UK banks have been criticised for failing to tackle issues with their risk management systems, despite regular messaging.

The Prudential Regulation Authority (PRA), the regulatory arm of the Bank of England responsible for prudential regulation and supervision of banks, set out its priorities for 2023 in a letter to chief executives of institutions.

The top priority set out by regulators was to improve risk management and governance frameworks to build financial resilience, addressing the blind spots exposed by the energy crisis and other major economic events which have impacted financial markets over the past few years.

Dr Henry Balani, Global Head of Industry & Regulatory Affairs at Encompass Corporation, said: “In uncertain economic times, it’s more important than ever that regulators work closely with banks and financial services organisations to improve risk management. All too often, manual systems remain in place for managing complex and time-consuming tasks related to anti-money laundering, risk and compliance. This approach is no longer fit for purpose.

"It’s time to wake up to the crucial role that innovative technology, and particularly automation, can play in improving and modernising risk management, and enabling banks to be ensured of effective and efficient compliance. Doing so will not only save time and money but will also help protect banks and their customers in increasingly challenging times.”

The PRA stated that these issues have continued, despite regular messaging around addressing the risks that arose following the collapse of a major hedge fund in 2021.