Wholesale Conduct Risk Management
This article will discuss the key elements of managing risk through a Wholesale Market Conduct Risk Framework and the challenges and opportunities faced by businesses that will seek to enhance how they will do so.
Introduction & Background
While protecting consumers has been at the heart of the Central
Bank of Ireland’s (“CBI”) strategy for many years now, more
recently we have seen Wholesale Market Conduct Risk increase
in importance. This is due in part to a number of global wholesale
market risk scandals and in part to the increase of investment
banking, broker dealing and wholesale banking activity in Ireland
post Brexit. We have seen from other jurisdictions what happens
when issues arise from a wholesale market conduct perspective;
frequent rogue trader scandals, manipulation of benchmark
borrowing rates and investigations into the integrity of FX markets
are examples that remind us that this is an area of risk that
requires constant reinvention and management.
Recognising the changing risk landscape in Ireland post Brexit, the
CBI has been quick to act by establishing a dedicated Wholesale
Market Conduct Risk division. They have publically announced that
in the design of a new supervisory framework, their approach will
be one that seeks to:
- Provide high levels of investor and market protection;
- Require high levels of price and product transparency;
- Is centred on governance and Senior Executive Accountability;
- Require trust by those seeking to raise funds and investors; and
- Prioritise resilience, with a focus on times of stress and
recognising the need to innovate, when the market so requires it.
- In order to assist firms with the implementation of an effective Wholesale Market Conduct Risk Framework, the CBI has issued two industry communications, highlighting their expectations and early observations2 in the Irish Wholesale Conduct Risk environment.
These expectations include practices related to:
- Market Conduct Strategy
- Governance and Organisation
- Risk Management
- Culture and People
- Metrics Monitoring