Featured Product

    RBI Governor on Upcoming Work on Governance and Compliance Functions

    June 12, 2019

    The RBI Governor Shaktikanta Das spoke about the current status and the way forward for regulation and supervision of the banking and non-banking sectors in India. In addition to outlining the critical issues facing the financial sector, he also summarized the upcoming work of RBI in the area of governance and compliance functions of banks and non-banks.

    The RBI Governor highlighted that the last few years have been testing times for Indian banks as they grappled with deteriorating asset quality leading to higher provisioning requirements, falling profitability and weak capital position. However, the banking system is on the cusp of a transformation, aided by recent policy measures to reduce vulnerabilities and improve its financial health. Several initiatives have been undertaken and are also underway to strengthen the regulatory and supervisory frameworks aimed at increasing the resilience of the banking system. He discussed the work done on dealing with stressed assets and on the frameworks for countercyclical capital buffer, liquidity coverage ratio, net stable funding ratio, and non-bank finance companies. Next, he highlighted some important issues that need to be addressed in the coming months, with the first and foremost issue being governance reforms in banks and non-banks, including the following:

    • Enhancing the quality and stability of the boards of public-sector banks through further streamlining appointment process, succession planning, and compensation. These aspects could be evaluated by bank boards and reviewed by the Banks Board Bureau.
    • Monitoring the performance of MDs/CEOs of both public- and private-sector banks by the Board of Directors, either through a sub-committee or through an external peer group review.
    • Establishing an effective performance evaluation system for banks to improve their financial and operating parameters. The Government, the Bank Board Bureau, and the Reserve Bank are engaged in developing an objective framework for performance evaluation of public-sector banks. This should redefine the contours of corporate governance in public-sector banks, with a focus on transparency, accountability, and efficiency.
    • Dealing with governance issues in private-sector banks, with these issues mainly relating to incentive structure of their managements, quality of audits and compliance, and efficient functioning of Audit and Risk Management Committees. RBI has proposed the guidelines for compensation in private-sector banks, which cover specification of minimum variable pay component and claw-back arrangements, among others.

    Along with risk management, compliance functions in banks is one of the key elements in the corporate governance structure. These have to be adequately strengthened and made sufficiently independent. some incidents in the financial sector have underscored the need for specialization in supervision and regulation. The build-up of risks among regulated entities due to exposure concentrations, non-transparent market practices and the associated contagion effects in the banking sector have significant implications for financial stability. Considering these issues, the Reserve Bank has now decided to build a specialized regulatory and supervisory cadre for regulation and supervision of banks, non-banks and co-operatives. This specialized cadre in the Reserve Bank will play a pivotal role so that sound banking and non-banking sectors efficiently intermediate the financing requirements of the entire economy.

    Considering the developments in fintech landscape, RBI is strengthening the surveillance framework and has issued draft guidelines on the Framework for Regulatory Sandbox. RBI will also continue to monitor the activity and performance of the non-bank financial sector, with a focus on major entities and their inter-linkages with other sectors. In conclusion, Mr. Das highlighted that reforms are an ongoing process. RBI will endeavor to be proactive in its approach. In the fast-changing financial landscape, RBI will continue to be watchful to the emerging challenges and respond to them appropriately to ensure a resilient and robust financial system, said Mr. Das.


    Related Link: Speech

     

    Keywords: Asia Pacific, India, Banking, Non-Bank Finance, Governance, Internal Controls, Compliance, Operational Risk, RBI

    Related Articles
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    News

    MAS Consults on Capital and Reporting Requirements for Market Risk

    The Monetary Authority of Singapore (MAS) launched a consultation on the standards for market risk capital and the associated reporting requirements for banks incorporated in Singapore.

    September 13, 2021 WebPage Regulatory News
    News

    FDIC Announces Winners of Tech Sprint to Reach Unbanked Consumers

    The tech lab of the Federal Deposit Insurance Corporation (FDIC) selected three winning teams in a tech sprint designed to explore new technologies and techniques to help banks meet the needs of unbanked consumers.

    September 13, 2021 WebPage Regulatory News
    News

    PRA Letter Sets Out Findings on Reliability of Regulatory Reporting

    PRA published a "Dear CEO" letter that sets out findings of a review on the reliability of regulatory reporting and reiterates the supervisory expectations on regulatory reporting.

    September 10, 2021 WebPage Regulatory News
    News

    APRA Connect to Go Live; APRA to Reduce Reliance on CLF

    The Australian Prudential Regulation Authority (APRA) confirmed that its new data collection solution APRA Connect will go live on September 13, 2021.

    September 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7472