Risk Headlines

Job Growth Zoomed in March, Fed in No Rush to Lower Interest Rates - source cnbc.com

Key Points:

The March jobs report presents a surprisingly strong and resilient U.S. labor market. The underlying significance of the data lies in its potential to influence monetary policy decisions further prompting the Federal Reserve to delay interest rate cuts.  For banks, the delay in rate cuts could impact interest rate risk management and pricing strategies.

A.I. Risk / Technology Risk

U.S. & UK Announce Partnership on AI Safety - source commerce.gov

Key Points:

The U.S.-UK partnership on AI safety is a significant step towards a more coordinated and proactive global approach to addressing the risks and challenges posed by rapidly advancing AI technologies. As two leading nations in AI development, their collaboration signals a growing international consensus on the need for robust AI governance frameworks and shared best practices.

For banks,, this partnership underscores the increasing regulatory and reputational pressures to ensure responsible AI deployment. Banks must not only adapt their own AI strategies and risk management practices to align with emerging global standards but also actively contribute to shaping the AI safety landscape through industry collaboration and engagement with policymakers.

Regulatory News - Fines, Losses, & Rules

OCC Acting Comptroller On “Operational Resilience” A Top Risk - source occ.gov

Key Points:

Acting Comptroller of the Currency Michael J. Hsu delivered remarks on "Operational Resilience", he emphasized the importance of operational resilience in the banking sector, which is the ability of banks to prepare for, adapt to, and recover from disruptions. Please see video.

Hsu pointed out that the risk of disruptions is increasing due to the growing magnitude of banking services, technological advancements, and the expanding role of third parties. The complexity and vulnerabilities in the system are multiplying at an increased pace and the underlying significance is that operational resilience needs to be a top priority for banks and regulators alike. The potential impacts of disruptions are too great to ignore. Banks will need to strengthen and innovate their risk management capabilities to stay on pace with the accelerated risk. 

• Operational disruptions are an underappreciated risk that could have massive impacts as the scale and complexity of the financial system grows

• Regulatory expectations around operational resilience are increasing, with the potential for new rules that could impact operations and costs

• Hsu discussed international efforts to enhance operational resilience, such as the EU's Digital Operational Resilience Act (DORA) and similar initiatives in the UK and Japan. He mentioned that U.S. federal banking agencies are considering updates to the operational resilience framework, focusing on large banks with critical operations.

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SEC Commissioner Hester Peirce’s Concerns on SEC Recent Regulatory Approach - source sec.gov

Key Points:

The SEC Commissioner, details how the agency has been issuing consequential regulations,  without adequate public input or cross-agency coordination. This unilateral approach creates substantial regulatory uncertainty for market participants.  

Even more troublingly, she describes a significant chilling of productive dialogue between the SEC and the entities it regulates.  Industry actors are increasingly afraid to consult the SEC, as they fear enforcement action. At the same time, the SEC staff, overburdened by rulemaking, is less willing or able to provide helpful guidance. This breakdown in communication impedes the surfacing and proactive resolution of regulatory issues.  A tenser, less collaborative relationship between industry and the SEC also deprives the agency of valuable on-the-ground insight into emerging issues and potential problems.  More broadly, these trends risk undermining the overall health and competitiveness of U.S. capital markets.

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FINRA Plays a Vital Role In Exposing Insider Trading - source finra.org

FINRA’s Insider Trading detection program with its sophisticated analytics provides actionable intelligence to law enforcement worldwide, leading to criminal and civil actions. Over 450 referrals in 2023 alone, routinely resulted in criminal and civil action.

Risk Data to Geek Out On

How to Prepare For Regulatory Exams - Is your Bank Prepared - source mckinsey.com

Key Points:

Regulators are conducting more detailed and comprehensive exams, focusing on areas such as asset liability management, credit, and operational risk. To navigate this heightened supervision, banks must proactively review and update their risk management processes, internal systems, and controls to ensure alignment with the changing environment and regulatory expectations. Mock exams serve as a valuable tool for banks to identify gaps, build a risk culture, and address weaknesses before actual regulatory reviews. Banks will discover many opportunities to create exam strategies that build confidence across the organizational groups that support these key activities. 

Conducting a thorough gap analysis of the existing compliance framework and implementing a risk-based, technology-driven approach to compliance management will be essential for successfully navigating the heightened regulatory environment. Regulatory exams are not "gotcha" moments; rather, they should elevate the risk conversations to further enhance leadership's ability to strengthen the organization's risk culture and drive confidence among regulators, customers, and shareholders.

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Thank you for reading,

Naeem

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