Role of Chief Risk Officer for borrowing, debt management, liquidity management and lending operations
1. There shall be a Chief Risk Officer for borrowing, debt management, liquidity management and lending operations, whose powers and functions are laid down in the present decision.
2. The role of Chief Risk Officer is to ensure that the systems, methodologies and processes used to implement the borrowing, debt management, liquidity management and lending operations are designed and implemented in a manner that ensures to the greatest extent possible the protection of the financial interests of the Union and the sound financial management of the borrowing, debt management, liquidity management and lending operations.
3. The role of Chief Risk Officer shall be exercised independently of the functions and tasks related to the planning, implementation, execution and accounting for operations. The Chief Risk Officer shall enjoy autonomy in carrying out the tasks and responsibilities described in this Chapter and shall be provided with the necessary resources.
4. The Chief Risk Officer shall report directly to the Member of the College responsible for the Budget with respect to the responsibilities set out in this Chapter.
5. A staff member entrusted with the role of Compliance Officer shall report directly to the Chief Risk Officer on matters set out in Article 19(4).
Establishment of a High Level Risk and Compliance Policy
1. The Chief Risk Officer shall draw up a High Level Risk and Compliance Policy that shall identify the principal risks to the financial interests of the Union arising from the implementation of the borrowing, debt management, liquidity management and lending operations. In this context, the Chief Risk Officer shall take into account the principles for risk recognition and assessment, according to which an effective internal control system identifies and continuously assesses the principal risks.
2. The High Level Risk and Compliance Policy shall set the strategic risk objectives and shall provide the overarching framework for the risk management guidelines applicable to borrowing, debt management, liquidity management and lending operations.
3. The High Level Risk and Compliance Policy shall identify all associated risks, including liquidity, market, funding, credit, counterparty and operational risks, arising from the implementation of the borrowing, debt management, liquidity management and lending operations. The High Level Risk and Compliance Policy shall set for each risk the high-level risk appetite, the general methodologies to measure the risk exposure, the monitoring and reporting requirements as well as the escalation mechanism to be taken in case of breaches or non-compliance. It shall verify the solidity of procedures needed to ensure the probity, integrity and transparency of those operations and shall limit any financial or operational risk appropriately.
4. The High Level Risk and Compliance Policy shall include the following rules and procedures:
(a)
rules and procedures to be respected by persons who are responsible for the operational implementation and execution of the diversified funding strategy, and;
(b)
rules and procedures to prevent money laundering, terrorist financing, execution of borrowing, debt management and lending operations by entities incorporated in or established in jurisdictions listed under the relevant policy on non-cooperative jurisdictions or that are identified as high-risk countries pursuant to Article 9(2) of Directive (EU) 2015/849 of the European Parliament and of the Council ( 16 ) , or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information, breaches of sanction regimes and other relevant financial irregularities.
5. The High Level Risk and Compliance Policy shall be reviewed at least annually and revised if necessary.
6. The High Level Risk and Compliance Policy shall be submitted by the Chief Risk Officer to the Member of the College responsible for the Budget for approval.
Role of the Chief Risk Officer
1. The Chief Risk Officer shall monitor that the High Level Risk and Compliance Policy is implemented in a comprehensive and consistent manner.
2. In particular, the Chief Risk Officer shall carry out the following tasks:
(a)
issue an opinion on the draft funding plan;
(b)
issue an opinion on the draft liquidity management strategy;
(c)
review internal rules and guidance documents issued by the Director-General of the Directorate-General for the Budget for the implementation of this Decision for consistency with the High Level Risk and Compliance Policy, that he or she may request to modify;
(d)
establish and oversee continued compliance with robust processes for risk identification, quantification and monitoring;
(e)
set up appropriate risk limits to ensure that the credit risk, market risk, and liquidity risk undertaken through the borrowing operation, debt management operations and liquidity management operations remain compliant with the risk objectives and risk appetite. The risk limits may be individual limits set up at counterparty level and/or instrument level, and risk limits set up at the level of the agregated exposures resulting from the debt management and the liquidity management operations.;
(f)
identify potential breaches of the High Level Risk and Compliance Policy or of other risk related guidelines, policies and limits and recommend possible steps to be taken in case of breaches or non-compliance.
Reporting by the Chief Risk Officer
1. The Chief Risk Officer shall regularly report on material risks and on the compliance with rules and procedures set according to Article 19(4) to the Member of the College responsible for the Budget, to the Risk and Compliance Committee, to the Director-General of the Directorate-General for the Budget and to the Accounting Officer. The Chief Risk Officer shall also provide regular information on risks and limits to persons who are responsible for the operational execution of the diversified funding strategy.
The Director-General of the Directorate-General for the Budget shall, without undue delay, take necessary measures to address those findings and provide explanations on the measures undertaken to the Chief Risk Officer.
When reporting to the Member of the College responsible for the Budget, the Chief Risk Officer may also, as appropriate, inform that Member about the findings referred to in the second subparagraph and about the deliberations of the Risk and Compliance Committee.
2. The Chief Risk Officer shall report on the implementation of the High Level Risk and Compliance Policy to the Commission once per year.
Role of the Risk and Compliance Committee
1. A Risk and Compliance Committee shall be established to support the Chief Risk Officer in the conduct of responsibilities of that officer.
2. The Risk and Compliance Committee shall:
(a)
be consulted by the Chief Risk Officer on the High Level Risk and Compliance Policy;
(b)
support the Chief Risk Officer in the tasks referred to in Article 20(2), points (a), (b), (c) and (d);
(c)
participate in evaluating, monitoring and approving practices regarding the implementation of the High Level Risk and Compliance Policy and relating to the risk management of the borrowing, debt management and lending operations;
(d)
support the Chief Risk Officer in assessing emerging risk exposures in connection with borrowing, debt management and lending operations, and be informed by the Chief Risk Officer about exceeding of limits set to reduce risks or non-compliance with the High Level Risk and Compliance Policy, and other risk related guidelines, policies and limits.
Members and organisation of the Risk and Compliance Committee
1. Members of the Risk and Compliance Committee shall be the Chief Risk Officer, the Accounting Officer of the Commission, the Compliance Officer, two staff members from Directorates-General whose functions entail knowledge of risk management and of financial markets supervision, two staff members of the Directorate-General for the Budget designated by the Director-General of the Directorate-General for the Budget.
2. The Director of the Directorate overseeing the issuance of debt to finance Union programmes shall be a permanent observer of the Risk and Compliance Committee without a voting right.
3. The Directors-General of Directorates-General responsible for risk management and supervision of financial markets and the Director-General of the Directorate-General for the Budget shall designate the Risk and Compliance Committee members. The designated members shall possess adequate knowledge and comptences in areas relevant for the work of the Risk and Compliance Committee, in particular in relation to risk management and financial market supervision.
4. The Chief Risk Officer shall appoint at least two and up to three external experts to participate in the meetings of the Risk and Compliance Committee. The external experts shall give opinions and participate in deliberations without voting rights on matters brought before the Committee.
5. The Risk and Compliance Committee shall, where possible, adopt positions on the basis of consensus or, when a consensus is not reached, on the basis of a simple majority of its members. In the event of a tied vote, the vote of the Chief Risk Officer shall be decisive.
6. The Risk and Compliance Committee shall adopt its rules of procedure.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
