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Even with strong trade-level controls, banks can face adverse client outcomes when portfolio interactions and stress-driven liquidity demands are not visible. Suitability for complex products must be evidenced at portfolio level under stress, not only at trade execution. We outline how to close this measurement gap.
Suitability risk for complex products depends on how the client's portfolio behaves under stress, not on a single trade. Even with strong trade-level controls, adverse client outcomes can arise when portfolio interactions and stress-driven liquidity demands are not visible across service models and booking centres.
The gap is not in policy. It is in measurement and embedment — translating the right principles into forward-looking, portfolio-level quantification.
Cristian MontilloDirector, Financial Risk Management, PwC SwitzerlandA defensible approach rests on two principles: complement qualitative judgement with forward-looking stress measures, and assess outcomes at client level, not trade-by-trade, to capture interaction effects. The same insights should also strengthen the quality of advice and client communication.
Supervisory expectations increasingly focus on auditable evidence that controls remain effective under stress. Portfolio-level signals only help when embedded in a clear operating model with a common risk taxonomy, consistent triggers, and explicit ownership across the lines of defence.
Explore the full whitepaper
Suitability Risk Measurement for Complex Financial Products
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