MORNBFI Vol. 1 - Planters Development Bank

APP. Q-5209.12.31vi. Commentary on major issueswhere further analysis and decisions arerequired; andvii. Who has carried out theassessment, how it has been challenged,and who has approved it.2. BACKGROUNDThis section would cover the relevantorganizational structure and business lines,and historical financial data for the bank(e.g., group structure (legal and operational),operating profit, profit before tax, profit aftertax, dividends, equity, capital resources heldand as compared with regulatoryrequirements, total loans, total deposits,total assets, etc., and any conclusions thatcan be drawn from trends in the data whichmay have implications for the bank’s future).3. CAPITAL ADEQUACYThis section could start with adescription of the risk appetite used in theICAAP. It is vital for the BSP to understandwhether the bank is presenting its viewregarding: (1) the amount of capital requiredto meet minimum regulatory needs, or(2) the amount of capital that a bank believesit needs to meet its business objectives(e.g., whether the capital required is basedon a particular desired credit rating, orincludes buffers for strategic purposes, orminimizes the chances of breachingregulatory requirements). A description ofthe methodology used to assess the bank’scapital adequacy should also be included.The section would then include adetailed review of the capital adequacy ofthe bank.The information provided wouldinclude:Timingi. The effective date of the ICAAPcalculations together with consideration ofany events between this date and the dateof submission which would materiallyimpact the ICAAP calculation together withtheir effects; andii. Details of, and rationale for, thetime period over which capital has beenassessed.Risks analyzedi. An identification of the major risksfaced in each of the following categories:• credit risk;• market risk;• interest rate risk in the banking book;• liquidity risk;• operational risk;• compliance risk;• strategic/business risk; and• reputation risk;ii. And for each, an explanation of howthe risk has been assessed and, whereappropriate, the quantitative results of thatassessment;iii. Where relevant, a comparison ofthat assessment with the results of theassessment under the Framework(specifically for credit risk, market risk, andoperational risk);iv. A clear articulation of the bank’s riskappetite by risk category if this varies fromthe assessment; andv. Where relevant, an explanation ofany other methods apart from capital usedto mitigate the risks.The discussion here would make clearwhich additional risks the bank considersmaterial to its operation and, thus, wouldwarrant additional capital on top of thatrequired for credit risk, market risk, andoperational risk under the Framework.Methodology and assumptionsA description of how assessments foreach of the major risks have beenapproached and the main assumptionsmade.At a minimum, the BSP expects banksto base their ICAAP on the results of thecapital adequacy requirement under theQ Regulations Manual of Regulations for Non-Bank Financial InstitutionsAppendix Q-52 - Page 6