Featured Product

    AMCM Issues Guideline on Supervisory Review Process for Banks

    November 28, 2022

    The Monetary Authority of Macao (AMCM) published a guideline on the supervisory review process that helps banks assess risks and capital adequacy.

    The guideline sets out the principles and arrangements of the supervisory review process, describes the general requirements and elements that should be included in the Internal Capital Adequacy Assessment Process (ICAAP), and defines the principles and methodologies of the Supervisory Review and Evaluation Process (SREP) of a bank. The guideline provides a transparent and informative description of the methodology and the supervisory procedures that the AMCM will adopt for capital assessment of banks and that will be integrated into a risk-based supervision framework. The guideline follows a principle-based approach and the requirements set out in this guideline apply to all banks incorporated in Macao on solo and consolidated basis. Below are the four key principles of the supervisory review process:

    • Principle 1—Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for maintaining their capital level.
    • Principle 2—AMCM has the responsibility and power to review and evaluate banks’ internal capital adequacy assessments and strategies as well as their ability to monitor and ensure their compliance with regulatory capital ratios. AMCM will take appropriate supervisory action if they are not satisfied with the result of this process.
    • Principle 3—AMCM expects banks to operate above the minimum regulatory capital ratios under Pillar 1 and has the ability to require banks to hold capital in excess of the minimum.
    • Principle 4—AMCM will seek to intervene at an early stage to prevent capital from falling below the minimum levels required to support the risk characteristics of a particular bank and will require rapid remedial action if capital is not maintained or restored.

    Under the ICAAP, a bank should carry out internal capital adequacy assessment based on its risk assessment results of the last financial year. A capital planning with stress testing should also be conducted, covering a period of at least three years following the last financial year. The above results should be presented in a report and submitted to AMCM no later than April 30 of each year following the last financial year. With regard to SREP, the guideline states that AMCM will carry out an overall assessment of a bank’s risk profile and the capital needs derived from its risk profile, to determine the total capital requirement of the bank. The total capital requirement set by AMCM comprises the regulatory capital requirement under Pillar 1 plus a capital add-on required by Pillar 2 to address the overall risks and uncertainties, including a capital buffer to cover stress testing; this total capital requirement also includes a supervisory capital add-on imposed by AMCM when considered necessary under the SREP.

     

    Related Link: Guideline (PDF)

     

    Keywords: Asia Pacific, Macao, Banking, Basel, Regulatory Capital, SREP, ICAAP, Stress Testing, Pillar 2, AMCM

    Featured Experts
    Related Articles
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697