Featured Product

    BoM Revises Guidelines on ECAI Use and Cross-Border Exposure of Banks

    April 01, 2021

    BoM recently revised a couple of guideline documents for banks and signed a memorandum of understanding (MoU) with BSP, the central bank of Philippines. The MOU, which took effect on March 01, 2021, covers cooperation in the development of banking and payment systems, fintech, cybersecurity, and sustainable central banking. One of the published guidelines addresses revisions to BoM's approach to the recognition process of External Credit Assessment Institutions (ECAIs) and the use of eligible ECAIs by banks, including as part of the standardized approach to credit risk; the revised guideline shall become effective as from April 01, 2021. The other revised guideline addresses certain requirements that banks would need to be follow in respect of their cross-border exposure.

    This guideline on recognition and use of ECAIs covers the recognition of ECAIs, the principles for consistent use of credit assessments of ECAIs, and the use of Export Credit Agencies (ECAs). The guideline sets out minimum requirements for each of the six eligibility criteria for recognition of ECAIs, including objectivity, independence, international access/transparency, disclosure, resources, and credibility. Only the credit assessments of eligible ECAIs shall qualify for the standardized approach to credit risk. BoM can use both direct and indirect recognition methods for ECAIs. An application to recognize an ECAI may be initiated by a bank intending to use its ratings under the standardized approach to credit risk, or by an ECAI itself. The BoM guideline on standardized approach to credit risk permits banks to use consensus country risk scores of ECAs to determine risk-weights for claims on sovereigns, in cases where countries are not rated by eligible ECAIs. BoM has not set up a recognition process for ECAs equivalent to the one required for ECAIs. However, ECAs must publish their consensus country risk scores and subscribe to the Organization for Economic Cooperation and Development (OECD)-agreed methodology, for these to qualify for calculating capital requirements under the standardized approach to credit risk.

    The guideline on cross-border exposure provides a risk-based management framework to mitigate the key cross-border banking risks. BoM has issued several guidelines in respect of the identification, measurement, management, and mitigation of credit risk. These include the guideline on country risk management, the guideline on credit risk management, and the guideline on credit concentration risk. The guideline on cross-border exposure supplements these existing guidelines and provides a set of additional minimum standards that would need to be followed by banks in respect of their cross-border exposure. With respect to regulatory reporting, the guideline specifies that a bank shall immediately inform BoM when the bank is affected by a material increase in underlying risks such as credit, legal, or reputational risks in connection with its cross-border exposure or is approached by foreign authorities regarding such matters. BoM stipulates that banks shall fully implement the requirements of this guideline within three months from its effective date.

     

    Related Links

    Keywords: Middle East and Africa, Mauritius, Banking, Credit Risk, Standardized Approach, Credit Ratings, ECAIs, Regulatory Capital, Basel, Cross-Border Exposures, Basel, BoM

    Featured Experts
    Related Articles
    News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News
    News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News
    News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News
    News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News
    News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News
    News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News
    News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News
    News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793