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In the eye of the beholder: Regulatory versus industry risk perception

Author

Listed:
  • Burns, Meghan E.

    (Associate Principal Analyst at Financial Industry Regulatory Authority, Office of the Chief Economist, USA)

  • Kenett, Dror Y.

    (Economist at Financial Industry Regulatory Authority, Office of the Chief Economist, USA)

  • Sokobin, Jonathan S.

    (Chief Economist and Senior Vice President, Financial Industry Regulatory Authority, Office of the Chief Economist, USA)

Abstract

Is the perception of risk, as outlined and defined by the regulatory and supervisory community, shared by private financial institutions? In this paper, we identify risk themes present in the public disclosures of key financial organisations and discuss similarities and differences. We find that for established (traditional) risk themes, there is relatively greater consensus between regulators and industry participants. For emerging risk themes, however, we find a divergence in perspectives between industry and regulators and, at times, even within each group. We discuss this spectrum of risk perspectives as well as approaches to mitigate the resulting ‘risk gap’ between the regulators and the industry.

Suggested Citation

  • Burns, Meghan E. & Kenett, Dror Y. & Sokobin, Jonathan S., 2020. "In the eye of the beholder: Regulatory versus industry risk perception," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 13(3), pages 242-254, June.
    • Handle: RePEc:aza:rmfi00:y:2020:v:13:i:3:p:242-254
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    More about this item

    Keywords

    risk themes; risk gap; risk disclosures; regulation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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