**GAO-09-499T**                      Published: Mar 19, 2009. Publicly Released: Mar 19, 2009.                  

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## Highlights

Financial regulators have an important role in assessing risk management systems at financial institutions. Analyses have identified inadequate risk management at large, complex financial institutions as one of the causes of the current financial crisis. The failure of the institutions to appropriately identify, measure, and manage their risks has raised questions not only about corporate governance but also about the adequacy of regulatory oversight of risk management systems. GAO's objectives were to review (1) how regulators oversee risk management at these institutions, (2) the extent to which regulators identified shortcomings in risk management at certain institutions prior to the summer of 2007, and (3) how some aspects of the regulatory system may have contributed to or hindered the oversight of risk management. GAO built upon its existing body of work, evaluated the examination guidance used by examiners at U.S. banking and securities regulators, and reviewed examination reports and work papers from 2006-2008 for a selected sample of large institutions, and horizontal exams that included additional institutions. In January 2009, GAO designated the need to modernize the financial regulatory system as a high risk area needing congressional attention. Regulatory oversight of risk management at large, financial institutions, particularly at the holding company level, should be considered part of that effort.

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## Topics

Auditing and Financial Management

Bank examinationBank managementBanking regulationFederal regulationsFinancial institutionsFinancial management systemsFinancial regulationInternal controlsLending institutionsMonitoringRegulatory agenciesRisk assessmentRisk factorsRisk managementSecurities regulationStandardsCorrective actionGovernment agency oversightPolicies and procedures