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Banking Supervision (Basic Core Principles (BCS) (Inherent Risks (Risk…
Banking Supervision
Basic Core Principles (BCS)
"29"
Reviewed from 25 in 2012
"1 - 13"
Need for timely supervisory actions through the Risk Based Supervision (RBS) Framework
Risk Based Supervision (RBS) Framework
Advantages of RBS
"Forward Looking"
I.e. Proactive
Not Resource Intensive
Addresses root causes rather than symptoms
Emphasizes risk management (quality of risk management) as single most important issue for regulators
Risk Management Control Functions
Risk Management
Internal Audit
Senior Management
Compliance
Board (Governance)
Financial Analysis
Performance Rating
4 more items...
Not a "one size fit all"
i.e. It accounts for differences in scope, size, risk and complexity
Characteristics of RBS
Emphasizes continuous assessment
Evaluates:
- Risk profile
- Financial conditions
- Risk management process
- Compliance with laws and regulations
Financial Institutions Risk Matrix
Roles (Functions), Responsibilities, Power (Authority) of Supervisors
Need for early intervention
"14 - 19"
Need for good governance
Need for Risk Management
Need for Compliance with Standards, Laws and Regulations
Used by IMF and World Bank to assess a country's banking system
De facto minimum standard for prudential regulations & banking supervision
Inherent Risks
Liquidity Risk
Legal/Regulatory Risk
Operational Risk
Strategy Risk
Market Risk
Insurance Risk
Credit Risk
Risk Ratings
Moderate
Above Average
Low
High
Pre-conditions for Effective Banking Supervision
Basel Accords
Prudential Guidelines