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Risk Management Presentation for Audit Conf AUSPres6-11-09 v5
27 pages
English

Risk Management Presentation for Audit Conf AUSPres6-11-09 v5

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27 pages
English
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Will Your Risk Management Program Pass the Casablanca Test?Bank Director MagazineBank Audit Committee ConferenceInsight on OversightJune 11 – 12, 2009Chicago, IllinoisJohn R. ReisnerManaging DirectorAustin Associates, LLCSession Goals• Acknowledging regulatory expectations• Five vital elements of an effective risk management program• Risk assessment model• Stress testing model• Interdependence: risk management and capital preservationThe Handwriting on the Wall – Part One• Market’s Fall Deepens as Concerns Mount on Banks – WSJ 112108• Job Losses are Worst Since ’74 –WSJ 120608• Recession Turns Malls into Ghost Towns –WSJ 052209• Banks Ramp Up Foreclosures –WSJ 041509• Pope Tells World Not To Lose Hope –WSJ 122608Risk Assessment MatrixAny Bank or Thrift - Risk AssessmentAs of May 31, 2009ADEQUACY OF DATE OF LAST RISK INHERENT COMPOSITE TYPE OF RISK RISK TRENDASSESSMENT RISK RISKMANAGEMENTCredit Jan 14, 2009 High Weak High IncreasingMarket Jan 14, 2009 High Marginally Weak High IncreasingMarginally Liquidity Jan 14, 2009 High High IncreasingAcceptableOperational July 16, 2008 Moderate Acceptable Moderate IncreasingLegal April 15, 2009 Moderate Acceptable Moderate IncreasingMarginally Reputational April 15, 2009 High High IncreasingAcceptableFoundational Components of an Effective Risk Management Program• Continuous risk identification• Accurate and timely measurement of risk• Controls to limit and mitigate risk• ...

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Nombre de lectures 25
Langue English

Extrait

Will Your Risk Management Program Pass the Casablanca Test?
Bank Director Magazine Bank Audit Committee Conference Insight on Oversight June 11 – 12, 2009 Chicago, Illinois
John R. Reisner Managing Director Austin Associates, LLC
Session Goals
•
•
•
•
•
Acknowledging regulatory expectations
Five vital elements of an effective risk
management program
Risk assessment model
Stress testing model
Interdependence: risk management and
capital preservation
The Handwriting on the Wall – Part One
•
•
•
•
•
Market s Fall Deepens as Concerns Mount ’ on Banks – WSJ 112108
’ Job Losses are Worst Since 74 – WSJ 120608
Recession Turns Malls into Ghost Towns – WSJ 052209
Banks Ramp Up Foreclosures – WSJ 041509
Pope Tells World Not To Lose Hope – WSJ 122608
Risk Assessment Matrix
Any Bank or Thrift - Risk Assessment
TYPE OF RISK
Credit
Market
Liquidity
Operational
Legal
Reputational
As of May 31, 2009
DATE OF LAST RISK INHERENT ASSESSMENT RISK
Jan 14, 2009
Jan 14, 2009
Jan 14, 2009
July 16, 2008
April 15, 2009
April 15, 2009
High
High
High
Moderate
Moderate
High
ADEQUACY OF RISK MANAGEMENT
Weak
Marginally Weak
Marginally Acceptable
Acceptable
Acceptable
Marginally Acceptable
COMPOSITE RISK
High
High
High
Moderate
Moderate
High
TREND
Increasing
Increasing
Increasing
Increasing
Increasing
Increasing
Foundational Components of an Effective Risk Management Program
•
•
•
•
•
Continuous risk identification
Accurate and timely measurement of risk
Controls to limit and mitigate risk
Monitoring to ensure effective management of risks
Accurate and timely reporting of risks at the management and board levels
The Handwriting on the Wall – Part Two
•
•
•
•
•
Banks Await Stress Test Results - WSJ 041509
Fed Sees Up to $599 Billion in Bank Losses -WSJ 050809
Small Banks Face Hits on Commercial Real Estate -WSJ 050509
Banks Won Concessions on Tests - WSJ 050909
Local Banks Face Big Losses - WSJ 051909
Agency Guidance: Institutions Potentially Exposed to CRE Concentration Risk
• •
•
Rapid growth in CRE lending Construction/land development loans approach/exceed 100% of total risk based capital Total CRE loans approach/exceed 300% of total risk based capital and o/s balance of total CRE loans has increased 50% or more during prior 36 months
Key Elements in Risk Management of CRE Concentration Risk
• • • • •
•
Board and management oversight Portfolio management MIS Credit underwriting standards Portfolio stress testing and sensitivity analysis Credit risk review function
Stress Testing
•
•
•
Quantify the impact of changing economic conditions on asset quality, earnings and capital Practices should be consistent with the size, complexity and risk characteristics of the loan portfolio May be as simple as analyzing the potential effect of stressed loss rates on the CRE portfolio, capital and earnings
Regulatory Expectations Going Forward
•
•
•
Stress testing – more than recommended – EXPECTED
Direct senior management and the board to maintain strong risk management practices
Heightened vigilance on the part of supervisors to assure standards are met in the areas of
•Capital adequacy
•Liquidity planning
•Risk management
Shot over the bow or direct hit?
•
•
•
Will the increased scrutiny and expectations reach the community bank level?
With regard to stress testing?
With regard to risk management and capital and liquidity planning?
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