There has been a disturbing uptick in operational risk at big banks that often transforms itself into other legal and reputational risks to financial institutions, Federal Reserve Governor Sarah Bloom Raskin said Tuesday. Raskin, speaking on a Suffolk University panel focusing on regulation, said that based on her discussions with bank examiners she has seen a hike in operational risks associated with problems related to people, processes and procedures at financial institutions. She cited the so-called "robo-signing" scandal as an example where institutions outsourced much of their mortgage compliance work to third parties without strong oversight of these institutions. "There is a very strong correlation between failures to manage operational risk and other risks to your institution," Raskin said. She rejected notions that a self-regulatory system could foster a culture of compliance.
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