Banks' Risk Officers at Risk

The recent departures of executives overseeing risk at several top banks burned by writedowns and losses suggests that more heads are likely to roll as the ongoing credit crunch roils on.

Over the past week, both Citigroup(C Quote) and National City(NCC Quote) replaced their heads of risk management.

Observers say that they expect more chief risk officers and chief credit officers -- more commonly seen at commercial banks -- to leave as the deterioration in the housing and mortgage markets continues to play out, most notably resulting in lower earnings and higher credit losses at the banks.

"The role internally has clearly grown in importance," says Terry McEvoy, an analyst at Oppenheimer. "They will be under further scrutiny and that the probability of individuals being asked to leave companies will grow as well."

Citi and Nat City were prominent among the banks and brokerages that have taken a beating this year as the mortgage crisis deepened.

Citi reported nearly $6 billion in writedowns in the third quarter as a result of its exposure to leveraged loan commitments, subprime mortgages and fixed-income trading, while its credit costs jumped by $3 billion. The losses also resulted in the ouster of its CEO Chuck Prince.

Nat City's third-quarter earnings plummeted by 80%, fettered by the disruption in the mortgage industry. The company, which has decided to cut its workforce by 2,500 employees -- most of which will come from mortgage-related positions -- said its mortgage banking business posted a loss of $152 million.

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