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202101 MaterialMisconductCostsActuals
For the purpose of the Concurrent Stress Test misconduct risk is defined as the current or prospective risk of losses to an institution arising from inappropriate supply of financial services including cases of wilful or negligent misconduct. The following is a non-exhaustive list of the main types of misconduct risk: (a) the mis-selling of financial products to retail customers (e.g. payment protection insurance); (b) the mis-selling of financial products to professional clients (e.g. US subprime mortgage-backed securities); (c) the violation of national and international laws, rules and regulations (e.g. tax rules, anti-money laundering rules, anti-terrorism rules, economic sanctions, anti-trust rules); (d) the manipulation of financial market benchmarks or financial market prices (e.g. the manipulation of LIBOR rates and foreign exchange benchmark rates); (e) the failure to meet fiduciary standards (e.g. disclosure obligations to shareholders). In practice, it is likely that most misconduct costs arise in relation to operational Event Type Category 4 (Clients, Products and Business Practices), as set out in CRR Article 324.