or division, or firm “owns the risk.” Let me explain what I think that phrase means, at least in some contexts. When a business line manager understands that she “owns the risk”—and not, say, the lawyers, compliance professionals, or anyone else—it means that she is accountable to a more senior manager and to the firm for the risk. Presumably, that means she will bring an appropriate focus and attention to issues of risk management. She will not assume that risk management is somebody else’s problem. Sometimes I worry, however, that this phrase—“own the risk”—has become overused and can itself give rise to risk. To be clear, clarity of roles and responsibilities with respect to risk management is critical. Business managers should not be able to outsource accountability for risk management to others. Still, I wonder if it is time to retire the phrase “own the risk” or at least be more thoughtful about its use.
Unicredit Group can probably be qualified as the quintessential European cross-border banking group, with operations in 22 European countries and, amongst these 22, in 19 Central and Eastern European countries. Alessandro is also the President of the European Banking Association. The last 2 to 3 years have been especially eventful for financial integration and stability, with once in a life-time developments. After Lehman Brothers filed for bankruptcy in September 2008, the global financial system experienced unprecedented stress and policy makers had to tread unknown territory in dealing with it. BIS Review 47/2010  1  The financial crisis has raised a host of policy issues that will provide food for reflection for generations to come. I will mention a few of them to set the scene and to kick-start the discussion. The first set of issues relate to the developments in the late nineties and early 2000s. The combination of high economic growth, ample liquidity, increasing financial integration and development, and “light handed” regulation sewed the seeds of the crisis to come. I believe that a number of people and organisations, including mine, identified vulnerabilities in the financial system before the crisis erupted. Nevertheless, we did not anticipate the timing and the intensity. We should ask ourselves what we missed in the run-up to the crisis and what the lessons are for the future. Once the crisis erupted in full force, a first casualty were the money markets, which provide the oil to make the banking system run smoothly. Money markets came to an unprecedented stand-still.