Group of 30 urges greater oversight of financial institutions

Increased oversight of financial institutions seems a certainty as world economies slide further into economic recession

Citigroup's revelation that it is to split in two and with Bank of America again going cap in hand to the US government for a further multibillion-dollar loan seems to validate recommendations made by the Group of Thirty that large banks need to be more closely regulated, and prohibited from participating in risk trading enterprises. Given their systemic importance to national and international economies, the report stated that such large banks should face restrictions on involvement in prop trading, hedge fund sponsorship, origination and distribution of structured credit products, and credit default swaps.

The G-30 recommendations - penned by the adviser to President-Elect Barak Obama, Paul Volker, among others - are likely to find adherents on Capitol Hill as well as in nations around the world as their economies slide further into recession. But what will these recommendations mean for op risk managers? Greater oversight seems certain now and robust operational risk management is one area firms cannot afford to shirk going forward. Although 2009 promises to be a gloomy year, chances are we will all be too busy to notice!