43. The BoT sets conservative capital adequacy requirements, the components of capital
absorb losses and the capital requirements are in line with Basel III. The average CET1 ratio for
D-SIBs sits around 15 percent and 16 percent for non-D-SIBs. Foreign bank branches are required to
hold capital like domestic banks. Three banks can use internal models for credit risk, and two foreign
bank branches have been accredited to use the market risk internal model approach. The BoT has a
well-staffed specialized team that accredits and oversees modelling by banks. Even though the BoT
has the power to set individual capital ratios and will require a 1 percent add-on for D-SIBs by 2020,
it has not yet tailored capital ratios to the risk profile of individual banks. The BoT should build on its
risk-based supervisory framework to develop a methodology that facilitates individual capital ratios,
at least for its largest and most complex banks.
44. Parts of the credit risk and asset classification requirements fall short of international
good practice, but the impact is limited due to strong supervision practices and high
provisions. The BoT's definition of restructuring and rescheduling is not in line with the definition of
forbearance in international good practice; it should include financial difficulty of the borrower, and
it should not be conditioned on the bank making a loss. Also, the probation period for restructured
exposures to be upgraded is currently three months, while international good practice requires it to
be a minimum of one year. The BoT regulation also allows an upgrade of the exposure to take place
when restructuring or rescheduling is granted. Moreover, there is also no limit on the number of
times banks can reschedule or restructure (evergreening). Furthermore, the regulation should be
more detailed on the level of application of the asset classification (borrower or transaction level).
Finally, banks should be required to include a list of indicators to determine the "unlikeliness to pay"
in their policies. The BoT supervisors are well-aware of these gaps in the regulation and perform
in-depth procedures to address these weaknesses. Current provisioning coverage levels are standing
at 140 percent, high compared to international peers.
Do'stlaringiz bilan baham: |
