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Defining risk for
a central bank:
This new study addresses
these subjects head on.
Central banks need to interpret the concept of risk in a very broad
sense, to embrace not only the identification and control of financial
market risks and payment systems risks, but also reputational risks,
political risks, regulatory risks and technological risks.
Issues such as moral hazard in central banking are also of prime
importance with respect to central bank risk management and the
central bank's role as lender of last resort.
Leading authorities
Risk Management for
Central Bankers brings together in one volume articles and research
from some of the world's leading risk management practitioners and
analysts.
Contributors include:
- George Vojta,
former vice chairman of Bankers Trust
- Brian Quinn,
former head of banking supervision, Bank of England
- Robert Lindley,
deputy head of secretariat, CPSS, Bank for International Settlements
- Christian Mulder,
senior economist, International Monetary Fund
- Jennifer Johnson-Calari,
principal investment officer, World Bank
- Carlos Bernadell,
head of middle office, European Central Bank
- Richard Allen,
senior manager, risk analysis & monitoring unit, Bank of England
- Amporn Sangmanee,
head of risk management, Bank of Thailand
- Roberto de Beaufort,
head of reserve management, Central Bank of Colombia
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State of the art
Risk Management for Central
Bankers includes a unique survey of how central bank risk managers
manage risk in practice. The survey of central bank risk managers
confirms that a high proportion of central banks are currently restructuring
their risk management operations. This survey reveals:
- Increasing integration
of risk management;
- Recognition of the
importance of operational risk;
- A need for clear
objectives for the various departments involved in risk management.
The role of the
risk management unit
The key tasks of all
central banks - monetary and exchange rate policy, oversight of
payment systems, supervision, crisis management - all require central
banks to manage risk.
In this book, current and former central bankers use their own experiences
to discuss how to identify and manage political and reputational
risks; experts in corporate organisation and governance address
the crucial question: if risk management is recognised as lying
at the heart of central banking, how should the structure and governance
of a modern central bank reflect this priority? What does this imply
for the reform of the organisation of central banks?
Clearly, central banks
are at very different stages of developing their own risk management.
One of the problems facing central banks is how to organise a risk
management department so that it can work effectively with the internal
audit department, the external auditors and the financial control
department.
Larger central banks
are leading the way in developing risk management procedures and
translating this into corporate governance in the central bank.
For smaller banks with limited resources, setting up a separate
risk management department is often not feasible. In these circumstances,
risk has to be assessed and controlled by departmental heads.
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Central Banking
Central Banking Publications
has organised two groundbreaking seminars on risk management, each
attended by around 30 central banks from all over the world. Many
of the themes of the book have been drawn from the conclusions reached
by the participants at these conferences.
One ingredient in successful risk management strategy is to make
each individual in a central bank, no matter whether he or she is
involved in financial market activity or not, think about the risk
faced in their own work. Raising "risk awareness" is widely recognised
as an important step to reducing operational risk for the organisation
as a whole. This book explains how such a risk management culture
can be developed in a central
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375 (outside
UK) 