Financial Stability Oversight Council and Non-financial risk: Difference between pages

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''US.''
''Risk management - banking - financial firms.''
(FSOC). The Financial Stability Oversight Council was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for three main purposes:


(NFR).


1. To identify risks to the financial stability of the United States that could arise from the financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or non-bank financial companies, or that could arise outside the financial services marketplace.  
Non-financial risks are all risks that are not financial risks.


The concept is particularly important for banks and other financial firms where, historically, the management of non-financial risks may in some cases have been neglected.


2. To promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the US government will shield them from losses in the event of failure.


:<span style="color:#4B0082">'''''Only a downside'''''</span>
:"Non-financial risk, whether related to misconduct, non-compliance, IT, reputational, cybersecurity or operational challenges, is not linked directly to financial decisions and has only a downside.
:In other words, unlike credit or market risk, here there are only potential losses, which can be large. In addition, non-financial risk can only be reduced or mitigated, but not eliminated, and it is far more difficult to quantify than financial risks.
:Despite all these difficulties, or perhaps because of them, non-financial risk has been on [bank] regulators’ and supervisors’ radar for quite some time. In fact, it’s been more than 15 years since the Basel II capital accord included a capital charge for operational risk."
:''Margarita Delgado, Deputy Governor, Banco de Espana, 2019''


3. To respond to emerging threats to the stability of the US financial system.


== See also ==
== See also ==
* [[Dodd-Frank]]
* [[Compliance risk]]
* [[Conduct risk]]
* [[Credit risk]]
* [[Cyberrisk]]
* [[Downside risk]]
* [[Financial]]
* [[Financial risk]]
* [[Guide to risk management]]
* [[Market risk]]
* [[Operational risk]]
* [[Regulatory risk]]
* [[Reputational risk]]
* [[Risk]]
* [[Risk management]]
* [[Risk mitigation]]
* [[Systemic risk]]
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]

Latest revision as of 22:46, 11 March 2023

Risk management - banking - financial firms.

(NFR).

Non-financial risks are all risks that are not financial risks.

The concept is particularly important for banks and other financial firms where, historically, the management of non-financial risks may in some cases have been neglected.


Only a downside
"Non-financial risk, whether related to misconduct, non-compliance, IT, reputational, cybersecurity or operational challenges, is not linked directly to financial decisions and has only a downside.
In other words, unlike credit or market risk, here there are only potential losses, which can be large. In addition, non-financial risk can only be reduced or mitigated, but not eliminated, and it is far more difficult to quantify than financial risks.
Despite all these difficulties, or perhaps because of them, non-financial risk has been on [bank] regulators’ and supervisors’ radar for quite some time. In fact, it’s been more than 15 years since the Basel II capital accord included a capital charge for operational risk."
Margarita Delgado, Deputy Governor, Banco de Espana, 2019


See also

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