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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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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

Ensure that the Bank has sufficient

resources for severe losses in a period.

Simplistic Quantitative

Methods

Active Assessment

and Management


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


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


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


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


The SREP and Capital Adequacy

Edward Sankey FIOR

Guernsey Financial Services

Commission

10 February 2011


Panel

  • Chairman: Mr Bob Moore

  • Panellists:

    • Mr Stephen Henry

    • Mr Roy McGregor

    • Mr Keith Stubbington

    • Mr Alan Bougourd


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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