Article

Navigating the risk based supervision process

Understanding and addressing

The move towards risk based supervision is a step in the right direction for the banking industry. However, challenges abound both for the supervisor and the banks as the industry grapples with wide-ranging issues including quality of data, scalability of regulatory reporting processes, efficacy of risk management systems and cost of compliance.

Gather an in-depth perspective

The Reserve Bank of India has embarked on a process to move towards a risk based supervision approach from the earlier transaction-centric approaches. The new approach is expected to significantly change the approach towards regulatory supervision. As a result, banks will be required to gear up to meet the requirements of the revamped supervisory process.

The key changes in the revamped regulatory supervision process are highlighted below:

  • Forward looking with a focus on both present and future risks
  • Optimization of supervisory resource deployment through off-site monitoring
  • Focus of on-site supervision on targeted and thematic reviews
  • Impetus on corporate governance and regular dialogue between the bank and supervisor

This document explains the revamped supervision process and provides a perspective on the holistic approach banks can take to integrate the supervisory process with the internal control systems and internal capital adequacy assessment processes.

Did you find this useful?

Related topics