“The Compliance Function in Banks and the Need for Increasing and Strengthening its Role - Lessons Learned from Practice”

Abstract

The environment in which banks operate requires familiarity with a growing number of techniques and regulations, as well as increasing attention to risk management policy. The following trends have been noticeable in recent years: diversification of business lines within large groups increase in the range of products on offer for the various categories of customer; growth of complex transactions; widening of the geographical area in which institutions are operating and accepting risks; fiercer competition among institutions, resulting in further profitability constraints. The overall outcome has been an increase and diversification of the risks incurred by institutions, against a background of continually evolving legislation. As a consequence, institutions are required to exercise a very high degree of vigilance, so as to ensure that their operations comply with the relevant rules and standards. This paper focuses on compliance risk. First it describe the definition of this risk and the regulatory framework in place dealing with this risk in Albania Banking System. Also are described main principles on the subject of compliance from best practices. It then looks to existing practices in banks and the role of different Bank Bodies and structures involved in governing the compliance risk. Finally in the light of these practices are identifying some moments how systems for controlling this type of risk might be improved.

Identifying the volatility of compliance risks for the pension custodian banks

“…The regulations applicable to implementing the compliance functions and the key principles of the institutional compliance management in banks were developed by the Basel Committee on Banking Supervision and presented as consultation documents (BCBS, 2003(BCBS, -2005. In turn, scholars address the following aspects in the study reports: implementing the compliance functions in banks (Singh, 2003;Edwards & Wolfe, 2004;Haynes, 2005;Misha, 2016); functional duties and roles of bank compliance officers (Fox, 1999;Meissner, 2018); assessing the compliance risks and their consequences, and compliance risk management (Haddad, 2016 According to analytical studies (Birindelli & Feretti, 2008) on the identification of compliance regularities and, specifically, the comparison of compliance systems used by Italian banks and structural subdivisions of foreign banking groups, the latter seem to pay more attention to compliance issues. Gabbi et al (2011) also factored in the criterion of international activity while cross-checking various groups of financial institutions (banks, insurance and investment companies) and pointed out that financial go-betweens with foreign capital appeared to be more experienced in terms of their ability to assess compliance risks and recognize their danger.…”