Banks face considerably lower ratings if they don’t tackle financial crime and governance

From: RegTech Analyst

Sigma Ratings and Fitch Ratings warn in a new report that banks and financial institutions could face serious risks if they neglect to tackle financial crime, oversight and governance risk.

The new joint research comes hot on the heels of Fitch investing in the RegTech company the other week.

The researchers found that financial crime and governance risk is likely to become ratings relevant in the future. They argued that the trifecta of authorities, investors and the public is likely to become even more conscious of the social impact of the institutions they do business with.

The fact that fines and remedition efforts continue to become more expensive also contributed to this.

The researchers also said that being able to detect the early warning signs in publicly available data is more likely to make a potential ratings action more likely.

They also found that utilising technology that can help aggregate massive amounts of data in real-time and distill it into actionable insights could enable banks and financial institutions to more closely monitor client behaviours

The report is named Governance Risk for Banks: Drawing on Experience and External Expertise to Assess Financial Crime Risk.

Fitch and Sigma Ratings also used the latter’s proprietary technology to look at three cases where Wells Fargo, Danske Bank, and Commonwealth Bank of Australia failed to live up to their compliance obligations.

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