• Off-site Supervision works on developing an effective risk-based approach that continuously monitors different types and developments of risks facing banks while assessing the extent to which banks are affected by current events. Furthermore, it works on enhancing the early warning system, which allows the CBE to take proactive measures to ensure the safety and soundness of the Banking Sector.
• The role of Off-site supervision is divided into three main functions: On-going surveillance, Management Information System (MIS) and Corporate Borrowers Monitoring.
1- On-going surveillance:
• The Off-site supervision applies the relationship manager concept whereby each team of relationship managers is responsible for monitoring and controlling individual banks by applying different techniques to enhance the analysis and assessment of banks and ensure that banks are in compliance with rules and regulations set by the CBE.
• The main source of information is the financial and prudential returns periodically received from banks, along with other periodic statements such as Central Credit Registry – CCR reports and shareholders statements. These periodic returns and statements could be supplemented by further information requested from banks on ad-hoc basis if deemed necessary.
• The department also receives data and information from multiple sources such as audited financial statements from external auditors, (which have to be ratified and approved by CBE prior setting the bank's General Assembly meeting according to article (84) of law no. 88 year 2003), reports from other regulatory bodies, market information, On-site inspection reviews. Moreover, periodic meetings with banks' senior management and directors take place on regular basis.
• Full-fledged reviews, analysis, and assessment of the bank's risk profile including but not limited to CAMELS, SWOT and peer analysis…etc. The process encompasses the review and assessment of financial statements, periodic capital adequacy ratio, liquidity, market and credit risk reports.
• The Off-Site department helps identify the scope of the On-Site inspection by detecting the most relevant and prioritized risk areas that should be examined based on reports from the Off-Site as well as several different departments. Upon the completion of the on-site inspection the department receives and follows-up with banks' Corrective Action Plan (CAP) that include bank's remarks on the findings and issues raised by the inspection along with given time frames for their rectification.
Central Bank of Egypt
Banking supervision sector
• The Banking Supervision Sector has developed a number of tools to ensure the quality and timeliness of data requested, thus facilitating and reinforcing its supervisory actions in a risk-based supervisory system. Furthermore, the department produces several reports that address and asses various risks, some of the most prominent reports include:
- The Bank Risk Profile; a report that covers each bank's detailed financial information, risk analysis and relevant trends. In addition to each bank's comparison to its peer group.
- The CAMELS report, which is used to measures the strengths and weaknesses of a given bank, based on both quantitative and qualitative factors. Moreover, different analysis takes place on the model such as peer and trend analysis, noting that the inspection teams are provided with the results of this report as part of the data that is presented to the On-site department during the pre-inspection phase for the purpose of validation.
- Stress Testing Reports; As part of the assessment process, standard as well as ad-hoc stress testing is conducted periodically to assess potential adverse scenarios related to perceived volatility of loss events that could negatively affect banks.
• In view of these reports, if any evolving problems are detected and identified in any of the reports produced by the department, the bank is contacted for prompt rectification of these problems in a timely manner or unscheduled inspection visits may be conducted.
2- Management Information System (MIS):
• The main responsibility of the MIS unit is to develop and upgrade the reporting systems as well as the on-going surveillance reports (Financial & Regulatory). These reports are risk focused and inline with the International and Financial Accounting Standards (IFRS). It also produces wide range of reports and information that serve different departments within the CBE as well as other external governmental authorities concerning the Banking Sector.
• Moreover, MIS consolidates data for the banking sector and provides data support for the on-going surveillance process.
3- Monitoring of large corporate borrowers and their connected parties:
• Corporate Borrowers Monitoring Unit's prime objective is to act as an early warning tool to detect any weaknesses in large corporate exposures and to ensure that these exposures are inline with CBE regulatory requirements as well as the prudent credit extension practices.
Central Bank of Egypt
Banking supervision sector.
• It also aims to measure concentration risk within various sectors and industries as well as examine banks' credit exposures and resilience to adverse conditions.