Transcript Diapositive 1

IOPS Toolkit for Risk-based
Supervision
Module 5: Supervisory Response
Supervisory Response Matrix
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A fundamental aspect of risk-based supervision is the logical connection
between the outcome a risk analysis undertaken and the subsequent
supervisory action taken in response.
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May be an “intervention” index generated by the product of probability
and impact, which then determines the level of supervisory attention.
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Supervisory response matrixes help plan supervisory actions and
timetables, using resources in an efficient manner and make the
supervisory approach more transparent.
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The number of rows and columns in the response matrix will depend on
the preferences of the supervisory authority and the environment in the
country .
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Thresholds need to be set which highlight suitably risky cases, but
equally do not place too much burden on what is often a limited
number of supervisory staff (most funds should fall into the lower risk
categories)
APRA PAIRS/SOARS
TPR Risk + Intervention Model
Supervisory Response Matrix: Inputs
Supervision Matrix: HFSA
Quality Control Mechanisms
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Quality control mechanisms ensure the supervisory response is proportionate and
consistent
Balance needs to be struck between individual supervisor’s judgement and central
control, weighting responsiveness of the assessment system with accuracy.
Mechanisms include:
 peer reviews
 sign off protocols
 benchmarking sessions
 internal comparisons and validations
 training
Ensuring that internal control mechanisms do not become too cumbersome is key
The matrix and supervisory response categories should be reviewed regularly / back
tested
Special attention needs to be given to prioritising between ‘high risk’ institutions
Oversight tools for ‘low risk’ institutions include:
 information campaigns (informing small entities of their regulatory requirements)
 random inspections (detecting non-compliance, acting as a deterrent and
protecting the supervisors credibility)
 and / or themed inspections, including sampling
Communication
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A risk-based approach to supervision involves different dynamics in
terms of communication between the supervisory authority and the
supervised entity
Rather than simply notifying the entity that a rule has been broken,
the assessment of supervisory judgement needs to be
communicated
The supervisory authority has to decide whether to disclose the
results of the risk assessment to the institution itself and, if so, the
extent to which details are communicated
Conditions under which public disclosure of risk assessments might
be appropriate must also be considered
When it comes to releasing a risk-score to the public as a whole, a
balance needs to be struck between clarity and dialogue between
the authority and the institution (and publicity acting as a deterrent
factor) and confidentiality (so that panic and flight from institutions
is not induced)
Enforcement Pyramid
Thank You
Presentations of practical examples to
follow