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The Minimum Requirements for Risk Management (MaRisk) is a regulatory requirement issued by the German Federal Financial Supervisory Authority (BaFin). These regulations apply to banks, financial service providers, and insurance companies and aim to ensure appropriate and effective risk management.
MaRisk covers various aspects of risk management, including the organization of risk management and controlling processes, risk-bearing capacity, liquidity management, and internal control systems. It also defines how institutions should organize their internal audits to ensure an independent review of risk management practices.
History of MaRisk
The history of MaRisk begins with the development of regulated risk management in the German banking landscape, which was driven by various financial crises and the resulting need for improved supervision of the financial system.
Before MaRisk, there were already various guidelines and requirements for banks’ risk management, but they lacked a uniform framework. The German Financial Supervisory Authority and the Federal Ministry of Finance recognized the need to formalize and standardize these requirements.
MaRisk was first introduced by the German Federal Financial Supervisory Authority (BaFin) in 2005. These regulations were developed in response to international developments, particularly in the context of the implementation of the Basel II agreements. Basel II focused strongly on risk management and capital requirements for banks and MaRisk was intended to ensure that German banks met these international standards.
Since its introduction, the MaRisk has been revised and adapted several times in order to respond to new findings, technological developments, and economic changes. Significant revisions took place in 2010, 2012, and 2017, among others. Each revision aimed to clarify the regulations, tighten the requirements for risk management, and increase the resilience of financial institutions to external shocks.
The financial crisis of 2007/2008 had a significant impact on risk management practices and led to stricter regulations worldwide. In Germany, this resulted in a further tightening of MaRisk for better risk control and monitoring.
MaRisk is continuously reviewed and adapted to ensure that it remains in line with current market requirements and international standards. Topics such as digitalization, cyber risks, and sustainability are becoming increasingly important in risk management.
What requirements are contained in MaRisk?
MaRisk contains a number of specific requirements that financial institutions in Germany must fulfill in order to ensure appropriate risk management. These requirements cover various areas of the banking industry and are designed to ensure comprehensive and effective risk management and monitoring.
Risk management processes:
Financial institutions must establish clearly defined risk management processes that cover all material risk types. These processes should include strategies and procedures for identifying, assessing, managing, monitoring, and communicating risks. The aim is to ensure a systematic understanding and management of all potential risks that could affect the institution.
Risk-bearing capacity:
Every institution must develop a risk-bearing capacity concept that ensures it is able to bear all material risks at all times. This concept must be regularly reviewed and adapted based on changes in the institution’s risk profile or operating environment.
Internal controls and auditing:
The establishment of an effective internal control system is required to monitor operational processes and compliance with internal and external guidelines. In addition, the internal audit department should function independently and regularly assess the appropriateness and effectiveness of risk management.
Organizational requirements:
Institutions must create clear organizational structures with clearly defined roles, responsibilities, and reporting lines. It is also important for sufficient human resources and expertise to be available to effectively implement the risk management processes.
Emergency planning (business continuity management):
It is necessary to develop and implement contingency plans to ensure business continuity in crisis situations. These plans should be regularly tested and updated to maintain their effectiveness.
Outsourcing and service provider management:
When business processes are outsourced to external service providers, institutions must ensure that these partners adhere to the same risk management standards. In addition, regulations for the risk management of these external relationships must be established.
IT and cybersecurity:
Given the growing importance of information technology and increasing cyber risks, institutions must implement IT security strategies and measures. These should prevent data loss and ensure the integrity of systems.
Liquidity management:
Special requirements for the management of liquidity risks are also part of MaRisk. Institutions must plan and monitor their liquidity reserves to guarantee they can meet their financial obligations at all times.
For which organizations is this compliance mandatory?
Compliance with MaRisk is mandatory for a wide range of financial institutions in Germany, including:
- Credit institutions: This includes all types of banks, including private banks, cooperative banks, and savings banks. MaRisk is considered an essential part of risk management practice for these institutions.
- Financial services institutions: Organizations that offer financial services but do not hold banking licenses are also covered by MaRisk. These include, for example, securities trading banks and some specialized credit institutions.
- Payment institutions and e-money institutions: With the increasing role of electronic payments and digital currencies, institutions are also required to implement risk-aware management practices that comply with MaRisk.
- Capital management companies: These companies, which manage investment funds and similar financial products, must also follow MaRisk guidelines, particularly with regard to risk assessment and management.
- Insurance companies: Although insurance companies are primarily regulated by the Insurance Supervision Act (VAG) and Solvency II regulations, there are overlaps and similar risk management requirements that are related to the principles of MaRisk.
These regulations ensure that the institutions concerned implement an effective risk management system that is capable of identifying, assessing, managing, and monitoring various types of risk in order to promote the stability of the German financial system.
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