The Evolution of Risk and Risk Management – A Prudential Regulator's Perspective

The decade since the Reserve Bank of Australia’s 1996 Conference on ‘The Future of the Financial System’ has been a period of remarkable strength for banking systems in advanced industrial countries, particularly Australia. Banking institutions have enjoyed strong growth in business volumes, high asset quality and record profi tability and they have proven their resilience in the face of episodic market and other shocks. The period has also been characterised by intensifying competition in banking, which has put margins under sustained downward pressure, and continued innovation, which has altered the complexity of banking activities. The increasing power and sophistication of technology, the growth of electronic commerce and greater use of outsourcing arrangements have led to fundamental changes in the manner in which banking institutions produce and deliver their services and manage their risks.