Financial Stability Nepal Rastra Bank Financial Stability Framework

Financial Stability Nepal Rastra Bank

Financial Stability Framework • • • Institutional Financial Stability Oversight Committee Financial Stability Sub-committee Financial Stability Unit FIU Regulation, Supervision and Payment System Dept. Policy Financial sector Development Strategy Nepal Rastra Bank Act, 2002 Bank and Financial Institution Act , 2006 Unified Directive- Corporate Governance, Basel III, Sectoral Limits, Single Obligor, Financial Inclusion etc Financial Stability Report – Biannually

An Overview and Performance of the Financial System 1 1 1. 2 1. 3 1. 4 2 3 3. 1 3. 2 4 Types of Fis Nepal Rastra Bank Licensed By NRB Commercial Banks Development Banks Finance Companies Microfinance Development Banks Insurance Companies Contractual Savings Provident Fund Investment Trust Cooperatives( saving & Credit) As of Mid-July 2016 Share in Financial Number Assets 1 21. 46 28 67 42 42 26 1 1 33599 47. 77 7. 67 2. 26 2. 20 3. 46 4. 92 1. 82 8. 44

Major FSIs

Implementation of Macro-Prudential Policies and Tools Primary • Basel III – Counter Cyclical Buffer, Leverage Ratio, Capital Conservation Buffer • DSIFI – identification process • Loan to Value – 50% • SOL – 25 to 50 % • Sectoral limit – 40 % , Real Estate 25% • Others • Deposti Gurantee • CDS • IPS, NCHL • Merger and Acquisition by Law • Bank resolution

Systemic Risk Monitoring and Supervision • • • Policy Risk based supervision Guideline AML/CFT supervision Manual System Audit Guideline Supervision Risk Based supervision of Commercial Banks AML/CFT risk Based Supervision

Recovery and Resolution Planning • Power conferred by NRB Act , 2002 Problem Bank Resolution by law, 2015 • Improving Management • Changing the management • Prohibition in trasaction • Selling assets • Consolidation • Good assets/Bad assets classification • Bridge Bank

Challenges and Way Forward • • Challenges New subject/Lack of experience Weak institutional framework/ca. Poor coordination Implementation of international standards – Basel III, AML/CFT, IFRS Presence of unregulated sector/parallel banking activities Way Forward Identified as a critical subject High level coordination mechanism Some of the tools being used- Basel III, Risk based supervision