MNI POLICY: Strong Risk Frameworks Key To Euro Banks' Profits

By Luke Heighton

     FRANKFURT (MNI) - Too many banks still see their risk appetite framework as

a "separate tool" rather than an integral part of their strategic

decision-making, the vice chair of the Supervisory Board of the ECB said on

Tuesday.

     Here are the key points from European Central Bank Executive Board member

Sabine Lautenschlaeger's Frankfurt speech to the Chairs of Supervisory Boards of

banks in Germany.

     -- Making a profit and managing risk are not contradictory, but strategic

decisions should always be based on a sound risk analysis and should facilitate

discussions at all levels of the organisation.

     -- Banks' supervisory boards "have room for improvement". Board members

need to be both available to supervisors and possess the experience and the

technical knowledge to meet current and future challenges.

     -- Bank boards in Germany and elsewhere often have too many members, making

it "hard to have sensible debates and take sound decisions".

     -- Not enough board members are formally independent of the bank. There

should be more independent thinkers who are prepared to "form their own opinions

and exert their own judgement".

     -- Non-financial risks - such as reputational risks, IT risks or legal

risks - should form an integral part of a bank's risk appetite framework, even

though they may be hard to measure.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$X$$$]