The Financial Services Commission (FSC) has embarked on a medium term project to adopt a risk-based supervision (RBS) methodology, for the oversight of the insurance, private pensions and securities industries. RBS involves the use of a forward looking view to assess the key risks faced by licensees and registrants, and the extent to which these entities have put appropriate mechanisms in place to manage their risks. The risks will vary based on the business model and strategies chosen by the entity, as well as developments in the external environment (the industry and the wider economy).
RBS will enable the FSC to be more efficient, in focusing its supervisory resources on entities whose risks give rise to concern, and are likely to negatively impact the stakeholders that the FSC seeks to protect. It leverages the work of the regulated entities’ corporate governance and oversight functions to minimize duplication of effort. In executing RBS, the FSC aims to reduce the regulatory burden on well managed entities, while still protecting the users of non-deposit taking financial services.
So far, the FSC has developed the necessary supervisory tools and templates for RBS, and conducted pilot on-site examinations using the RBS approach in order to test and fine-tune the framework. We have completed a total of twelve (12) RBS on-site examinations on entities across the three sectors regulated by FSC. The FSC aims to conduct the last two pilots this year, so that any lessons learnt can be incorporated when finalising the framework. Within the next quarter, the FSC will circulate the concept paper on the RBS methodology to industry stakeholders, for any comments and questions on our new approach to supervision.
RBS represents a paradigm shift for the FSC, including new information requirements. Licensees and registrants will be kept updated on impending changes, and we look forward to continued engagement with our stakeholders as we move closer to full implementation of the RBS framework.
