RBI issues guidelines for banks on chief risk officer’s role
Banks are advised to lay down a board-approved policy clearly defining the role and responsibilities of the chief risk officer, the RBI said
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Mumbai: Reserve Bank of India (RBI) on Thursday issued guidelines on defining the role of chief risk officer (CRO). This comes at a time when banks are sitting on a pile of stressed assets worth Rs7 trillion.
In order to bring uniformity in approach, followed by banks, as also, to align the risk management system with the best practices, banks are advised to lay down a board-approved policy clearly defining the role and responsibilities of the CRO, the RBI notification said.
CRO shall have direct reporting lines to the either to the managing director and CEO or risk management committee (RMC) of the board. In case the CRO reports to the managing director and CEO, at least once a quarter, the RMC shall meet the CRO on a one-to-one basis, without the presence of the MD and CEO.
The CRO shall not have any reporting relationship with the business verticals of the bank. Also, it should be clearly mentioned whether his role is of an adviser or a decision maker.
“There shall not be any ‘dual hatting’, the CRO shall not be given the responsibility of chief executive officer, chief operating officer, chief financial officer, chief of the internal audit function or any other function,” the notification said.