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.

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