BSP releases rules on stress testing, ‘branch lite’

THE Bangko Sentral ng Pilipinas’ (BSP) Monetary Board released on Thursday separate guidelines giving banks two years to use a combination of different approaches for stress testing and allowing them to put up so-called branch bank branches—in the country.

BSP said the guidelines on conduct ing stress-testing exercises, approved on the results of stress testing, banks - may adopt proactive measures, such ing governance standards and risk as implementing capital build-up management expectations on such initiatives or enhancing risk man agement practices that are all aimed

Stress testing is used to evaluat improving their resilience in times changes in risk factors on a bank’s “Related to this, the [guidelines’] issuance provides that the board of directors should consider the

“In this respect, banks are exresults of stress-testing exercises in pected to develop sound assump tions generally depicting events or setting risk appetite; in planning - for business continuity managecant losses and to assess the impact ment; and in the case of domestic of these scenarios on the bank’s systemically important banks, in Monetary authorities said these

The central bank issued the expectations are consistent with guidelines to further strengthen earlier guidelines on corporate risk governance and contribute to the sustained safety and soundness Methodologies for stress test ing range from simple sensitivity

It said stress testing allows banks analysis to more complex tools, to prepare for events with severe such as scenario analysis and re-

Following the principle of pro - ments are set out for stand-alone

for system and model capabilities for the conduct of effective stresstesting exercises have been laid -

The principles of accuracy and integrity, completeness, timeliness and adaptability are the same underpinnings of robust stress testing

The approved guidelines apply to all banks on solo and consoli

Banks that are part of group structures shall conduct stresstesting exercises on a consolidated basis or at the parent bank’s level, covering all institutions regarded as material entities in the bank

The Bangko Sentral is giving banks two years from the effectivity date of the guidelines’ issuance to gradually progress from their existing stress-testing practices to fully

Greater access

Regarding the approved guidelines on establishing branch lite units, the BSP said these would facili- competitive financial products

The guidelines were issued in reponse to the lack of banking -

- ible provisions in the guidelines, banks would be able to expand in

Branch-lite units can offer products and services suited for the would depend on the banks’ business model and strategies, as

The central bank noted that banking products offered by these units shall exclude those suited for sophisticated clients

“Branch lite is a full branch, considered a full branch, there products that they think will best fit the particular area that they needed to offer,” BSP Deputy Gov

The new guidelines also rationalize current classifications of

Bangko Sentral said this policy initiative is consistent with its reform agenda to develop a more