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INTERNATIONAL MONETARY FUND
34. Effective follow-up ensures that recommendations from the BoT are implemented.
Recommendations in examination reports are discussed with senior bank management and a copy
of the report is sent to the bank's board. Date for responses are established and examiners
follow-up as part of their offsite ongoing monitoring. Numerous examples of examination reports
follow-up were shared with assessors.
35. A bank's risk profile is reflected in a composite rating. Banks are analyzed and, based on
their risk profiles, governance and operating policies, are assigned forward-looking ratings covering
the significant activities that may have an impact on financial condition and performance. At the
completion of the analysis, the bank is also assigned a composite rating that aids supervisors in
developing their supervision plans. The BoT can further leverage its risk analysis by increased
targeting of activities to areas of higher risk and more narrowly scoping annual onsite examinations,
as appropriate.
36. The BoT's consolidated supervision powers have been significantly enhanced. FIBA was
amended to include consolidated supervision over banking groups and financial business groups
(FBGs). FIBA grants the BoT authority to approve the establishment of FBGs, require changes in their
structure if it impedes proper supervision, and to supervise the bank, its parent, subsidiaries, and
affiliates as if they were the same juristic person. The BoT maintains detailed organizational charts of
all FBGs and their ultimate beneficial owners.
37. The BoT supervisory framework and practices provide the foundation for the
continued development of risk-based supervision. Notifications and examination manuals
increasingly focus on analysis of qualitative factors such as governance, risk management and risk
appetite statements in determining the bank's composite rating. The BoT onsite examination has
focused both on the quantitative (e.g., capital, liquidity) as well as qualitative aspects (e.g., adequacy
of board policies, quality of risk management). Moreover, to ensure that the Bank complies with the
BoT notifications, transaction testing is performed to assess bank operations and processes.
Inspection reports are moving away from past audit and compliance approaches. Issuance of best
practices guidance and defining supervisory expectations would encourage the migration from
auditing to risk analysis and facilitate corrective action based on qualitative factors. An additional
pillar is ensuring banks' internal controls and audit adequately monitor and control transaction risk.
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