By Joann Villanueva
The Bangko Sentral ng Pilipinas (BSP) is set to implement two new regulations targeted to further protect banks’ operational risks by 2020.
In her speech during the Chamber of Thrift Banks (CTB) membership meeting in Makati City Tuesday, BSP Deputy Governor Chuchi Fonacier said they are scheduled to implement by June next year the supervisory assessment framework or SAFr in lieu of the CAMELS rating.
CAMELS is an international rating system that checks on banks’ capital adequacy, management capability, earnings, liquidity, and sensitivity.
Fonacier said SAFr will have a four-point rating on banks’ overall health, with 4 as the highest and 1 as the lowest, unlike CAMELS’ 5 ratings.
“It features an assessment that is business model-centric that will shape the BSP’s supervisory intervention and influence, the frequency of examination,” she said.
Fonacier said they have conducted a parallel run with a major bank for SAFr implementation, but the results of the comparison with CAMELS are still being finalized.
She explained SAFr is forward-looking assessment while CAMELS’ is historical thus, there are some developments after the assessment period that are not incorporated vis-à-vis the bank’s ratings.
In an interview by journalists after the event, Fonacier said banks should be able to properly assess the risks and prepare for these because this is part of risk management.
“This is reputation risk management, meaning they should be very conscious of what are the potential threats to the reputation of the bank,” she said.
Fonacier further said SAFr is a holistic assessment of a bank’s overall health since it also checks on the various kinds of risks that banks face.
Under this system, which has yet to be approved by the Monetary Board (MB), an assessment will be made every two years, unlike CAMELS that is done annually.
The BSP is set to implement in the second quarter next year the risk-based pricing framework that will weigh “risks associated with lending and financing are adequately compensated.”
“Borrowers with lower risk profile should be charged with lower interest rates and vice versa,” she said.
Fonacier said they have released a draft circular on the system, which industry players and some small banks said maybe “tedious” to implement. (First published in PNA)