Given the systemic importance of the banking system as a whole in a small country as ours, the Bank tightened the supervisory process by increasing the frequency of on-site examination of banks, enhancing the levels of exchange with the regulated entities and more intensive analysis of off-site prudential returns.
However, the use of such models in calculating capital requirements is likely to be restricted to a limited subset of internationally active banking organizations, given the model’s reliance on accurate data and the expense involved in developing these techniques. As you are undoubtedly aware, banks in countries with poor data and resource constraints are unlikely to employ high-quality risk management systems.