IOPS Toolkit for Risk-based Supervision

Module 1: Preparation for Risk-based Supervision

Legislative Background• Legislative Approach

discretion in the interpretation of legislation discretion in the enforcement of legislation Prudent person rule

• Legislative Support Supervisory objectives Supervisory powers

• Independence• Fit + proper test• Issue guidance• License• Collect information• Enforcement

• Risk-based legislation

Supervisory Organisation -Organisational alignment

Supervisory Organisation: Skills and Culture

• Skills and culture - training in philosophy as well as process required

• Number of staff - not necessarily more but deploy experienced carefully

• Level of centralization – balance of supervisor responsibility and central oversight

Supervisory Organisation: Structure

• Horizontal -analysts oversee a portfolio of pension funds

• Vertical -analyst specialize in one function, such as registering new funds/ data gathering

• Matrix -hybrid approach

Supervisory Organisation: RBS Information• Information on what is going right as well as wrong• Qualitative information on how entities are complying with rules as

well as quantitative showing as doing so• Probability of risks• Impact of negative events• Systemic information• Trend as well as point in time information• Early warning triggers• Stress tests• Information from sources other than supervisory• Performance measures for supervisory authority• Do not need detailed information on every compliance failure

Supervisory Organisation: Information Sources

Supervisory Organisation: RBS Information

Industry Skills and Readiness