Banks Need AI Resources

ALSO: The Regulatory Fines Hit Record Highs

Author

Naeem Qasim
November 30, 2023

Welcome back to the Risk Queue,

As the year is ending, we are seeing how Financial Firms plan to compete with AI and navigate the regulatory landscape.

Lets get to it,

Naeem Qasim

CEO & Founder, Risk On Q

Risk Headlines

Banks Operational Risk Capital Proposals For Basel III Endgame Need Further Examining By Regulators - Source GARP.org

Key Points:

  • The proposed Basel III rules (B3E) to estimate operational risk capital (ORC) would shift banks from using internal models to a standardized approach. If implemented, these mandatory changes carry major cost and risk management implications for banks.

  • Given open questions over the credibility of the regulatory analysis, many banks are asking regulators to pause B3E until more data and rigor is studied to truly understand operational loss drivers. While higher capital rules aim to protect the system, imposing costs without an empirical basis is concerning. A more practical approach here is to have Banks report on the investments being made to enhance the operational capabilities that actually detect, mitigate and reduce risk, this will allow Regulators to examine areas of deficiency in the banks risk profile.

You can read the full story at GARP.org here. 

A. I. Risk / Technology Risk

JPMorgan Partnering With US Regulators On AI Projects  - Source Pymnts.com

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US, Britain, other Countries Ink Agreement on AI “Secure By Design” - Source Reuters.com

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Banks are fiercely competing for AI talent, with data, analytics, and AI roles being among the highest-paid positions. Compensation for AI roles are off the charts, AI can solve many of the mundane bank processes.

Fines, Losses, & Rules

Bank of America fined $12 mln by CFPB-Reporting False Mortgage Data - Source ConsumerFinance.gov

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In the landscape of escalating global enforcement fines, it is imperative for our institution to proactively address key areas of regulatory focus. The surge in fines to $5.65 billion in Q3 2023 underscores the critical need for a robust risk management strategy. With over 85% of fines imposed by US regulators, heightened awareness and compliance with US regulatory requirements are paramount.

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Kelleher believes that Swiss regulators lacked the necessary tools to hold Credit Suisse accountable. The call for stronger regulation comes in the aftermath of UBS's rescue of Credit Suisse in March. Swiss regulators were said to be lacking tools to hold Credit Suisse bankers and board members accountable for an unviable business model.

Emerging Risk

Barclays Plans Job Cuts As Part of $1.25 Billion Cost Saves - Source livemint.com

The company's restructuring efforts are part of a broader initiative to convince shareholders of its plan to improve valuation.

Risk Data to Geek Out On

Banks are on the AI fast track, the Risk Function will play a critical role in the development of future products, tools, and new revenue stream for banks, Bill’s conversation with AI expert Yejin provides many insights on potential AI risk that we should keep in mind.

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Thanks for reading.

Until next time!

Naeem

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