Operational issues in the implementation of risk-based supervision framework

Abstract

With the objective of the Bangko Sentral ng Pilipinas (BSP) to achieve and maintain a safe and sound banking system, the focus of regulators shifted from traditional supervision to risk-based supervision. This approach calls for changes in the supervisory environment such as enhanced supervisory tools, refocused on-site inspection process, reoriented human resource, and risk-focused prudential regulations. The BSP adopts risk-based supervision to compel banking institutions to be more risk-oriented through the evaluation of management practices, policies, and procedures in the context of managing potential risks. As a result, banking institutions can provide the best banking services and products with the highest return of investment at a minimal risk.

JEL classification: G28