The following will be discussed in this chapter: What are weak banks? mandate of basel committee task force, supervisory objectives for dealing with weak banks, guidelines and principles for dealing with weak banks, symptoms and causes of bank problem, result of loose supervision. | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: TWENTY Summary of previous Session Banking sector Supervision in Pakistan Financial sector of Pakistan Banking Companies Ordinance Powers of State Bank of Pakistan Prudential Regulation for Banks Off site --- On site Monitoring at SBP Monitoring policy of SBP 2 Agenda of this session Section 5 What are Weak Banks? Mandate of Basel Committee Task force Supervisory objectives for Dealing with Weak Banks Guidelines and Principles for dealing with weak banks Symptoms and causes of bank problem Result of loose supervision To the external environment 3 Weak Banks Weak banks are a worldwide phenomenon. They pose a continuing challenge for bank supervisors in all countries, irrespective of the political structure, financial system and level of economic and technical development. All bank supervisors have to be prepared to minimise their incidence and deal with them if they occur. 4 Weak Banks (Contd.) Weak . | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: TWENTY Summary of previous Session Banking sector Supervision in Pakistan Financial sector of Pakistan Banking Companies Ordinance Powers of State Bank of Pakistan Prudential Regulation for Banks Off site --- On site Monitoring at SBP Monitoring policy of SBP 2 Agenda of this session Section 5 What are Weak Banks? Mandate of Basel Committee Task force Supervisory objectives for Dealing with Weak Banks Guidelines and Principles for dealing with weak banks Symptoms and causes of bank problem Result of loose supervision To the external environment 3 Weak Banks Weak banks are a worldwide phenomenon. They pose a continuing challenge for bank supervisors in all countries, irrespective of the political structure, financial system and level of economic and technical development. All bank supervisors have to be prepared to minimise their incidence and deal with them if they occur. 4 Weak Banks (Contd.) Weak banks have common problems and there are lessons to be drawn by pooling the experience of supervisors, especially the specific actions that have or have not worked in given circumstances. In the past, the lack of contingency arrangements and understanding of the tools available for dealing with weak banks have sometimes resulted in unnecessary delays in supervisory actions. 5 Weak Banks (Contd.) They have been key factors in the high costs of resolving banking problems. Appropriate guidance could reduce the costs and spillover effects of these problems. 6 Weak Banks (Contd.) Basel Committee emphasised the importance of developing guidance on dealing with weak banks on an individual basis, which was considered to be primarily a supervisory issue. 7 Weak Banks (Contd.) The Basel Committee on Banking Supervision agreed that the development of international supervisory guidance on dealing with weak banks would be helpful. To this end, the Basel Committee, in co-operation with its Core .
