Accountability, Escalation And Risk-Based Decision Making In Building Societies

This blog is part of a series of insights on Building Society risk management.

In the last year, an increasing number of supervisory reviews performed by the Prudential Regulation Authority ('PRA') in the sector have commented on the extent to which risk management is properly embedded within the first line of defence. The root causes behind the level and strength of comment made by the PRA have generally been driven as a result of, one or more of, the following:

• business functions within the first line of defence not having properly considered risk when conducting their day-to-day operations, as they see 'risk' as a second line responsibility;
• firms having routinely overridden their own systems and controls (i.e. routinely permitted exemptions to key credit criteria to lend disproportionately outside of lending policy);