The risk appetite framework of Maltese banks : a comparative analysis

Abstract

The aim of this dissertation is to analyse how local banks have responded to the regulatory pressures put on by international regulatory and supervisory bodies in relation to the Risk Appetite Framework (RAF). To satisfy this aim, this dissertation will adopt a qualitative approach, utilizing semi-structured interviews as the primary source of data collection, supplemented by secondary sources of data such as: reports; guidelines; and certain financial statements. A sample of Maltese Banks will be considered across the various bank categories recognized by the Central Bank of Malta, namely: Core Domestic Banks; Non-Core Domestic Banks; and International Banks. The interviews will be held with a member of the respective banks’ Risk Department team or with the relevant member within the bank, in the case that banks do not have a Risk Department. After holding interviews with the participants, the data gathered will be analysed by comparing the responses of the banks and highlighting the main similarities and differences. The main themes will be brought to light, with particular focus on whether the banks utilize the RAF, for how long they have been utilizing it and the frequency adopted when reviewing such a dynamic framework. Moreover, banks’ development and implementation approach with regards to the structure and content of the RAF will be compared. The benefits and challenges encountered by the participants throughout the process of developing and implementing the RAF will also be evaluated. Finally, recommendations will be made to the main parties involved in the application of such a framework, namely, Maltese Banks and the regulator.