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OCC turns spotlight on custody risk

OCC turns spotlight on custody risk

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Control systems must be rigorously applied if custodians are to effectively manage their risks. So states the US Office of the Comptroller of the Currency in a new set of guidance for banks and compliance officers.

The US regulatory agency says the guidance will assist examiners in determining whether a bank has adequate systems to identify, measure, monitor and control the risks undertaken in custody services. In issuing the notes, the OCC observes that the level of assets under custody has increased significantly, as has competition among financial institutions for this business.
The OCC says that implementation of effective control systems is imperative "given the need for banks to effectively employ technology to process large volumes of transactions under custody."
The handbook applies the OCC’s supervision by risk framework to custody services by outlining the underlying credit, interest rate, liquidity, price, foreign currency translation, transaction, compliance, strategic and reputation risks.

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