The Risk Management Function: the Case of a Group of Italian Credit Cooperative Banks

This study focuses on the analysis of the risk management function of the credit cooperative banks in the North-West of Italy. We analysed all reports, published in 2014, regarding the specific risk policy, the Risk Appetite Framework (RAF), the ICAAP reports and the public disclosure of Pillar III of each bank, as required by Basel II Capital Framework. Our first aim was to individuate and thus evaluate the process and the activities of the risk management function. In addition, we analysed the output of this process, which is the ICAAP report, in order to underline and demonstrate that the adequacy and compliance of the Corporate Governance with the laws are reflected in the capitalisations of banks. This is the reason why we decided to monitor if credit cooperative banks of the sample were adequately capitalised in 2014 and if they complied with the requirements of Basel II. Our research is organised as follows: in Paragraph 2, we provide the literature review and in Paragraph 3 there is the theoretical background of the topic presented. The definition of the sample of banks and the methodology are described in Paragraph 4. In this section, we also include the presentation of the research questions and phases of analysis. Our results and discussions are presented in Paragraph 5 and conclusions are in the last part of our research.