BCP assessment useful for banking supervision

Banking core principles (BCP) provide measures for an assessment of strength and weaknesses of a supervisory system.

Speaking on 'Banking Supervision and Regulations' to Bangladesh banking officers Central Bank is Supervision Department Director, Y.P. Fernando said BCP assessment is a useful basis for formulating strategies and action plans to improve bank supervision.

"It enables supervisors to further strengthen their systems to promote safety and soundness of financial systems. Core principles are used in the Financial Sector Assessment Program conducted jointly by the IMF and the World Bank," she said. Fernando said banks are very important in the financial system and it dominates 65 percent of the financial system in Sri Lanka.

The objective of banking supervision is to preserve financial system stability by promoting sound risk management and good governance.

Fernando said there should be comprehensive risk management policies and processes to identify, evaluate, measure, monitor and control all material risks.

They should be able to assess capital adequacy relation to risk profile.

This process has to be properly documented, reviewed and updated.

Core principles for effective banking supervision is an attempt by the Basel Committee for banking supervision to enhance prudential supervision of banks in all countries which comprise 25 principles to provide a basis for further development of effective bank supervisory systems. RK