The central bank has asked the class B and C financial
institutions also to conduct stress test from this quarter end.
Earlier, a year ago, the central banks had made it mandatory for the
class A commercial banks to start stress
testing that could ensure one of the risk indicators. The test can reflect the financial institutions strength in case of mass withdrawal and how they can manage the risk by evaluating the potential
impact. Depending
on the results, institutions are to correct their weaknesses.
“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,” the central bank said in its
directives.
The financial institutions
have also to submit the results within a month 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.
Likewise,
the central bank has also asked national level financial institutions to report
the results to the Nepal Rastra Bank’s Offsite Division Bank Supervisions Department within a
month of every quarter-end.
The central bank had prepared a standard module to carry out stress test of banks based on the framework of IMF and Basel Committee on Banking Supervision. Banks need to assess their soundness in case of key risks like credit, market and liquidity risks.
Meanwhile,
the central bank has allowed Class B and C financial institutions to open
interest-bearing accounts at development banks and finance companies till the
end of the current fiscal year. Earlier, they were allowed to their money at the
commercial banks only.
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