More than half of financial-services companies increased the number of employees focused on risk management in the past 12 months, a survey by the Institute of International Finance said.
About 57 percent of the 75 financial companies surveyed across 38 countries added risk positions and 36 percent said they expect to hire people this year, according to a report by the lobby group for international banks published today with accounting firm Ernst & Young LLP.
“Boards of directors and senior management teams recognize that core issues of corporate culture are crucial to sound risk management,” Bank of Nova Scotia Chief Executive Officer Rick Waugh, who is also vice chairman of the IIF board, said in a statement today.
Banks are employing more people to manage risk as regulators push them to hold more capital to avoid a repeat of the financial crisis. JPMorgan Chase & Co.’s decision to change how it measures trading risk aggravated a $2 billion trading loss on credit derivatives, Chief Executive Officer Jamie Dimon told Congress on June 19.
The IIF report said 26 percent of companies had made “good progress” in implementing a plan to gage the level and nature of risk they should take.
“There is still much to be done to change and fully integrate new methodologies and processes,” Ernst & Young’s Patricia Jackson, who directed the report, said in the statement. “Embedding risk appetite across all levels remains a key challenge for many firms.”
In addition, about 40 percent of banks said Basel III regulations would lead to an increase in loan charges for corporate customers of 50 basis points to 100 basis points. About 13 percent indicated they are considering leaving a country because of the latest rules by the Basel Committee on Banking Supervision, the survey said.
“The changes will have a significant effect on the costs of doing business,” the IIF said. “Margins will have to go up.”
The survey was conducted from December through March, the company said.
-- Editors: Jon Menon, Steve Bailey