Risk-based supervision

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Risk-Based Supervision

TC Note sets out main features of RBS

Toronto Centre note provides a high-level overview of risk-based supervision (RBS) for all regulators and supervisors. Describes the principle features of RBS and the main operational and managerial issues that supervisors encounter when moving to a risk-based framework. Discusses: i) characteristics of RBS; ii) principles of RBS; iii) risk-based process; iv) documentation; v) peer review and quality assurance; vi) cultural and managerial challenges; and vii) use of RBS across sectors.

Publisher: Toronto Centre Release date: Mar 2018

Type: TC Notes

Peer: The Development and Use of Risk Based Assessment Frameworks , Turning Risk Assessments Into Supervisory Actions , Implementing Risk Based Supervision: A Guide for Senior Managers , How Supervisors Can Improve the Effectiveness of Financial Education

Topics: Risk-based supervision

Sectors: Banking, Insurance, Pensions, Securities

Probability and Impact Rating System (PAIRS)

APRA explanation of its risk-based supervision framework

Australian Prudential Regulation Authority description of its risk-based supervisory approach incorporating assessments of both the probability and impact of the failure of an APRA-regulated entity. Includes common set of rating components for inherent risk, management and control, and capital support; a structured process for combining component ratings into a probability of failure rating; and an impact rating scale. Reflects the manner in which APRA conducts its supervisory activities under its framework for prudential supervision.

Publisher: National Regulators Release date: Feb 2018 Country: Australia

Type: Supervisory Practice

Topics: Risk-based supervision, Supervisory framework

Sectors: Banking, Insurance, Pensions

Risk Assessment Framework for Federally Regulated Private Pension Plans

OSFI's framework for conducting risk assessment of private pension plans

Office of the Superintendent of Financial Institutions of Canada description of its Risk Assessment Framework for federally regulated private pension plans. The risk assessment focuses on: i) early identification of pension plans that may have problems meeting minimum funding requirements, complying with the PBSA, or adopting policies and procedures to control and manage risk; ii) prompt communication with plan administrators advising them of material deficiencies and non-compliance issues; and iii) implementation of appropriate interventions to compel administrators to take corrective measures to address the deficiencies.

Publisher: National Regulators Release date: Apr 2017 Country: Canada

Type: Consultative, discussion and issues paper

Topics: Pension and retirement plans, Risk-based supervision, Supervisory framework

Sectors: Pensions

Supervisory Oversight and Response System (SOARS)

APRA guide on consistent supervisory intervention

Australian Prudential Regulation Authority description of how supervisory concerns based on PAIRS risk assessments should be acted upon. SOARS is APRA's main tool to achieve consistent application of supervisory intervention.

Publisher: National Regulators Release date: Apr 2017 Country: Australia

Type: Supervisory Practice

Topics: Risk-based supervision, Supervisory framework, Early intervention and enforcement

Sectors: Banking, Insurance, Pensions

Selling Investment Products and Handling Client Securities

HKMA guidance on the application of its regulatory standards

Hong Kong Monetary Authority guidance clarifies how its regulatory standards apply to: i) pre-trade disclosure; ii) assessment of customer's concentration risk; iii) "portfolio-based" suitability assessment for private banking customers; iv) alternative investment products; v) supervision of transactions with mismatch(es) or exception(s); vi) staff training; and vii) regular review of controls in relation to handling of client securities.

Publisher: National Regulators Release date: Feb 2017 Country: Hong Kong, China

Type: Guideline

Topics: Risk-based supervision, Consumer education and protection, Transparency and disclosure, Conduct

Sectors: Banking, Securities

Supervisory Priorities in non-Basel Committee Jurisdictions

Results of FSI survey of macroeconomic and financial stability priorities and challenges

Financial Stability Institute paper sets out results of survey of jurisdictions that are not member of Basel Committee on Banking Supervision (BCBS) to gain understanding of their supervisory priorities and challenges. Results show top three macroeconomic and financial stability challenges in non-BCBS jurisdictions are: i) increasing digitalization of finance and financial technology; ii) low or negative interest rate environment; and iii) commodity price volatility. Top three enhancements to supervisory approaches are: i) ensuring forward-looking approach to (risk-based) supervision; ii) enhancing on-site and off-site supervisory approaches; and iii) strengthening bank resolution frameworks.

Publisher: Others Release date: Oct 2016

Type: Consultative, discussion and issues paper

Topics: Supervisory framework, Risk-based supervision, Recovery and resolution, Systemic risk

Sectors: Banking

Modernizing Insurance Solvency Regime

Geneva Association discussion paper on key features of solvency regimes in selected jurisdictions

Geneva Association discussion paper provides overview of current practices, approaches and methods, focusing on selected elements such as valuation principles, risk sensitivity, risk-based capital and internal models. Provides insights and information on the regulatory regime in several countries that have already adopted a risk-based solvency capital approach or are in the process of doing so.

Publisher: Industry Groups Release date: Aug 2016

Type: Consultative, discussion and issues paper

Parent: Common Framework for the Supervision of Internationally Active Insurance Groups

Topics: Capital adequacy, Risk-based supervision

Sectors: Insurance

Risk-Based Global Insurance Capital Standard

IAIS consultation on proposed Insurance Capital Standard on valuation, qualifying capital resources and standard method for determining capital requirement

International Association of Insurance Supervisors consultation solicits comments on three key components of ICS Version 1.0 for confidential reporting purposes: i) valuation methodologies; ii) qualifying capital resources; and iii) implementation of risk based approaches to determine regulatory capital requirements. Focus is on a standard method, with consideration of other methods of calculation of ICS capital requirement to be addressed in Version 2.0.

Publisher: Global Standard-Setting Bodies Release date: Jul 2016

Type: Consultative, discussion and issues paper

Peer: Risk-based Global Insurance Capital Standard Version 2.0, Implementation of Insurance Capital Standard Version 2.0, Insurance Capital Standard Version 1.0 for Extended Field Testing

Topics: Risk-based supervision, Capital adequacy

Sectors: Insurance

Deadline for comments: Oct 2016

How the Central Bank of Ireland is Implementing Risk-Based Regulation

Central Bank of Ireland report sets out its approach to risk- based regulation and supervision

Central Bank of Ireland (CBI) report explains principles of Probability Risk and Impact SysteM (PRISM), a systematic risk-based framework. Allows CBI to: i) adopt a consistent way of thinking about risk across all supervised firms; ii) allocate resources based on impact and probability; iii) undertake a sufficient level of engagement with all higher impact firms; iv) assess firm risks in a systematic and structured fashion; v) ensure that action is taken to mitigate unacceptable risks in firms; vi) provide firms with clarity around CBI's view of risks they pose; vii) use quality control mechanisms to encourage challenge; and viii) analyze better management information about the risk profiles of supervised firms and sectors.

Publisher: National Regulators Release date: Feb 2016 Country: Ireland

Type: Consultative, discussion and issues paper

Topics: Risk-based supervision, Supervisory framework

Sectors: Banking

Risk-Based Approach for Money or Value Transfer Services

FATF guidance to assist countries to apply risk-based approach to money service businesses

Financial Action Task Force guidance to assist countries and their supervisory authorities to apply risk-based approach associated to money or value transfer services (MVTS). Risk-based approach requires that measures to combat money laundering and terrorist financing are commensurate with risks. Overall risks and threats are influence by extent and quality of regulatory and supervisory framework as well as implementation of risk-based controls and mitigating measures by each MVTS provider.

Publisher: Global Standard-Setting Bodies Release date: Feb 2016

Type: Guideline

Peer: Risk-Based Approach for the Banking Sector

Topics: Financial inclusion, Money laundering and terrorist financing, Risk-based supervision

Sectors: Banking

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382 records