Financial Institutions Must Learn From Recent Mistakes, RMA President & CEO Tells...

Financial Institutions Must Learn From Recent Mistakes, RMA President & CEO
Tells Senate Banking Subcommittee

Kevin M. Blakely says greater board-level risk expertise, incentive
compensation reform, and direct involvement of CEO in promoting risk
management are key.

PHILADELPHIA, June 19 /PRNewswire-USNewswire/ -- RMA President and CEO Kevin
M. Blakely testified today before the U.S. Senate Banking, Housing, and Urban
Affairs Subcommittee on Securities, Insurance, and Investment at a hearing on
the subject of risk management and its implications for systemic risk.

"Difficulties notwithstanding, the current environment affords an excellent
opportunity to learn from mistakes and improve risk management processes going
forward," Blakely said. "As we muddle through the misery, we are all smarting
from it and smarter for it."

In his testimony, Blakely stressed that financial institutions need to raise
the profile of risk management throughout their companies. Risk management
must be the responsibility of every employee, starting at the top with the
CEO. He addressed a number of issues and concluded with the following
recommendations:

-- Institutions should add risk expertise to their boards of directors.
Boards can also help in the risk management effort by creating
incentive
compensation systems that encourage management to understand and
actively engage in the practice of risk management.

-- CEOs should relentlessly promote management's responsibility for
risk and directly participate in the management of risk.

-- Regulators should continue their current focus on risk governance
within
financial institutions. Regulators can and should share the knowledge
they glean with regard to successful risk governance at institutions
under their purview.

-- Regulators should continue to perform scenario analysis on important
sectors of the industry, such as the credit derivatives market, to
anticipate potential threats to the financial system and the national
economy.

"There is recognition within the industry that mistakes have been made. Major
mistakes. And there is also a genuine determination that, as an industry, we
need to do better," Blakely stated. "Whether solutions come from bank
management, regulators, or legislators, we must be careful not to compound an
already tenuous situation."

About RMA
Founded in 1914, The Risk Management Association is a not-for-profit,
member-driven professional association whose sole purpose is to advance the
use of sound risk principles in the financial services industry. RMA promotes
an enterprise-wide approach to risk management that focuses on credit risk,
market risk, and operational risk. Headquartered in Philadelphia, Pa. RMA has
3,000 institutional members that include banks of all sizes as well as nonbank
financial institutions. They are represented in the Association by 20,000 risk
management professionals who are chapter members in financial centers
throughout North America, Europe, and Asia/Pacific. Visit RMA on the Web at
www.rmahq.org.

SOURCE RMA - The Risk Management Association

Meg McBride, RMA Public Relations, +1-215-446-4110