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Hungarian Banking Sector: Risk Management Strategies
As the banking sector continues to evolve, risk management has become a crucial aspect for financial institutions to ensure stability and profitability. Two major banks in Hungary, CIB Bank and UniCredit Bank, have implemented robust operational risk management strategies to mitigate potential losses.
Risk Management Strategies
According to an analysis of their annual reports, both banks take a proactive approach to identifying and mitigating operational risks through the use of qualitative and quantitative tools. CIB Bank’s Operational Risk Committee (ORC) oversees operational risk management activities, while UniCredit Bank employs the Advanced Measurement Approach (AMA) under Basel II regulations.
The Advanced Measurement Approach
The AMA is considered one of the most advanced operational risk methods, taking into account internal loss data, external loss data, risk scenarios, and business environment factors. This approach allows banks to better assess their operational risk exposure and implement targeted mitigating actions.
Operational Risk Management Activities
In addition to these quantitative measures, CIB Bank’s annual operational self-diagnosis identifies criticalities and defines corresponding mitigating actions. Both banks also maintain a strong oversight over operational risk exposure, with the Group Management Board responsible for ensuring effective control frameworks are in place.
Changes in the Hungarian Banking Sector
The Hungarian banking sector has undergone significant changes since the 2008 financial crisis. CIB Bank, formerly owned by Intesa Sanpaolo, has reduced its dependence on external funding and increased its self-funding capacity. The bank’s loan-to-deposit ratio decreased from 142.6% to 91.3% over the past five years.
UniCredit Bank
UniCredit Bank, another major player in the Hungarian market, reported a solid capital position in 2014, allowing it to pay dividends to its shareholders. The bank’s loan-to-deposit ratio also improved, decreasing from 137% to 81%.
National Bank of Hungary
The National Bank of Hungary has praised the banking sector’s efforts to build up significant capital and liquidity buffers, which can reduce the impact of potential losses on lending.
Conclusion
In conclusion, CIB Bank and UniCredit Bank have demonstrated a commitment to effective operational risk management, employing robust strategies to mitigate potential losses. The Hungarian banking sector’s efforts to strengthen its regulatory framework and improve risk management practices have contributed to its current stability.
References
- Banai Á., Király J., Nagy M. (2010). Az aranykor vége Magyarországon. Külföldi szakmai és lokális tulajdonú bankok a válság előtt és válság után.
- Basel Committee on Banking Supervision (2001).
- Lubbe, Snyman (2010). Operational Risk Management: A Guide for Directors and Managers.
Note
The article is rewritten to follow the typical structure of a media article, with a focus on local idiosyncrasies. The language has been adapted to be more accessible to a general audience, while maintaining the technical accuracy required by the topic. The references have been reformatted to conform to standard citation styles used in academic writing.