Tuesday, 5 November 2024
Best Systemic and Prudential regulator
Keeping in check, the build-up of systemic risk in the system- safeguarding the so called too big to fail financial institutions, the collapse of any one of which can paralyze the entire financial system- is understood to be the job of the macro- prudential regulator responsible for the oversight of all deposit-taking institutions. This scorecard assesses how the regulator perceives its own role, whether it has the capability to carry out that role and if it does a good job in fulfilling that role. In this scorecard we rely heavily on the philosophy of looking at what the regulator does rather than the approach it uses as evidenced in evaluating dimensions that take into account, the health of the systemically important institutions being regulated.
| Evaluating Dimension | Weightage (%) | |
|---|---|---|
| 1. | Self-defined scope of coverage | 20 |
| Clarity in defining policy on intervention | ||
| Transparency and consistency in conduct | ||
| 2. | Independence and governance | 10 |
| Appointment procedures of senior staff of the agency | ||
| Quality of accountability mechanisms (if any) | ||
| 3. | Profile of institutions regulated | 10 |
| Number of institutions | ||
| Total loans as a percentage of GDP | ||
| Market share of top 10 ( if applicable) by total assets | ||
| 4. | Quality of institutions regulated | 20 |
| Current average CAR (Tier 1) of the top banks representing more than 70% of the country’s total bank assets | ||
| Current average NPL ratio of the top banks representing more than 70% of the country’s total bank assets | ||
| Current average LTD ratio of the top banks representing more than 70% of the country’s total bank assets | ||
| 5. | Control of foreign institutions operating in the country | 10 |
| No. of full license foreign institutions in the country | ||
| Percentage of total assets of the banking system held by foreign institutions [More assets, system more susceptible to systemic risk] | ||
| 6. | Coordination with other agencies (central bank, government etc.) | 10 |
| 7. | Quality of recent systemic risk aversion exercise | 20 |
| Was there one? | ||
| Was it necessary? | ||
| Was it handled well? | ||
| Final Score | 100 | |