Risk management

Risk management

Banking activities form an essential element of meeting the Bank's objectives and ensure its financial strength and independence. The BIS engages in banking activities that are customer-related as well as activities that are related to the investment of its equity, each of which may give rise to financial risk comprising credit risk, market risk and liquidity risk. The Bank is also exposed to operational risk. Within the risk framework defined by the Board of Directors, the Management of the Bank has established risk management policies designed to ensure that risks are identified, appropriately measured and controlled, and monitored and reported.

The independent risk control function for financial risks is performed by the Risk Control unit. The objective of this function is to identify, assess and measure, control and mitigate, stress-test, monitor and report financial risk. As part of this objective, Risk Control develops corresponding policies and proposals, and monitors compliance with defined rules and limits.

The independent operational risk management function is shared between the Compliance and Operational Risk Unit (CORU) and Risk Control, which quantifies, in cooperation with CORU, capital to cover operational risk. Operational risks and mitigating controls are regularly assessed for the Bank's main processes. Operational incidents and related action plans to remedy the identified operational weaknesses are reported to CORU for assessment and follow-up.

Both Risk Control and CORU report directly to the Deputy General Manager.

Capital adequacy

As an international financial institution that is overseen by a Board composed of Governors of major central banks and that, by nature, has no national supervisor, the Bank is committed to maintaining its superior credit quality and financial strength, in particular in situations of financial stress. The Bank continuously assesses its capital adequacy for financial and operational risks, based on an annual capital planning process that focuses on two elements: an economic capital framework and a financial leverage framework.