Our Bureau

Mumbai, Oct. 15

BANKS should identify and introduce operational risk management as an independent risk management function across all departments.

In a guidance note issued on Saturday, the Reserve Bank of India has put the onus of effective management of operational risk on the board directors of banks.

The design of risk management framework should be oriented towards the banks' own requirements, dictated by the size and complexity of business, the risk philosophy, the market perception and the expected level of capital, the note said.

However, the risk management systems should be adaptable to changes in business, size, market dynamics and introduction of innovative products by banks in future.

"The board of directors is primarily responsible for ensuring effective management of the operational risks in banks," the guidelines said.

The bank's senior management should be given the responsibility of implementing operational risk management as approved by the board.

(This article was published in the Business Line print edition dated October 16, 2005)
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