Bafin calls for better risk management

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FRANKFURT – German financial regulator Bafin has called for banks to exercise better risk management in the wake of the credit crisis.

The German federal watchdog said German banks’ risk management had been caught unprepared for the complex global risks highlighted by the crisis.

“Banks need to set up their risk management systems in such a way that they can tell in time when extreme situations are approaching, and to remain able to act once they have arrived,” said Bafin president Jochen Sanio. “Expertise, risk management and money, that is what the German banks that plunged into the subprime adventure lack.”

Last year, German banks IKB and Sachsen LB were badly hit by the liquidity crisis and required billions of euros in bailouts.