The review covers new products, significant changes to existing products, new business lines and entry into new markets. The risk management function feeds its assessment of risk under various scenarios into the review, and if the arrangements are not in place, the launch is postponed1.

What counts as a new product depends on the size, complexity and sophistication of the institution. Even a small change to a payment formula is a reason to review the product as new if it changes the nature of the risk significantly2.

Notes

  1. Basel Committee on Banking Supervision, "Principles for enhancing corporate governance" (October 2010; Japanese provisional translation by the Financial Services Agency, in Japanese), paragraph 88 (printed page 31). ↩

  2. Board of Governors of the Federal Reserve System, "Trading and Capital-Markets Activities Manual", Section 2070.1 "Legal Risk" (September 2002), page 7, "New-Product Approval". ↩