BCBS published a report presenting the findings of a range-of-practice study on how supervisors worldwide have adopted frameworks, processes, and tools to support early supervisory intervention. The report examines approaches to early supervisory intervention, with a view to providing supervisors with the opportunity to further their understanding of this challenging issue.
Based on the practices observed, early supervisory intervention involves supervisors taking actions to correct an identified weakness or potential issue before rules or buffers are materially breached. In the context of prudential supervision, early intervention programs are aimed at minimizing the impact of material distress and the probability of failure of an individual bank or group of banks on the broader financial system. Early supervisory intervention is firmly entrenched within a risk-based approach to supervision, where the intensity of supervisory attention escalates as the risks and impact that an institution poses to financial stability increases. The study finds that early supervisory actions taken by supervisors depend not only on the expert judgment of supervisors but also, to a large extent, on an organizational infrastructure that sets in place:
- Supervisory reinforcement through both vertical and horizontal risk assessments to maximize the early detection of risks
- A clear framework for when actions should be taken
- Internal governance processes and programs to support supervisory development and capacity-building
No single supervisor uses or adopts all of the practices outlined in this report. Rather, these practices are a compilation of the range of approaches being used in various jurisdictions. Case studies are included to help illustrate some of these methods. The report also recognizes the extensive literature and guidance on the supervisory review process, supervisory frameworks, and methods, which many authorities use as part of their day-to-day on- and off-site monitoring. This report limits its references to practices, methodologies and tools used in the context of early supervisory intervention.
Related Link: Press Release
Previous ArticleValdis Dombrovskis of EC Speaks at a Roundtable on Cryptocurrencies
Next ArticleFSB Completes Peer Review of Singapore
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.