RBI brings fresh norms to help banks manage risks

The Reserve Bank of India (RBI) on Wednesday came out with fresh norms for tightening the risk management of banks, asking them to scale up to the Basel-II norms — the third stage of international banking norms.

The Advanced Management Approach (AMA) norms, released by RBI, will guide banks to measure operational risk, maintain solvency and migrate to the next stage of the capital adequacy requirements. The AMA guidelines, which deal with computation of capital charge for managing operational risks, are likely to be implemented from April 1, 2014.

To meet the Basel-II norms for risk management, RBI had already put in place the Basic Indicator Approach and the Alternative Standardised Approach. RBI had advised the banks to assess their preparedness with reference to the guidelines. The banks have also been told to approach RBI whenever they are ready to go for a preliminary assessment of their risk management system.

“If the result of this preliminary assessment is satisfactory, RBI will allow banks to make a formal application for migrating to AMA. It will then perform a detailed analysis of the bank’s risk management system and proposed model prior to according approval,” the regulator said.

Source: Business Standard