Risk Governance of Financial Institutions in the EU

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This paper investigates the determinants of risk governance practices at financial institutions in the EU. Using hand-collected data on a sample of 54 banks and 33 insurance companies, we find that risk governance practices are stronger in banks than in insurance companies, more advanced in common law countries (UK and Ireland) and less well developed in Napoleonic countries (Benelux, France, Spain), and influenced by the corporate governance characteristics of the corporation. More specifically, institutions with powerful owners (>20%) tend to give more power to the board in setting up the risk framework but report weaker risk controls, and institutions with more independent boards report stronger risk controls while giving less autonomy to the risk committee.

Author(s):

Marion Dupire    
Univ. Lille
France

Regine Slagmulder    
Vlerick Business School
Belgium