By throwing the gauntlet down before traditional risk managers, the regulators have demanded that the banks rise to the challenge of actively identifying and remediating risks. This move will catalyse a global regulatory upward spiral that affects the entire industry.
The firms' arms race
The large firms affected have massive information and technology infrastructures spread across the globe. The UK's push towards an intensive regime will force firms to upgrade their risk management capabilities which have clearly not kept pace with the growth of the industry. An investigation reveals that firms are only 49 per cent prepared to meet their systems and controls, stress testing and reporting requirements.
Figure one: The ability of the current system to comply with the new liquidity regime, indicated by percentage
The stress testing and systems and controls requirements need to be met by 2,800 firms within the next 40 days. Reporting will start in June 2010. Preparing to meet
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