BANK

MANAGEMENT,SUP
ERVISION
AND
EXAMINATION
Bank Management
Bank Management

Fundamentas

Banks are busness rms that buy

(borrow) and se (end) money to make a
prot

Money s the raw matera for banks

Repackagers of money

Fnanca cams on both sdes of baance

sheet

LabtesSources of funds

AssetsUses of funds
Bank Management

How a bank manages ts assets and

abtes. The bank has four prmary
concerns:
1. Lqudty management
2. Asset management

Managng credt rsk

Managng nterest-rate rsk

3. Labty management
4. Managng capta adequacy
Bank Management

Lqudty Management

Borrow from other banks

Se Securtes

Borrow from FED

Ca n or Se oh Loans
Excess reserves are nsurance aganst
above 4 costs from depost outows.
Bank Management

Asset Management: the attempt to earn

the
hghest possbe return on assets whe
mnmzng the rsk.
1. Get borrowers wth ow defaut rsk, payng
hgh
nterest rates
2. Buy securtes wth hgh return, ow rsk
3. Dversfy
4. Manage qudty
Bank Management

Labty Management: managng the

source of funds, from deposts, to CDs,
to other debt.
1. Important snce 1960s
2. No onger prmary depend on deposts
3. When see oan opportuntes, borrow or
ssue CDs to acqure funds
Bank Management

Managng Capta Adequacy

Bank capta s a cushon that prevents bank

faure.

Hgher s bank capta, ower s return on equty

Tradeoh between safety (hgh capta) and

Return On Equty

Banks aso hod capta to meet capta requrements.

The Base Commttee on Bankng Supervson sets
mnmum capta requrements the rato of bank
capta to rsk weghted assets.
A bank mantans reserves to essen the
chance that t w become nsovent.
Banking
Supervision
Banking Supervision in !e
P!i"ippines

#ega" $ra%e&ork

R'A' No' ()*+ ,T!e Ne& -enra"

Bank
A., /00+1 2 -onso"i3ae3
supervision

Genera" Banking #a& o4 5666 2

Risk78ase3 approa.! o
supervision
Banking Supervision in !e
P!i"ippines

-onso"i3ae3 supervision

Driven 89 .o%p"e: 8anking groups an3 %i:e3

.ong"o%eraes

Sin.e /00;< a..e"erae3 i%p"e%enaion sin.e

566*

Risk78ase3 approa.! o supervision

Driven 89 .o%p"e:i9 o4 8anking 8usiness

Gra3ua" s!i4 sin.e /00(< a..e"erae3

i%p"e%enaion
sin.e 566*

A""o&s 8anks o ake risks as "ong as !ese are

a8"9 %anage3, a8sor8e3, an3 pri.e3
Banking Supervision in !e
P!i"ippines

Inerna" re=uire%ens 4or !e risk78ase3 approa.!

o
supervision

Daa .o""e.ion an3 sorage

$inan.ia" reporing pa.kage

Daa >are!ouse S9se%

In4or%a" arrange%ens &i! ?nan.ia" regu"aor9

agen.ies

Over!au" o4 !e e:a%inaion@oA7sie %onioring

pro.ess

Repor o4 E:a%inaion, -AME#S, Insiuiona"

Overvie&
Banking Supervision in !e
P!i"ippines

Inerna" re=uire%ens 4or !e risk78ase3

approa.! o supervision

Ski"" ses an3 raining

In7!ouse sru.ure3 raining progra%

E:erna" raining progra%s

Inernaiona" .eri?.aions

Re7organiBaion o4 !e BSP Supervision

an3
E:a%inaion Se.or
Banking Supervision in !e
P!i"ippines

O!er supervisor9 oo"s

Bank Per4or%an.e Repors ,BPR1

s9se%

Bank Ear"9 >arning S9se% ,E>S1

E:a%iner Resour.e S.!e3u"ing S9se%

,ERSS1
Banking Supervision in !e
P!i"ippines

I3eni?e3 gaps in -o%p"ian.e &i! !e Base" -ore

Prin.ip"es 4or EAe.ive Banking Supervision
,8ase3 on 5665 IM$ assess%en1

#ega" proe.ion 4or supervisors

$or%a"iBaion o4 in4or%aion s!aring an3 .ooperaion

&i! "o.a" an3 4oreign ?nan.ia" supervisor9
agen.ies

-on3u. o4 .onso"i3ae3 supervision an3 8ank

e:a%inaion

$ra%e&ork 4or pro%p .orre.ive a.ion an3 pro8"e%

8ank reso"uion

Appropriae san3ar3s 4or 8anksC risk %anage%en

s9se%
Banking Supervision in !e
P!i"ippines

Deve"op%ens in -o%p"ian.e &i! !e Base" -ore

Prin.ip"es 4or EAe.ive Banking Supervision

#ega" proe.ion 4or supervisors 2

in."u3e3 in propose3 revisions o BSP -!arer

$or%a"iBaion o4 in4or%aion s!aring an3

.ooperaion &i! "o.a" an3 4oreign ?nan.ia"
supervisor9 agen.ies

In4or%aion e:.!ange an3 .ooperaion a%ong

"o.a" ?nan.ia" supervisors !roug! !e
$inan.ia" Se.or $oru% ,$S$1

* 4or%a" agree%ens &i! 4oreign ?nan.ia"

supervisor9 agen.ies, negoiaing &i! ( o!ers
Banking Supervision in !e
P!i"ippines

Deve"op%ens in -o%p"ian.e &i! !e Base" -ore

Prin.ip"es 4or EAe.ive Banking Supervision

-on3u. o4 .onso"i3ae3 supervision an3 8ank e:a%inaion

BSP7SES reorganiBaion a"so inen3e3 o suppor

.onso"i3ae3 supervision

One o4 propose3 revisions o BSP -!arer is !e gran o4

au!ori9 o BSP o "ook ino 8anksC non7a""ie3 su8si3iaries
an3 aD"iaes

Manua" on Supervision an3 E:a%inaion o4 Banks revise3

!roug! a TA &i! USAID

Deve"op%en o4 a susaina8"e an3 re"evan 4or%a" 4oun3aion

raining progra% 4or BSP e:a%iners !roug! a TA &i!
$irs Iniiaive
Banking Supervision in !e
P!i"ippines

Deve"op%ens in -o%p"ian.e &i! !e Base" -ore

Prin.ip"es 4or EAe.ive Banking Supervision

$ra%e&ork 4or pro%p .orre.ive a.ion an3 pro8"e%

8ank reso"uion

P-A 4ra%e&ork revie&e3 an3 en!an.e3 in 566)

E:p"i.i .rieria 4or p"a.ing 8anks un3er P-A an3

%easures o 8e un3eraken

Pro.e3ures a"rea39 in p"a.e 4or ?nan.ia""9

3isresse3 8anks, 8u app"i.aion is !a%pere3 89
a8sen.e o4 .oer.ive "ega" insru%ens

Propose3 revisions o BSP -!arer inen3e3 o

give BSP %ore po&ers o eAe.ive"9 .arr9 ou
pro8"e% 8ank reso"uion'
Banking Supervision in !e
P!i"ippines

Deve"op%ens in -o%p"ian.e &i! !e Base" -ore

Prin.ip"es 4or EAe.ive Banking Supervision

Appropriae san3ar3s 4or 8anksC risk %anage%en

s9se%

T!e 4o""o&ing supervisor9 gui3e"ines on risk

%anage%en !ave a"rea39 8een issue3 an3
i%p"e%ene3

Risk %anage%en o4 ?nan.ia" 3erivaives

Inerna" .re3i risk raing s9se%s

Marke risk %anage%en

#i=ui3i9 risk %anage%en

IT risk %anage%en

Supervision 89 risk
Banking Supervision in !e
P!i"ippines

A3opion o4 inernaiona" san3ar3s

Base" II a3ope3 in Eu"9 !is 9ear

Preparaor9 &orkF A.ive %onioring o4 3eve"op%ens,

revisions@a3Gus%ens in "o.a" 4ra%e&ork,
.apa.i978ui"3ing

Si%p"e approa.!es a3ope3 H Pi""ar + gui3e"ines

A3van.e3 approa.!es %a9 8e a""o&e3 89 56/6< I-AAP

gui3e"ines un3er e:posure o in3usr9

Approa.! o !o%e7!os issues on approva" &ork o 8e

3i.ae3 89 "ega" saus o4 4oreign 8ank eniies

Inernaiona" a..ouning san3ar3s a3ope3 sin.e 566*

Suppore3 89 an e:erna" au3ior a..re3iaion

s9se%
Banking Supervision in !e
P!i"ippines

En!an.ing .orporae governan.e

Re73e?ne3 3uies an3 responsi8i"iies o4 8ankCs

8oar3
o4 3ire.ors

A3opion o4 I? an3 properJ san3ar3s 4or 8ank

oD.ers

Sreng!ening ani7%one9 "aun3ering

regu"aions

-uso%er i3eni?.aion re=uire%ens

KK- progra%s .o%p"ian &i! B-BS san3ar3s

Banking Supervision in !e
P!i"ippines

Deve"op%ena" Iniiaives

-apia" %arke 3eve"op%en !roug!F

.onri8uions o 4oreign e:.!ange

"i8era"iBaion

3o%esi. 8on3 an3 3erivaives

%arke
3eve"op%en

pa9%ens s9se%s upgra3e

Banking Supervision in !e
P!i"ippines

Deve"op%ena" Iniiaives

En!an.e3 a..ess o 8anking servi.es 89 !e

poor
!roug!F

susaina8"e %i.ro?nan.e pra.i.es o4

8anks

Innovaive 3ep"o9%en o4 %o8i"e 8anking

servi.es

$inan.ia" "iera.9

#egis"aive a3vo.a.ies
-on."u3ing Re%arks

Supervision o4 8anks in !e P!i"ippines !as gone a

"ong &a9 in !e "as /6 9ears

Despie !e "i%is se 89 !e e:ising "ega"

4ra%e&ork,
!e BSP .oninues o upgra3e is supervision an3
e:a%inaion approa.!es in "ine &i!
inernaiona""9
a..epe3 san3ar3s

T!e BSP a"so srives o i%prove 8anking pra.i.es

!roug! !e issuan.e o4 re"evan regu"aions

Lo&ever, .rii.a" .!anges o !e BSP -!arer are

ne.essar9 o a.!ieve 4ur!er i%prove%ens in !e
pra.i.e o4 8anking supervision in !e P!i"ippines
Bank
E:a%inaion
Bank E:a%inaion

Denton

an examnaton of the ahars and records of a bank by a

state or federa bank examner

Is an evauaton of the safety and soundness of a bank.

Prmary Focus

examnaton of the banks assets and abtes

revew of the banks adherence to reguatons and

standards, ts compance wth varous aws - such as
truth-n-endng

an examnaton of the banks eectronc data processng

systems

For banks to operate n a safe and sound

Bank E:a%inaion

Conducted by:

the comptroer of the currency

state chartered banks by the Federa

Depost Insurance Corporaton (FDIC)
or

the state bankng department

Bank E:a%inaion

the -AME#S system

Capta adequacy,

Asset quaty,

Management,

Earnngs,

Lqudty and

Senstvty
Bank E:a%inaion

Capta Adequacy

Percentageratoof ananca nsttuton's

prmary captato ts assets(oansand
nvestments), used as ameasureof
tsnanca
strengthandstabty.

A measure of the nanca strength of a

bank or
securtes rm, usuay expressed as a rato
of ts capta to ts assets.
Bank E:a%inaion

Asset Ouaty

estmaton of the quaty of bank assets (prncpay

oans and eases) as measured by a ender's credt
standards,
and thequdtyof securtes hed n the nvestment
portfoo. If assets are packaged for resae to nvestors n
thesecondary market, the crteron for determnng
quaty of assets s, "What can I expect to get n the
market f I
se my oans?" In ths context, asset quaty has ess to
do wth charge-ohanayss than themarketabtyof the
credt portfoo.
Bank E:a%inaion

Management

Asset

The management of a cent's nvestments by a

nanca servces company, usuay an nvestment
bank. The company w nvest on behaf of ts cents
and gve them access to a wde range of tradtona
and aternatve product oherngs that woud not be to
the average nvestor.

An account at a nanca nsttuton that ncudes

checkng servces, credt cards, debt cards, margn
oans, the automatc sweep of cash baances nto a
money market fund, as we as brokerage servces.
Bank E:a%inaion

Management

Labty

Use and management of abtes, such as customer

deposts, by a bank n order to factate endng and
aow for baanced growth. Management of money
accepted from depostors as we as funds secured
from other nsttutons consttute abty
management.
It aso nvoves hedgng aganst changes n nterest
rates and controng the gap between the maturtes
of assets and abtes.
Bank E:a%inaion

Earnngs

The amount of prot that a company produces durng a

specc perod, whch s usuay dened as a quarter
(three caendar months) or a year. Earnngs typcay
refer to after-tax net ncome. Utmatey, a busness's
earnngs are the man determnant of ts share prce,
because
earnngs and the crcumstances reatng to them can
ndcate whether the busness w be protabe and
successfu n the ong run.
Bank E:a%inaion

Lqudty

The degree to whch an asset or securty

can be bought or sod n the market wthout
ahectng the asset's prce. Lqudty s
characterzed by a hgh eve of tradng
actvty. Assets that can be easy bought or
sod are known as qud assets; The abty
to convert an asset to cash qucky. Aso
known as "marketabty."
Bank E:a%inaion

Senstvty

The magntude of a nanca nstrument's

reacton to changes n underyng factors.
Fnanca nstruments, such as stocks and
bonds, are constanty mpacted by many
factors.
Senstvty accounts for a factors that mpact a
gven nstrument n a negatve or postve way
n an attempt to earn how much a certan
factor w mpact the vaue of a partcuar
nstrument.
Bank E:a%inaion

Banks are ranked on a scae of one to

ve n each category, and receve an
overa
assessment, wth one beng the
strongest
and ve the weakest.

Banks wth CAMELS of four and ve are

ordnary paced on a watch st and
montored cosey.
Thank You !!!

Presented by: Aurora
Mahnay
Lady Lsa Crodua
Marechu B.
Bevestre