MORNBFI Vol. 1 - Planters Development Bank

APP. Q-5209.12.31a. Risk identificationA bank could prepare a list of all materialrisks to which it is exposed; for that purpose itmay find it useful to identify and consider itslargest past losses and whether those lossesare likely to recur. The identification of allmaterial risk to which a bank is exposedshould be conducted in a forward lookingmanner.b. Capital assessmentFor all the risks identified through theprocess above, a bank could then considerhow it would act, and the amount of capitalthat would be absorbed, in the event that oneor more of the risks identified was tomaterialize.c. Forward capital planningA bank could then consider how its capitalneed as calculated above might change in linewith its business plans over its strategic timehorizon, and how it might respond to thesechanges. In doing so, a bank may want to performa sensitivity analysis to understand how sensitiveits capital is to changes in internal and externalfactors such as business risks, and changes ineconomic/business cycles.d. ICAAP outcomeFinally, a bank should document theranges of capital required as identified aboveand form an overall view on the amount ofinternal capital which it should hold.(Circular No. 639 dated 15 January 2009)Q Regulations Manual of Regulations for Non-Bank Financial InstitutionsAppendix Q-52 - Page 4