The compliance function according to MaRisk
By introducing the 4th MaRisk amendment, the German banking supervisory authority BaFin has rolled out an additional compliance function in addition to the existing securities and money laundering compliance mechanisms.
This decision stems from the financial crisis, which led to high losses for banks resulting from customer lawsuits against financial advice given and the sale of investment products. In addition, losses were incurred from compensation payments in the lending business, which were largely caused by contractual weaknesses in loan agreements ("compliance risk"). One of the reasons for these losses was that the institutions did not account for changes in standards in contracts or did not do so in a timely manner. With the introduction of the MaRisk compliance function, changes in standards are to be recognized at an early stage, ensuring their effective implementation.
The compliance function has the task of identifying the relevant areas and standards that are subject to particular risks, i.e. that a compliance risk can be significant. Beyond the conventional compliance topics, further regulations are to be subsumed under this, which focus in particular on consumer protection (e.g. in the credit business). As a rule, these are losses that are also recorded and must be included in a collection of loss data (e.g. using Interexa AG's ORC product) for operational risks.
Implementing a structure with three lines of defense in which the operational responsibility for implementing standards remains with the specialist departments in the front and back office is of particular importance. The compliance function acts as a second line of defense and brings the issues together from an overarching perspective.
Inventory List – Materiality Testing - ICS
Point 2 of MaRisk AT 4.4.2. calls for "the identification of the key legal regulations and requirements, the non-compliance with which may endanger the assets of the institution, ... taking risk aspects into account...".
Obtaining an overview of the standards applicable to the Bank (inventory list or "legal inventory") is the essential starting point for examining the main legal regulations and requirements (= standards).
Financial institutions must then assess the materiality of the standards contained in the inventory list. Here, the definition and implementation of parameters defined ex-ante is essential to ensuring that the presentation is as objective and standardized as possible. These parameters can be weighted specifically to each financial institution, condensed into a key figure and visualized in the form of a simple traffic light system. New standards and changes to standards must be regularly added to / updated in the inventory list.
Our products: RADAR / COMPTech / RWC
In order to identify and address new standards and current developments (including consultations and drafts) well in advance, VÖB-Service GmbH, in cooperation with SKS Unternehmensberatung GmbH & Co. KG, provides the web-based information service RADAR. RADAR informs companies in the financial sector about regulatory innovations and changes well in advance and provides summaries of content and an assessment of the effects on the organizational and IT structures of banks. RADAR will soon feature an inventory list function. On the one hand, relevant standards are identified as an inventory list for the standards valid as of a given date. On the other hand, the inventory list function in RADAR informs users of changes to existing or new standards. RADAR is an essential tool for meeting the requirements of paragraph 2 of MaRisk AT 4.4.2.
In the process of developing best practice standards, all institutions should have some form of inventory and materiality analysis process. This materiality procedure should go beyond the digital statement "substantially yes/no" on the basis of objective criteria. SKS has both a proven approach and the corresponding documentation.
Through our subsidiary Interexa AG, you can access the Regulatory Workflow Center (RWC) workflow tool, which records (selectively) the information provided—e.g. via RADAR—and enables further individualized processing and distribution in financial institutions. RWC helps users define, organize and allocate responsibilities and creates transparency from the identification of standards to their implementation.
SKS is the ideal partner to assist you link monitoring and inventory lists with core processes, their corresponding key controls and your institution’s ICS. SKS is here to help you subdivide standards in a meaningful way to enable a targeted transfer of standards into processes, ensuring requirements are optimally implemented within your organization. Mapping the standards world to the process world makes it possible.
Our COMPTech solution uses artificial intelligence to provide an initial assessment of the relevance of new legal norms, providing compliance officers with key insights. The tool relies on bank-internal data (e.g. product database, organizational structure, SfO/OHB) for decision support (using the AI), ensuring a high degree of accuracy, which continues to improve with time thanks to COMPTech’s built-in machine learning technology. Working closely with our customers, we train the AI using internal documentation and can also establish links to processes and products if required.
The advantages at a glance
- Productivity and performance: COMPTech works 24 h / 365 days per year—its speed and scope are outstanding.
- Quality and reliability: COMPTech minimizes errors and eliminates human error altogether.
- Satisfaction and innovation: The elimination of everyday, repetitive routines unleashes human creativity, fostering new innovations.
- Cost effective: COMPTech reduces FTE costs, reducing redundant activities in compliance as well as in other departments.
- Transparency: COMPTech creates transparency in regulatory monitoring and thus helps to to manage (compliance) risks holistically.
For further information and/or the support of our experienced MA-Risk Compliance specialists please contact us!