A year after madding it mandatory for commercial banks (A class) to go through stress testing, the Nepal Rastra Bank (NRB) has extended the compulsory provision to development banks (B class) and finance companies (C class) too. The central bank on Wednesday issued a circular to this effect.
Stress testing is a risk management tool used to evaluate the potential impact on a firm of a specific event and movement components like earning, liquidity and capital. The measure is applied to find out risks and possible risks an organization has to face in the future. Depending on the results, institutions are to correct their weak aspects.
“The stress test should be conducted based on the financial statement of the first quarter, and its result should be discussed with the board of directors and top level management of the institution concerned,” the central bank directive reads.
Also, the financial institutions have to forward the results within 30 days of the first quarter to the concerned supervision division.The central bank has also directed the financial institutions to file a precaution plan and policy to for future after acknowledging its status to the board of directors.
NRB Spokesperson Bhaskar-mani Gnawali said the NRB implemented stress testing for ‘B’ and ‘C’ class financial institutions as per the provision of the monetary policy for the current fiscal.
He said stress testing for development banks and finance companies is being implemented to ensure they are timely aware about the complexity they are facing and take appropriate action after consulting with the board.
According to the NRB, B class financial institutions are largely trouble free, while there are some structural problems in finance companies.“There is a window for them to merge and strengthen themselves,” Gnawali added.The central bank has also allowed development banks and finance companies to deposit cash in commercial banks for earning interest.
The provision, which allows B and C class institutions to withdraw cash when required, will exist till mid-July 2014.
source: the kathmandu post,30 jan 2014
LINK
Stress testing is a risk management tool used to evaluate the potential impact on a firm of a specific event and movement components like earning, liquidity and capital. The measure is applied to find out risks and possible risks an organization has to face in the future. Depending on the results, institutions are to correct their weak aspects.
“The stress test should be conducted based on the financial statement of the first quarter, and its result should be discussed with the board of directors and top level management of the institution concerned,” the central bank directive reads.
Also, the financial institutions have to forward the results within 30 days of the first quarter to the concerned supervision division.The central bank has also directed the financial institutions to file a precaution plan and policy to for future after acknowledging its status to the board of directors.
NRB Spokesperson Bhaskar-mani Gnawali said the NRB implemented stress testing for ‘B’ and ‘C’ class financial institutions as per the provision of the monetary policy for the current fiscal.
He said stress testing for development banks and finance companies is being implemented to ensure they are timely aware about the complexity they are facing and take appropriate action after consulting with the board.
According to the NRB, B class financial institutions are largely trouble free, while there are some structural problems in finance companies.“There is a window for them to merge and strengthen themselves,” Gnawali added.The central bank has also allowed development banks and finance companies to deposit cash in commercial banks for earning interest.
The provision, which allows B and C class institutions to withdraw cash when required, will exist till mid-July 2014.
source: the kathmandu post,30 jan 2014
LINK
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