Recommended Action Plan to Improve Compliance of the Basel Core Principles
|Reference Principle||Recommended Action|
|1.2 Independence||The security of tenure provided in law to the senior management of the Commission should be strengthened.|
|1.6 Information sharing||Implement an effective system of cooperation and information sharing between the ECCB and the Commission.|
|2. Permissible activities||Consider making the definition of bank clearer and more explicit.|
Clearly define the permissible activities of banks that are licensed and subject to supervision, with particular reference to restrictions on the ability of captive banks to accept third-party deposits.
|3. Licensing||Apply the recently revised licensing procedures in practice at the first opportunity.|
Address concerns in respect of captive banks noted above in licensing procedures and/or regulations.
|5. Investment criteria||Fully implement the new regulation and guideline governing investment criteria.|
|6. Capital adequacy||Establish a definition of capital, a method of calculation and the ratio required not lower (more lenient) than established in the Basel Capital Accord, and grant the Commission the power to impose a higher capital ratio.|
Require that the capital adequacy ratio be calculated and applied on a consolidated bank basis, where applicable.
Require at least semi-annually capital adequacy reporting by banks to the supervisor.
|7. Credit policies||Fully implement the credit policy requirements of the recently finalized Investment and Lending guideline.|
The supervisor should verify periodically that banks make credit decisions free of conflicting interests.
|8. Loan evaluation and loan-provisioning||Fully implement the loan evaluation and loan loss provisioning requirements of the recently finalized Investment and Lending guideline.|
Consider introducing a requirement for a general provision for loss.
|9. Large exposures limits||Fully implement the large exposure limits set out in the recently finalized Investment and Lending guideline, and without undue forbearance.|
|10. Connected lending||Fully implement the connected lending restrictions set out in the recently finalized Investment and Lending guideline, and without undue forbearance.|
|11. Country risk||The supervisor verify that banks have information systems, risk management systems and internal control systems to comply with the Commission’s policies, and revise the examination manual accordingly.|
|12. Market risk||Determine that banks have set appropriate limits for various market risks, including their foreign exchange business.|
Determine that banks perform scenario analysis, stress testing and contingency planning, as appropriate, and periodic validation or testing of the systems used to measure market risk.
Have the expertise needed to monitor the actual level of complexity in the market activities of banks.
|13. Other risks||The supervisor should assess compliance with the recently issued guidelines on risk management processes.|
|14. Internal control and audit||Amend the draft guideline to reflect the changes to Section 65 of the IBC Act, and fully implement the new requirements in practice.|
|16. On-site and off-site supervision||Create a database that facilitates monitoring trends and developments for the banking sector as a whole.|
Ensure that the new quarterly reporting system is providing the required information in a timely manner.
|17. Bank management contacts||Fully implement a program of regular meetings with senior and middle management to discuss operational matters such as strategy, group structure, corporate governance, performance, capital adequacy, liquidity, asset quality, risk management systems, etc.|
Ensure that the supervisor is being notified by the banks in a timely manner of any substantive changes in their activities or any material adverse developments, including breaches of legal and prudential requirements generally.
Strengthen required background, experience and duties of the resident Senior Officer (required as of July 2002) for those banks that have only a basic physical presence in Antigua and Barbuda.
|18. Off-site supervision||Ensure that the new quarterly reporting system is providing the required information in a timely manner, including information on on- and off-balance sheet exposures, assets and liabilities, profit and loss, capital adequacy, liquidity, large exposures, loan loss provisioning, market risk and deposit sources.|
Implement an analytical framework that uses the statistical and prudential information for the ongoing monitoring of the condition and performance of individual banks.
|19. Validation of supervisory information||Fully implement the plan to hold meetings with banks and their auditors to discuss the results of work by the external auditors and to agree on the responsibilities for any corrective work.|
|20. Consolidate supervision||Fully implement the new powers granted the supervisor to evaluate the risks that non-banking activities conducted by a bank or banking group may pose to the bank or banking group. This includes developing supervisory routines to ensure awareness of the overall structure of banking organizations (i.e., the bank and its subsidiaries) or groups and an understanding of the activities of all material parts of these groups, including those that are supervised directly by other agencies.|
|21. Accounting standards||Fully implement the requirements of the recently enacted legislation.|
|22. Remedial measures||Implement the new powers in practice as/when the situation warrants.|
Consider amending the law so that supervisory action taken under Section 261of the IBC Act is not suspended, or at least not wholly suspended, pending the outcome of an appeal.