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The SREP and Capital Adequacy

The SREP and Capital Adequacy . Edward Sankey FIOR Guernsey Financial Services Commission. 10 February 2011. Agenda. Aim of Capital Adequacy Regulation Approach to ICAAP Process Benefits from the ICAAP Governance Panel . The Aims of Capital Adequacy.

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The SREP and Capital Adequacy

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  1. The SREP and Capital Adequacy Edward Sankey FIOR Guernsey Financial Services Commission 10 February 2011

  2. Agenda • Aim of Capital Adequacy Regulation • Approach to ICAAP Process • Benefits from the ICAAP • Governance • Panel

  3. The Aims of Capital Adequacy Ensure that the Bank has sufficient resources for severe losses in a period. Simplistic Quantitative Methods Active Assessment and Management

  4. Sources of Risk Examples of major exposures are: • Contingent liabilities • Collateral/security management • External factors • Systematic risks • Major initiatives What gives rise to very large exposures for your bank? • Key vulnerabilities

  5. Application to Banks in Guernsey The Computer Game analogy. Level 5: Capital etc strategies Level 4: Good Governance Level 3: Used in Decisions Level 2: Risk policies such as risk tolerance Level 1: Scope for Major Losses ICAAP Report demonstrates quality in governance and leadership in a “Total Guernsey Bank” way

  6. Benefits from the ICAAP ICAAP – a Process, not a £Xm answer. CEO Decision Do ICAAP as Compliance formality using mgt and staff time for no gain and risking a response Set out to use the Process as a means of improving the Bank’s decision making and performance

  7. Governance Group Direction v. Subsidiary Management For a Bank Director the interests of the Shareholder are not the only concern Considerations by Bank, GFSC • Using the potential of • the bank • the Directors

  8. The SREP and Capital Adequacy Edward Sankey FIOR Guernsey Financial Services Commission 10 February 2011

  9. Panel • Chairman: Mr Bob Moore • Panellists: • Mr Stephen Henry • Mr Roy McGregor • Mr Keith Stubbington • Mr Alan Bougourd

  10. Opportunities • Improve control and supervision on sources of potential loss (eg on outsourcing.) • Strengthen processes. Have better information. Make efficiencies • Improved pricing – risk-based pricing • Product development • Contingency planning • Dynamic assessment, especially for Treasury, lending. (ie frequent updating of positions , including in advance of decision.) • Triggers for action

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