The changing global economic environment is presenting more complex and variable risks which challenge traditional approaches to the assessment and management of risk. Risk-based supervisory assessments allow supervisors to determine the potential risks posed by individual licensees and can measure both the likelihood and the impact of particular risks, should they occur, on the whole financial system. Broadly, the purpose of a risk-based supervisory process is effective and efficient monitoring and evaluation of licensees on a continual basis.
The Central Bank of The Bahamas’ (“Central Bank”) Risk Based Supervisory Framework (RBSF) seeks to achieve an accurate assessment of individual licensees’ risks, controls, managerial strength and financial condition, on an ongoing basis, in order to facilitate a prompt and timely response to emerging problems.
To achieve this, the RBSF aims to foster greater communication and interaction between licensees and supervisors. Licensees are able to make contributions to the assessment process by providing information about their specific business profiles, inherent risk and risk management processes. In turn supervisors are able to tailor their assessments to focus on licensee specific issues thus achieving a more accurate assessment.
Overall the Central Bank’s RBSF involves the following:
- Identifying significant operations, such as business lines, entities or processes;
- Identifying and assessing inherent business risks for significant operations;
- Evaluating licensees’ mitigating controls, management and oversight functions, financial positions; and
- Determining licensees’ net risk.
Licensees may obtain additional information on the Central Bank’s RBSF from the documents below: