04 June 2012

ECA finds strong demarcation between the management of financial and operational risks in the ECB

The ECA published its specific annual report examining the appropriateness of the ECB's overall risk management framework, and assessing whether the ECB manages operational and financial risks effectively.

The ECA concludes in its specific annual report that the ECB has established a comprehensive organisational structure; roles and responsibilities are clearly assigned, but that there is a strong demarcation between the management of financial and operational risks in the Bank. This increases the risk that the view of the Bank’s exposures might not be comprehensive. In addition, the annual accounts of the ECB contain only brief information about certain risk management issues.

The assessment of the operational risk framework showed that the ECB has a clear organisational structure and has established adequate operational risk management policies. However, the ECA identified some weaknesses in the ECB’s approach to assessing, monitoring and controlling / mitigating risks.

The review of the financial risk management framework indicated that the financial risk management methodology designed is sound and adequate for the management of investment and policy operations at the ECB. However, improvements are required in the practical application of the methodology.

The ECA makes a number of recommendations to the ECB to further improve its overall risk management. These include:

• considering setting-up a hierarchically independent, single, risk management function, such as a chief risk officer or committee that would concentrate solely on risk management and ensure a comprehensive view of the Bank’s exposures;
• further improving its public disclosure of risk management practices to external parties in the annual accounts by applying best practices, such as IFRS 7.

Press release

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