Standard & Poor’s Ratings Services announced that it is expanding its review of the financial service industry’s trading risk management practices.

The initial target for the expanded reviews will be global banks and other financial institutions that have initial target for the expanded reviews will be global banks and other financial institutions that have significant trading operations.

The evaluation of trading risk management practices will be extensive and will remain an integral part of Standard & Poor’s overall ratings process, the rating agency says. “Standard & Poor’s expanded risk management approach focuses on the effectiveness of the policies, infrastructure, and methodologies that a financial institution has in place,” said Standard & Poor’s risk management specialist Prodyot Samanta.

“Historically, most serious losses in trading operations have been traced generally to not one but a series of weaknesses in these three areas. We believe our formalized approach will enable us to evaluate more closely the strengths and weaknesses of an institution’s overall trading risk control practices.”

And, the information from the TRM reviews will be included as part the full credit analyses. “As Standard & Poor’s has historically factored risk management issues into the ratings process, we expect that most firms will have risk management capabilities commensurate with their ratings,” Samanta said. “However, some ratings changes could occur if this analysis finds exceptional strengths or weaknesses in risk management.”

Standard & Poor’s says this TRM initiative is part of a broader effort to provide more in-depth analysis and incisive commentary on the many critical dimensions of risk that determine overall creditworthiness. In the past two years, it has intensified its risk assessments of liquidity, recovery in the event of default, accounting, corporate governance, credit derivatives, and securitization. Standard & Poor’s says that, ultimately, it intends to provide both a holistic assessment of enterprise risk management of corporations and financial institutions and a discrete analysis on key components of credit, operating, market, and other risks.