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THIRD GCC REGULATORS’ SUMMIT 1st March, 2009 Dubai

THIRD GCC REGULATORS’ SUMMIT 1st March, 2009 Dubai. TOPIC: EMERGING INTERNATIONAL STANDARDS OF SUPERVISION AND COMPLIANCE AND THE FUTURE OF OPERATIONAL RISK STANDARDS PRESENTER: Cherno S. Jallow, QC Director of Policy Research & Statistics BVI Financial Services Commission.

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THIRD GCC REGULATORS’ SUMMIT 1st March, 2009 Dubai

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  1. THIRD GCC REGULATORS’ SUMMIT1st March, 2009Dubai TOPIC:EMERGING INTERNATIONAL STANDARDS OF SUPERVISION AND COMPLIANCE AND THE FUTURE OF OPERATIONAL RISK STANDARDS PRESENTER: Cherno S. Jallow, QC Director of Policy Research & Statistics BVI Financial Services Commission Financial Services Commission

  2. Obligations of Central Banks and/or Supervisors in risk reduction 2. Obligations of Commercial Banks Financial Services Commission

  3. 3. Emerging Standards of regulation and supervision • General Principles • importance of strengthening “regulatory regimes, prudential oversight, and risk management and ensuring that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances” – G20 Communique; Financial Services Commission

  4. 3. Emerging Standards of regulation and supervision - cont’d • adhering to established standards as an effective measure of managing risk; • strengthening transparency and accountability, promoting integrity in the financial markets, reinforcing international cooperation and reforming international financial institutions to better police the global financial perimeter; Financial Services Commission

  5. Areas of Enhanced and Emerging Standards – cont’d Areas of Enhanced and Emerging Standards • establishing common high quality accounting standards; • enhancing risk disclosure policies; Financial Services Commission

  6. Areas of Enhanced and Emerging Standards – cont’d • adopting measures geared towards preventing compensation schemes that reward excessive short-term returns or risk taking; • requiring credit rating agencies to meet the highest standards of regulation set by IOSCO; Financial Services Commission

  7. Areas of Enhanced and Emerging Standards – cont’d • in relation to risk management as it concerns financial institutions: • the development of enhanced guidance to strengthen banks’ management practices which accord with international best practices; Financial Services Commission

  8. Areas of Enhanced and Emerging Standards – cont’d • the management of liquidity risk and creation of strong liquidity cushions; • the engagement of processes that allow for timely and comprehensive measurement of risk concentrations and large counterparty risk positions across products and geographies; Financial Services Commission

  9. Areas of Enhanced and Emerging Standards – cont’d • the re-assessment of risk management models to guard against stress and ensure timely reporting obligations; • the undertaking of efficient and effective risk management and due diligence measures with respect to structured products and securitization; Financial Services Commission

  10. Areas of Enhanced and Emerging Standards – cont’d • the obligation to develop appropriate skills and competence to quickly respond to evolutions/innovations in the financial markets and in relation to new products; • the developing of a better and enhanced regime of information sharing, especially as it relates to market stability; Financial Services Commission

  11. Consequences for banks • re-evaluation of existing operational risks and adoption of enhanced measures to better contain or manage risks; • re-evaluation of internal controls and systems to measure up to the new and enhanced standards of compliance; • increased security within the financial services sector. Financial Services Commission

  12. Putting Meat to the Bones • IMF; • FSF; • FATF; • IOSCO. Financial Services Commission

  13. 4. The Challenges and the Way Forward - cont’d • ensuring that both the regulator and the banks measure up to established international standards of supervision and compliance; this includes compliance with established laws; • establishing factors essential to operational risk and identifying red flags at an early stage; Financial Services Commission

  14. 4. The Challenges and the Way Forward – cont’d • making a continual assessment of staff qualification and competence; • undertaking robust on-site and off-site inspections of banks; Financial Services Commission

  15. 4. The Challenges and the Way Forward – cont’d • establishing and enforcing an adequate AML/CFT regime which, amongst other things, places appropriate emphasis on robust customer due diligence information gathering measures; • keeping attuned to market developments and making necessary adjustments in operational risks; Financial Services Commission

  16. 4. The Challenges and the Way Forward – cont’d • ability on the part of both the regulator and the banks’ management to develop guiding principles and techniques to quickly resolve problems identified in relation to operational risks; • developing a sustained consensus on regional cooperation in fostering a regional compliance culture. Financial Services Commission

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