Banks asked to assess their capital adequacy

Unified guidelines for calculating liquidity

The Banking Control Commission (BCC) has called on banks operating locally to perform an Internal Capital Adequacy Assessment Process (ICAAP) as per Basel requirements.

Banks have until the end of September 2013 to submit their ICAAP results to the BCC.

The ICAAP should be prepared in collaboration with all concerned departments, namely the Risk and Audit Committees, and the Financial Management, Risk Management, and Internal Audit Divisions, as well as any other internal units or outsourcing associates involved.

The ICAAP should be consolidated, meaning it should cover the bank and all its subsidiaries and related entities operating both locally and abroad.The BCC has issued a unified set of guidelines for banks to use when calculating their capital adequacy.

After performing the ICAAP, banks should analyze the results and take the necessary measures to boost the quality of their core capital, improve internal governance, and improve risk management policies.

Basel III commitments require banks to hold more tier 1 high-quality capital to reduce risk and absorb additional losses. The Central Bank had set the minimum required total capital ratio at 10.5 percent at end-2013 and at 12 percent by end-2015. These ratios are higher than the eight percent stipulated by Basel III criteria as they also include coverage for systemic risk and Capital Conservation Buffer.