Supervision Manual

Risk-Based Supervision is a structured, yet flexible, forward-looking process designed to identify, assess, measure, monitor and control/reduce/mitigate key risk factors to which individual banks and the entire financial industry are exposed. By using the Risk-Based Supervision approach, supervisors assess risk management policies and practices used by banks to control/reduce/mitigate risk. Risk-Based Supervision focuses the level of supervisory attention on those risk areas that pose the greatest risk to the banks’ safety and soundness. Risk-Based Supervision also supports the CBK in achieving its regulatory objectives, while taking into account the need to engage its resources in the most efficient and effective manner. The purpose of this manual is to organize and formalize the supervisory objectives and procedures that provide guidance to the CBK bank examiners, and to enhance the quality and consistent application of supervisory procedures. The manual provides specific guidelines for: determining and setting the supervisory strategy for each bank; determining the procedures to be used in examining all areas of a bank, including those procedures that may lead to the early detection of trends that, if continued, might result in a deterioration in the condition of the bank; evaluating the adequacy of the institution’s risk management practices and procedures, and the degree of compliance with them; evaluating the overall performance and activities of management and the Board of Directors; preparing work papers that support conclusions reached and aid in evaluating the work performed and using objective criteria as a basis for the overall conclusions.

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Supervision Manual

4 October 2016