Regulatory Compliance

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Regulatory Compliance

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Regulatory Compliance

  1. 1. Everything I am aware of, I am in control of… Serge Andezian, CISA, LACPA Beirut, 09/09/09 Senior Internal Auditor, IT Auditor sandezian@bankofbeirut.com.lb
  2. 2. Who am I? 2 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  3. 3. Who am I? Serge A. Andezian is a Senior Internal Auditor / IT Auditor working at Bank of Beirut s.a.l. www.bankofbeirut.com.lb 3 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  4. 4. Who am I? He holds Masters Degree in Business Administration from the Lebanese American University LAU, Beirut with Audit specialization 4 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  5. 5. Who am I? He is member of: The Institute of Internal Auditors IIA Information Systems Audit & Control Association ISACA and Lebanese Association of Certified Public Accountants LACPA 5 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  6. 6. Who are you? 6 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  7. 7. Who are you? The financial crisis is forcing companies to make tough decisions!! There is a risk that we might need to lay off Moussa 7 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  8. 8. Why I am here? 8 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  9. 9. Why I am here? Regulations: Abandon Hope all ye who enter here > 9 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  10. 10. What's the importance of Regulations? 10 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  11. 11. Why are you into regulations? Why are you into Regulations? 11 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  12. 12. 1- Objectives of Banking Regulation 1. Prudential (protect depositors) 2. Systemic risk reduction 3. Avoid misuse of banks 4. Protect banking confidentiality 5. Credit allocation 12 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  13. 13. 2 - Principles of Banking Regulation 1. Minimum requirements 2. Supervisory review 3. Market discipline 13 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  14. 14. 3 - Instruments and requirements 1. Capital requirements 2. Reserve requirements 3. Corporate governance 4. Credit rating requirements… 14 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  15. 15. Break 15 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  16. 16. Case Study- Morti Bianche ” 16 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  17. 17. 4 - Compliance Risk Compliance Risk is -- “…the risk of regulatory sanctions, financial loss, or damage to reputation and franchise value that arises when a banking organization fails to comply with laws, regulations, or the standards or codes of conduct of self-regulatory organizations applicable to the banking organization’s business activities and functions” 17 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  18. 18. 4.1 - Components of Compliance Risk Regulatory Risk Operational Risk Legal Risk Reputational Risk 18 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  19. 19. 4.2 - Control Your Compliance Risks •Identify, manage, monitor, and control your Risk •Effectiveness of controls in place to mitigate Risk 19 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  20. 20. 5 – Lessons Learned What made Lebanon avoid the eye of the Storm ? 20 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  21. 21. 5 – Lessons Learned (Reasons) 1. Policies & Prudential Measures set by BDL 2. Effective role of the Supervisory Authority 21 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  22. 22. 5.1 – Policies & Prudential Measures Investments in real estate •Banks are prohibited from investment in real estate except to acquire their premises (BDL Circular Nov. 1999) •Real estate acquired in settlement of bad loans should be liquidated within max 2 years (CMC Art. 154; BDL Circular Dec. 2000) 22 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  23. 23. 5.1 – Policies & Prudential Measures (cont’d ) Investments in loans •Loans against financial instruments (BDL Circular October 1998) •Limited to 50%of the portfolio •Margin call at 25%decline in the value of portfolio •Real Estate loans (BDL Circular July 2008) •Limited to 60%of real estate value 23 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  24. 24. 5.1 – Policies & Prudential Measures (cont’d ) Adoption of Basel II •In April 1st 2006, BDL decided to adopt Basel II (Standardized Approach) effective 1/1/2008 •Capital Adequacy Ratio (CAR) Basel II is around 12% today 24 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  25. 25. 5.2 – Role of Supervisory Authorities •BCC off site supervision carried out on a monthly basis monitoring of financial statements • BCC on site supervision extends beyond review & assessment of banks internal systems, policies & procedures & review credit files 25 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  26. 26. 5.2 – Role of Supervisory Authorities This ensured: • Early capture of new risks •Adequate provisioning levels •Proper safe lending & sound investment 26 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  27. 27. What Happens If Compliance Risk Is Not Effectively Managed? 27 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  28. 28. 6 – Cost of non-compliance •In 2004 the Bank of America lost unencrypted tapes with account information on 1.2 million US federal employee credit cards, including 60 US senators. The tapes went missing during shipment to a remote site. •April 2005: Details of 3500 Australian customers from 18 banks, including names and account numbers, lost on a USB stick by a representative of the Australian High Tech Crime Centre during transit to an international meeting on computer crime. 28 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  29. 29. 6 – Cost of non-compliance (cont’d) 29 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  30. 30. Q&A 30 Wednesday, September 16, Everything I am aware of, I am in control of… 2009
  31. 31. Thank You 31 Wednesday, September 16, Everything I am aware of, I am in control of… 2009

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