Around 60% of European banks are concerned that non-financial risks such as cybercrime may lead to an increase in their capital requirements in the next 1-3 years, according to research by KPMG.
The research found that 10% of respondents predicted a 50% increase in capital requirements due to increasing non-financial risks from cybercrime, IT failures, and compliance issues.
According to KPMG, non-financial risks are responsible for 10% of total losses in almost half of European banks, compared with more than 10% of risk-weighted exposures being linked to operation risk.
The firm also states that over half of banks plan to overhaul their assessment of non-financial risks, due to increased supervision and scrutiny.
Of the banks surveyed, 80% said that they expected scrutiny of how they managed risks around profitability, business models, and risk culture to increase over the next 1-3 years.
Fiona Fry, head of KMPG’s FS Regulatory Centre of Excellence said: “Banks and regulators are clearing turning their attention to non-financial risks which can have a huge impact on the bank’s bottom line.
“Each of these risks tend to require specific know-how from a multitude of areas, and so specific risk management processes should be established, sooner rather than later.”
