The risks of regulations and supervision
Risk management and regulations are closely intertwined. Sometimes risk management improves with regulations. Sometimes regulations are just a burden. And sometimes regulations even hurt proper risk management. Right now, we need more common sense and less detailed rules.
As a risk manager, one must think about regulations. Regulations can help one do what is necessary. But at the same time, regulations greatly burdens internal financial and managerial resources. Not complying with regulations even becomes a risk in itself. Furthermore, complying with regulations and capital requirements may also give a false sense of security. We stop thinking.
Therefore, as a regulator and supervisory authority, one must think about the effect of one’s actions on sound risk management.