In the domestic context, a significant shift has happened in the approach to supervision of commercial banks in the form of risk based supervision. At the core of supervisory monitoring under RBS is an assessment of the quality of a bank’s procedures for evaluating, monitoring and managing risk, and of the bank’s internal models for determining economic capital.
The success of the risk based supervision approach is incumbent upon quality and integrity of data, skill levels and competency across the banks and regulators and above all, an orientation of the top management of the bank towards risk-oriented business activities and oversight function. I will touch upon some of these issues in the course of my address.