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Financial services risk insights Vol II

Compliance function in banks and role of chief compliance officers

Bank governance has been a key area of focus given multiple failures in the form of steep non-performing asset (NPA) provisions due to underwriting across banks and the recent bail out of a large private sector bank. The Reserve Bank of India (RBI) has been focusing on strengthening governance across the custodians of the second and third line of defence through different directions and also through, what some may refer to as the fourth line of defence, the statutory auditors through the long form audit report amendment addressed in the 5 September 2020 guidelines.

In our second volume of Financial Services Risk Insights, we focus on the RBI guidelines on compliance function in banks and the role of chief compliance officer (CCO). While the previously released guidelines in 2007 and 2015 focused on compliance function in banks, the practices followed by different banks with respect to compliance as a governance function have been divergent. Therefore, the RBI felt the need to release a guideline to establish consistencies across banks.

The publication focuses on the thematic changes suggested by the RBI and its implication on banks.