Control Bank
During part of the financial crisis, the interbank market was almost completely paralysed. At present, short-term liquidity is also tight and very expensive. The optimisation of existing liquidity management or the establishment of efficient new systems for this purpose is a mandatory exercise for all financial institutions. In this context, too, one of the challenges is to develop a consistent data basis and integrate the systems into bank-wide management. In view of temporarily tight liquidity, an urgent task is to develop alternative funding strategies.
In part, existing risk models turned out to be a weak spot in the crisis. Many risks had been underrated and some were assessed to be hardly relevant. It will be critical to success to include qualitative factors and stress tests into these models so that the next crisis can be better anticipated. However, there are issues related to many aspects of risk management that could well have been implemented a longer time ago. In many banks, for example, risk appetite has to be redefined and the risk strategy has to be designed in a more conservative fashion.
In addition, the asset allocation practised in many banks is largely outdated. Classic optimisation approaches are put to the test. The re-orientation of bank-wide asset allocation in a way that consistently exploits opportunities for limiting risks constitutes a critical success factor in a challenging environment.
Another consequence of the financial crisis will be more intensive regulation. In addition to more special audits and higher capital requirements, numerous new regulations are to be expected (e.g. on securitisation and large exposures). Good preparation and timely introduction of appropriate measures can help banks to meet rising requirements.