MORNBFI Vol. 1 - Planters Development Bank

APP. Q-5209.12.31Framework and additional risks, whereapplicable, should be assessed separately.Capital transferabilityDetails of any restrictions that maycurtail the management’s ability to transfercapital into or out of the business(es)covered, for example, contractual,commercial, regulatory or statutoryrestrictions that apply.4. CURRENT AND PROJECTEDFINANCIAL AND CAPITAL POSITIONSThis section would explain the currentand expected changes to the business profileof the bank, the environment in which itexpects to operate, its projected businessplans (by appropriate lines of business), andprojected financial position for, say threeto five years.The starting balance sheet and date asof which the assessment is carried outwould be set out.The projected financial position mightconsider both the projected capital availableand projected capital resource requirementsto support strategic/business initiatives.These might then provide a baseline againstwhich adverse scenarios (please see CapitalPlanning below) might be compared.Given these business plans, this sectionwould also discuss the bank’s assessmenton whether additional capital is necessaryon top of that assessed to cover their existingrisk exposures, as well as future plannedsources of capital.5. CAPITAL PLANNINGThis section would explain how a bankwould be affected by an economic recessionor downswings in the business or marketrelevant to its activities. The BSP is interestedin how a bank would manage its businessand capital so as to survive a recession/market disruption while meeting minimumregulatory standards. The analysis wouldinclude financial projections forward for,say, three to five years based on businessplans and solvency calculations. Likewise,a bank should disclose here the keyassumptions and other factors that wouldhave significant impact on its financialcondition, in conducting scenario analyses/stress testing.Typical scenarios would include howan economic downturn/market disruptionwould affect:i. the bank’s capital resources andfuture earnings; andii. the bank’s capital adequacyrequirement under the Framework takinginto account future changes in its projectedbalance sheet.It would also be helpful if theseprojections showed separately the effects ofmanagement potential actions to change thebank’s business strategy and theimplementation of contingency plans.In addition, banks are encouraged toinclude an assessment of any other capitalplanning actions that would be necessaryto enable it to continue to meet itsregulatory capital requirements throughouta recession/market disruption such as newcapital injections from related companies ornew share issues.Given the projected capital needsarising from an economic recession orbusiness/market downswings, this sectionwould also discuss the bank’s assessmenton whether additional capital is necessaryon top of that assessed to cover their existingrisk exposures and business plans.6. CHALLENGE AND ADOPTION OFTHE ICAAPThis section would describe the extentof challenge and testing of the ICAAP.Banks should describe the review and signoffprocedures used by senior managementand the board. It might also be helpful if acopy of any relevant report to seniormanagement or the board and their responsewere attached.Manual of Regulations for Non-Bank Financial Institutions Q RegulationsAppendix Q-52 - Page 7