MORNBFI Vol. 1 - Planters Development Bank

APP. Q-5209.12.31Annex AINTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS(Suggested Format)The BSP expects that there will be a fairdegree of variation in the length and formatof submissions since banks’ business andrisk profiles differ. As such the ICAAPdocument should be proportional to thesize, nature and complexity of a bank’sbusiness.This format has been provided as astarting point. Banks are not required toadopt this format. However, adopting thisformat may be convenient for banks as itcovers the minimum issues which typicallywould be the subject of review by the BSPand may therefore make the review processmore efficient for both the bank and the BSP.Equally, use of this template is not asubstitute for being aware of the relevantrules.What is an ICAAP document?An ICAAP document is a bank’sexplanation to the BSP of its internal capitaladequacy assessment process. While thismay be based on existing internaldocumentation from numerous sources, theBSP will clearly find it helpful to have asummary prepared to communicate the keyresults and issues to it at a senior level.Since the BSP will be basing many of itsviews on the information contained in theICAAP document, the bank’s board ofdirectors and senior management shouldhave formally approved its contents. Assuch, the BSP would expect the ICAAPdocument to be in a format that can beeasily understood at a high level and tocontain all the relevant information that isnecessary for the bank and BSP to make aninformed judgment and decision as to theappropriate capital level and riskmanagement approach.Where appropriate, technicalinformation on risk measurement and capitalmethodologies, and all other works carriedout to validate the approach (e.g. boardpapers and minutes, internal or externalreviews) could be contained in appendices.1. EXECUTIVE SUMMARYThe purpose of the Executive Summaryis to present an overview of the ICAAPmethodology and results. This overviewwould typically include:i. The purpose of the report and whichgroup entities are covered by the ICAAP;ii. The main findings of the ICAAPanalysis:• How much and what compositionof internal capital the bank considers itshould hold as compared with the capitaladequacy requirement under the existing BSPRisk-Based Capital Adequacy Framework(the Framework), and• The adequacy of the bank’s riskmanagement processes given the risksassumed;iii. A summary of the financial positionof the business, including the strategicposition of the bank, its balance sheetstrength, and future profitability;iv. Brief descriptions of the capital anddividend plan; how the bank intends tomanage capital going forward and for whatpurposes;v. Commentary on the most materialrisks, why the level of risk is acceptable or,if it is not, what mitigating actions areplanned;Manual of Regulations for Non-Bank Financial Institutions Q RegulationsAppendix Q-52 - Page 5