Downloaded 184 times
Uploaded byVeeresh Kumar
ICAAP - INDIAN BANKS
This document provides an overview of the Internal Capital Adequacy Assessment Process (ICAAP) under Basel II Pillar 2 requirements. It discusses the purpose of Pillar 2 in complementing Pillar 1 by addressing bank-specific risks. The ICAAP process involves identifying and quantifying all risks, conducting stress tests, and assessing capital adequacy. The document then outlines Bank of Baroda's implementation of ICAAP, including its risk policy, data collection from various departments, and quarterly reporting to internal committees and regulators.
More Related Content
ICAAP - INDIAN BANKS
- 1. 11/17/14 ICAAP –Internal Capital Adequacy Assessment Process
- 2. 11/17/14 Presentation onICAAP Overview Basel II and its Three Pillars Overview of Pillar II ICAAP & SREP Risk & Capital ICAAP Process Components of ICAAP Pillar II Risks BOB ICAAP & its implementation Policy Structure Data Collection Reporting
- 3.
- 4.
- 5.
- 6. 11/17/14 Why PillarII ? 1. Measurement and Management of Bank specific risks other than regulatory defined 2. Pillar 2 establishes a process of prudential supervision that complements and strengthens Pillar 1. 3. Pillar II includes Quanti able (interest rate risk fi in the non-trading book, concentration risk and the residual risk that remains when collateral is lower than expected), but also risks that require a more qualitative approach (such as reputational and strategic risk). (ICAAP) 4. ICAAP links together the Banks strategy, future business development, the risks related to these and the capital adequacy. Basel I did not include any of this.
- 7. Overview of PillarII 11/17/14
- 8.
- 9. ICAAP & SREP 11/17/14
- 10. Responsibilities - Supervisorsvs Bank 11/17/14 SUPERVISOR Review and Evaluate a Bank’s ICAAP Take appropriate action if not satisfied Review and Evaluate Bank’s compliance with Capital Ratio. Ability to require Banks to hold capital more than the minimum. Intervene at an early stage to prevent capital falling below minimum Rapid remedial action if capital is not maintained and restored BANK Banks should have in place a process for assessing their overall capital adequacy in relation to its risk profile and a strategy for maintaining its capital levels Banks should operate above the minimum regulatory capital ratios
- 11. Risk Identification and quantification All risks to which banks are or could be exposed to including hard to measure risks. Stress Testing Banks should have a stress test program to assess the effect of extreme yet plausible events. Capital Planning Bank is supposed to adopt a prospective approach to Capital Adequacy. It is required to assess the sufficiency of capital for the risks identified and stress tests conducted. 11/17/14 ICAAP- Split into two parts
- 12. RISK POLICY- Bankshould have detailed policies for managing and monitoring various risks. RISK APPETITE- The Risk Appetite of the Bank in terms of various risks should be clearly spelt out in the policies. RISK STRUCTURE- The Bank should have a risk architecture to manage risks. RISK REPORTING- It is a decision support system to identify risks and their affect on the Bank’s business. 11/17/14 Components of ICAAP
- 13. The Process ofICAAP of a bank can be illustrated through the following diagram 11/17/14
- 14.
- 15.
- 16.
- 17.
- 18. Gamut of Pillar2 Risks Concentration Risk Country Risk Interest Rate Risk in Banking Book Risks not fully covered in Pillar 1 Liquidity Risk Reputation Risk Settlement Risk Business and Strategic Risk 11/17/14
- 19. BOB ICAAP &Implementation 11/17/14 BANK OF BARODA (PARENT) Domestic Operations Overseas operations Domestic Subsidiaries Overseas Subsidiaries
- 20. Data Collection TheRisk Management Department prepares the ICAAP Document and compute the capital requirement against various risks by co-coordinating with heads of various departments. The following departments are associated with the supply of ICAAP data. 11/17/14 Planning Department Marketing Department Market Risk Management Cell Operational Risk Management Cell Credit Risk Management Cell Corporate Accounts and Taxation Department Human Resource Management Public Relations and Official Language Department ASCROM Cell in Recovery Department
- 21. 11/17/14 Company SecretaryDepartment Compliance Department Legal Department Operations and Services Department Retail Banking Department Wholesale Banking Department Mid Office Cell International Subsidiaries and Territories
- 22. Reporting ICAAPis prepared on quarterly basis and submitted to the ALCO and BOARD for review and further directions if any. The reviewed ICAAP document is submitted to the regulator. 11/17/14
- 23.