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The risk appetite statement is a formal articulation of the bank’s willingness to accept risk. It is typically linked to the risk management philosophy, and is accompanied by a risk appetite framework.
Risk Appetite Statement (RAS): The written form of a bank’s risk appetite. It includes qualitative statements as well as quantitative measures expressed relative to earnings, capital, risk measures, liquidity and other relevant measures as appropriate. It should also address risks which are more difficult to . :
EU banks and supervisors should ensure that institutions have a strong management body in its supervisory function which challenges decision-making and that a sound risk strategy. Also, risk appetite and risk management frameworks should be in place, as well as governance arrangements that effectively foster a
Discover how banks are transforming their risk appetite perspectives and practices in response to evolving customer needs, industry trends, and economic shifts.
In their risk appetite statements, banks should spell out how much risk, and of what kind, they are willing to take on. These statements are crucial to ensure consistent risk management throughout the bank. They also allow the board to have a holistic view of the risks that need to be managed.
These risk drivers can have an impact on supervised institutions through existing internal and external vulnerabilities prevalent in the banking system itself or in the economic environment in which banks operate.
The 2020 IACPM Risk Appetite study collected responses from 57 financial institutions globally, including 50 Banks, six Development Banks, and one Insurance Company. In addition, IACPM staff conducted
