Dangers associated to this 12 months’s banking failures are taking on extra space within the minds of chief threat officers at U.S. banks.
Half of chief threat officers noticed treasury and asset liability-management dangers as a prime concern in 2023, in keeping with a survey of 51 chief threat executives carried out by the Threat Administration Affiliation, a commerce group, and consulting agency Oliver Wyman. Simply 16% of executives mentioned the identical in 2022.
The survey outcomes spotlight the lasting influence that
“It was an necessary lesson realized: how shortly contagion threat can have an effect on monetary establishments,” one survey respondent mentioned.
The survey drew on responses from chief threat officers at 51 U.S. monetary establishments recorded in the summertime of 2023. The banks included these with lower than $100 billion in property and people with greater than $100 billion in property.
About 90% of chief threat officers surveyed reported plans to improve a minimum of one in every of their treasury threat administration capabilities, and two-third reported plans to improve 5 or extra. 9 in 10 banks reported wanting to enhance their liquidity stress testing skills. The enhancements might embody adjustments to the situations, fashions, methodologies or assumptions used for the check.
Enhancing approaches to interest-rate threat administration additionally ranked excessive for the chief threat officers. About 85% of respondents listed revamping this space as a prime precedence transferring ahead, in keeping with the survey outcomes.
“Curiosity-rate threat and liquidity threat administration matter — even supposing these areas have obtained restricted supervisory consideration prior to now decade,” one chief threat officer surveyed mentioned.
The subsequent three treasury threat capabilities almost certainly to be focused for enchancment are enhancement to threat administration inside the securities portfolio (70%), money circulate forecasting (59%) and different liquidity-related initiatives (52%).
“The banks which have extra maturation to do of their [treasury management and liquidity risk] practices in all probability really feel a bit extra nervous,” mentioned Michael Duane, a companion within the finance and threat apply at Oliver Wyman.
Chief threat officers mentioned they spent extra time occupied with monetary dangers, together with the elevated concentrate on treasury dangers, in 2023 than final 12 months. Along with that, larger monetary establishments had been prone to spend extra time targeted on monetary dangers than their smaller counterparts, the survey discovered.
Moreover, subsequent 12 months is prone to carry dangers past what was mentioned on this survey, primarily with operational threat tied to the continued
Most CROs mentioned they count on consideration from regulators to extend in 2024. About 89% of the executives anticipate a rise in liquidity-related regulatory and supervisory points at peer banks subsequent 12 months. And 81% of chief threat officers count on a leap in capital-related regulatory findings in 2024.
“When you take a look at massive regional banks, actually on a median foundation, capital has been constructed over the course of the 12 months,” mentioned Allen Tischler, senior vp of the monetary establishments group at Moody’s Investor Providers.