Risk & Compliance
Risk & Compliance is one of the focus topics of Finance Loop. Emerging tech changes both the risks financial firms face and the tools used to manage them. RegTech supports customer checks and transaction monitoring, including KYC and AML, while digital systems help firms analyze credit risk and liquidity risk. Greater reliance on technology also makes IT resilience and provider oversight part of financial risk management, covered by DORA. The articles explain these duties alongside MiCA for crypto services and the EU AI Act for AI, so readers can identify the rules and controls relevant to a digital financial service. Frankfurt is home to banking supervision at the ECB as well as EIOPA and AMLA.
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What is credit risk?
Credit risk is the risk that a borrower or counterparty does not pay as agreed. How banks measure it under the CRR, with the standardized and the IRB approach. -
Market risk vs credit risk: what is the difference?
Market risk is loss from price moves; credit risk is loss when a borrower does not pay. How Basel III and the CRR measure each, with a comparison table. -
What is liquidity risk?
Liquidity risk is the risk that a bank cannot pay its obligations when they fall due. How the LCR and the NSFR limit it, each with a minimum of 100%. -
Liquidity vs solvency: what is the difference?
Liquidity is the ability to pay debts when due; solvency means assets cover all liabilities. How ratios, bank rules and insolvency law tell the two apart. -
What is counterparty risk?
Counterparty risk is the risk that the other side of a trade defaults before settlement. How it differs from credit risk and how EMIR clearing limits it. -
What is collateral?
Collateral is an asset pledged or transferred to secure a loan or trade. EU rules under Directive 2002/47/EC, haircuts, repos and DLT-based collateral. -
What are Basel III requirements?
Basel III sets minimum capital, leverage and liquidity rules for banks. The ratios, the EU rules in CRR III from 1 January 2025, and Basel III vs Basel IV. -
What is compliance in banking?
Compliance in banking makes sure a bank follows the rules that apply to it. What the compliance function does under EBA guidelines, MaRisk and the AMLR. -
KYC vs AML: what is the difference?
KYC is the customer check inside anti-money laundering; AML covers the whole program. Duties under the EU AMLR, the role of AMLA and KYC for crypto firms. -
What is MiFID II in simple terms?
MiFID II is the EU directive for investment firms and trading venues, in force since 3 January 2018. Client rules, inducements, research and trade reporting. -
What is regtech?
RegTech is technology that banks use to meet regulatory, compliance and reporting duties; suptech is its twin at the supervisor. Uses, EBA data and DACH rules. -
What is DORA regulation?
DORA is the EU Digital Operational Resilience Act, Regulation (EU) 2022/2554, in force since 17 January 2025. Its five areas, scope and IT provider rules. -
What is MiCA regulation?
MiCA is the EU Markets in Crypto-Assets Regulation, Regulation (EU) 2023/1114. What it covers, how banks use it, stablecoin rules, dates and the transition. -
What is the travel rule?
The travel rule makes banks and crypto firms send payer and payee data with each transfer. FATF Recommendation 16, EU Regulation 2023/1113 and DACH practice. -
What does the EU AI Act regulate?
The EU AI Act, Regulation (EU) 2024/1689, regulates AI by risk. Credit scoring and life and health insurance pricing are high-risk uses; dates and bank duties.
Where to start
Risk management in banking means that a bank measures the risks it takes, holds capital and liquid assets against them and reports both to its supervisor. Crypto firms in the EU follow the same pattern under MiCA and the Travel Rule, with BaFin as the supervisor in Germany. RegTech is the software that runs these checks.