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Federal Reserve Bank of DALLAS R OB ERT D. McTEER, JR. DALLAS, TEXAS PRESIDENT AND CHIEF EXECUTIVE OFFICER 75265-5906 October 28, 1998 Notice 98-99 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Enhancing Bank Transparency and Operational Risk Management DETAILS The Basle Committee on Banking Supervision has issued two papers entitled Enhanc ing Bank Transparency and Operational Risk Management as part of its ongoing work to im prove risk management standards in banks. The paper on bank transparency provides guidelines to banks and bank supervisors on public disclosures in bank financial reports. The paper recommends that banks make meaningful disclosure in the following six broad areas: • • • • financial performance; financial position (including capital, solvency, and liquidity); risk management strategies and practices; risk exposures (including credit risk, market risk, liquidity risk, and operational, legal, and other risks); • accounting policies; and • basic business, management, and corporate governance information. The Basle Committee strongly recommends that banks address these categories in their financial reports and other disclosures to the public. Within each broad area, significant detail in disclosures may be required, depending in part on the institution’s activities. The paper on operational risk management makes public the results of recent inter views with major banks in the G-10 countries on their management of operational risk. The For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) purpose of these interviews was to assess the current state of the art of operational risk manage ment. The survey results indicate that, while senior management’s awareness of operational risk has been increasing, most banks are only in the early stages of developing a framework for measuring and monitoring operational risk. The Basle Committee plans to continue monitoring developments in this area. The papers can be obtained from the Bank of International Settlements’ (BIS) Web site at <http://www.bis.org>. They are also available from the Basle Committee’s Secretariat at the BIS and from the Basle Committee member bank supervisory authorities and central banks. MORE INFORMATION For more information, please contact Gayle Teague at (214) 922-6151. For addi tional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours,
@FedFRASER