The new supervisory approach will be two-pronged – first, strengthening the internal defenses of the supervised entities; and second, greater focus on identifying the early warning signals and initiate corrective action. 18. To strengthen the internal defenses, higher emphasis is now being given on causes of weaknesses than on symptoms.
The symptoms of weak banks are usually poor asset quality, lack of profitability, loss of capital, excessive leverage, excessive risk exposure, poor conduct, and liquidity concerns. These different symptoms often emerge together.