Banks must improve risk management: Financial auth, DNB

According to De Nederlandsche Bank (DNB) and the Authority for Financial Markets (AFM), banks have to improve their management of the risks entailed in contributing to or using benchmark. The two financial regulators drew this conclusion based on a study on the development and the use of financial benchmarks, the risk of manipulation and the extent to which Dutch financial institutions know to manage such integrity risks. The study was published today. The study took place in 10 banks and 15 other financial and non-financial institutions and scrutinized various benchmarks, such as benchmarks for interest rates, exchange rates and commodity prices. Larger Dutch banks have started evaluating their involvement in benchmarks and tightening the control framework. The regulators think that further attention is needed to achieve the necessary cultural change in financial institutions that make use of benchmarks. This is necessary to ensure the integrity of benchmarks and to avoid conflicts of interest in financial institutions. DNB and AFM provided good practices to improve risk management and raise awareness of integrity risks around benchmarks, which they expect financial institutions to include in their operations. The regulators will assess whether the institutions have made sufficient progress in improving risk management during the course of this year.