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Banks across the European Union (EU) are falling short in meeting the guiding Principles on operational resilience and risk established by the Basel Committee in 2021, according to a recent assessment.
The early 2023 evaluation of the adoption of these Principles, designed to enhance banks’ ability to withstand operational risk-related events, revealed varying effectiveness and maturity of measures across banks and jurisdictions. Mapping interconnections and interdependencies for critical operations and defining tolerances for disruption were identified as common challenges during the adoption process.
While the report acknowledges well-established operational risk management governance within banks, it highlights that roles, responsibilities, and capabilities for operational resilience among board members are still under development.
The assessment also identified gaps in the effectiveness of self-assessment tools designed to identify threats and vulnerabilities. Additionally, challenges in considering the end-to-end delivery of critical operations and the plausibility and severity of scenarios were noted, with some banks needing to improve business continuity and contingency plans, particularly when third parties are involved in critical operations.
The Basel Committee suggests that further efforts are required by banks to enhance practices, emphasizing the need for adequate resourcing and prioritization. Full adoption of these Principles may take up to two more years to achieve.
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