Supervisory Guidelines for Identifying and Dealing with Weak Banks

On June 18th, the Basel Committee published guidelines for identifying and dealing with weak banks for the purpose of receiving comments from supervisory agencies.

In the report a weak bank is defined as “one whose liquidity or solvency is impaired or will soon be impaired unless there is a major improvement in its financial resources, risk profile, business model, risk management systems and controls, and/or quality of governance and management”.

The report describes indicators and approaches to identify weak banks by on-site examinations, business model assessments, MIS, stress testing and review of recovery plans. Furthermore, the report presents recommendations to dealing with weak banks such as taking corrective actions, resolutions issues and exit strategies. It addresses specific topics such as cross-border issues and global systematically important banks.

The structure of the document that summarizes well its content is as follows:

BIS weak banks report structure

The report is specifically targeted to the supervisory community and to international financial institutions that are advising to supervisory agencies. However, supervised institutions can also use this report a good source for supervisory expectations.

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See the report at: