Regulators – Singapore’s MAS releases guidelines on assessment and supervision of risk

Singapore’s supervisor, the Monetary Authority of Singapore (MAS) has issued guidelines on how it will assess the risk in financial institutions and develop the appropriate supervisory plans.

The "MAS’ Framework for Impact and Risk Assessment of Financial Institution” covers MAS’ supervisory objectives and principles, and the processes that underpin the framework - including how MAS assesses the impact of risk within financial institutions and the use of the MAS risk assessment process, Common Risk Assessment Framework and Techniques (CRAFT), to assess their risks. The new guide builds on the earlier “Objectives and Principles of Financial Supervision in Singapore”. Highlights of the document are MAS aims and the maintenance of a stable financial system. However themes that affect the industry as a whole and issues that cut across different financial service sectors are not covered.

The guide says “In seeking to meet its supervisory objectives, MAS does not aim to prevent all failures.  Through an impact and risk model, MAS varies and calibrates the supervisory attention paid to a financial institution according to its potential to affect the achievement of MAS’ supervisory objectives. MAS’ approach to supervision requires MAS, financial institutions and stakeholders to work closely together.”

The central role of the board and senior management is emphasised as is their need to play the central role for proactive oversight and governance of a financial institution’s activities.  MAS looks to the board and senior management to address issues of supervisory concern and supports the efforts of the institution to maintain an environment of sound risk management and internal processes commensurate with the institution’s business activities and their risks.

Ms Teo Swee Lian, Deputy Managing Director (Prudential Supervision) said “This monograph explains the framework and processes that underpin our risk-focused approach to supervision. We hope that by bringing greater transparency to the supervisory process, our regulated institutions and other stakeholders will better understand our objectives and the role they play in achieving our desired outcomes.”

This document is an excellent example of the processes, also followed by the UK’s FSA and other global regulators, of assessing risk in regulated financial institutions and using a risk-based approach in this actual assessment.