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Divisions and committees
Capital and Risk Management
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Capital and Risk Management
Overview
Capital management is a core activity of bank management. Its primary objective is to balance the supply of capital with the demand for it. In doing so, the interests and requirements of key stakeholders, most notably equity and debt investors, clients, analysts and the bank’s supervisors and management, must be considered. The demand for capital arises as banks’ business activities entail risks that need to be adequately covered to ensure that potential losses can be absorbed both in the ordinary course of business and under stress. Ultimately, the level of capital held needs to address all stakeholder requirements while permitting an adequate return on capital. Risks managed range from idiosyncratic, business model specific risks to systemic or macroeconomic risks that banks are commonly exposed to.
Capital management operates as an advisor to bank management for day-to-day business decision-making and execution as well as planning and strategy formulation, ensuring that sufficient capital is available at all times, that it is invested wisely and that adequate returns are provided. Effective capital and risk management frameworks contribute to an efficient functioning of banks as part of capital markets, foster financial stability and further integration of capital markets in the EU, UK and globally.
Multiple definitions of capital and risks are used in bank management, ranging from the regulatory (prudential or “normative”) capital and risks as defined by the Basel standards to economic capital and risks as prescribed by bank’s internal definitions and in accordance with economic risk measurement concepts. It also includes capital defined under crisis management aspects as capital components and quantification of capital can take on specific characteristics under recovery or resolution conditions.
AFME assists their Members in all of the aforementioned aspects of capital and risk management and the respective policy making, where we focus primarily on financial risks (quantifiable and non-quantifiable). We cover both the EU and UK, while keeping the global nature of finance and financial regulation into account. Besides conventional risk types, AFME also engages in thought leadership covering new and emerging risks, facilitating an effective cooperation between the industry and policy makers in order to create most suitable capital and risk management frameworks. We interact with our Members, regulators, supervisors and legislators providing evidence based information and collective knowledge and experience.
Policy Areas
The Capital and Risk Management Division is led by Caroline Liesegang and includes the following policy areas:
Economic Capital Management and Supervision
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AFME’s
Economic Capital Management and Supervision
policy area focuses on EU and UK supervisory policies in the field of risk and capital management. The work is led by the Pillar 2 Sub-group, supported by thematic working groups that cover specific policy areas.
Prudential Regulation
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AFME's
Prudential Regulation Division
focuses on the issues relating to changes to the global, EU and UK prudential regulatory frameworks.
Recovery & Resolution
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AFME’s
Recovery & Resolution division
focuses on supporting the development of an effective recovery and resolution framework in the EU and the UK, and the ongoing work to enhance resolvability.
Systemic Risk and Macro-Prudential Regulation
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AFME’s Prudential Regulation Division considers both existing and prospective drivers and forms of
systemic risk
and maintains a specialist working group to consider macroprudential policy which is designed to increase the resilience of the financial system through the identification, monitoring and mitigation of systemic risks.
Sustainable Risk Management
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AFME’s
Sustainable Risk Management
focuses on EU and UK industry developments regarding climate-related and environmental risks, including climate risk stress testing and scenario analysis, and ESG risks in the prudential framework.
Press Releases
Briefing Notes
Consultation Responses
Publications
Press Releases
Briefing Notes
Consultation Responses
Publications
See all press releases
Press Releases
AFME welcomes adoption of delegated act to delay the implementation of the European Union’s market risk framework
25 Jul 2024
Press Releases
AFME welcomes political agreement on EU implementation of final Basel III standards
6 Dec 2023
Press Releases
AFME appoints Caroline Liesegang as Head of Prudential Regulation and Research
16 Mar 2022
See all briefing notes
Briefing Notes
AFME / ISDA joint letter responding to the European Banking Authority (EBA) on its report on Standardised Approaches under Counterparty Credit Risk (CCR)
13 Oct 2023
Briefing Notes
2023 EBA Stress Testing Methodology - AFME’s feedback on the draft ST methodology
12 Aug 2022
Briefing Notes
AFME overview of the key learnings by industry of the 2022 ECB climate risk stress test
5 Aug 2022
See all consultation responses
Consultation Responses
AMFE response to EBA Consultation Paper on draft Implementing Technical Standards on joint decision process for certain prudential permissions
15 Oct 2024
Consultation Responses
ISDA-AFME response to EBA consultation on Regulatory Technical Standards on CVA risk of securities financing transactions
8 Oct 2024
Consultation Responses
AFME response to EBA-ESMA Discussion Paper on Call for Advice on the investment firms prudential framework
3 Sep 2024
See all publications
Publications
MiFIR / MiFID II reforms in the EU and the UK - Implementation Guide for firms operating in wholesale secondary markets
24 Oct 2024
Publications
UK and EU Fixed Income - Data Quality Project Initial Findings and Outline Report
21 Oct 2024
Publications
High-level Roadmap for Adoption of T+1 in EU Securities Markets
14 Oct 2024