Banks required to
submit strategic plans

To be submitted regularly to

Banking Control Commission

The Central Bank’s Banking Control Commission (BCCL) has asked all banks to prepare strategic plans and related action plans, according to BCCL’s circular no 292.

The banks must update these plans at least once a year and when needed. They should submit them annually to the BCCL before the end of January.

The action plans are used to execute the bank's general strategy.

The strategic and action plans must cover a period of at least three years. They should also encompass the foreign units of the banks either through consolidated or standalone plans.

The banks used to prepare strategic plans on their own initiative and the BCCL used to look at these plans, according to a person familiar with the matter. It has now officially and explicitly asked the banks to prepare the plans and submit them on a regular basis, the source said. The BCCL has also stipulated the conditions and the framework for this task.

The general strategy, according to the BCCL’s circular, must feature the expected changes pertaining to the banks’ expansion plans. Such changes include the branches to be opened (or closed), setting up of headquarters, and upgrading or changing their information technology systems. Anticipated changes in the shareholder base, the board of directors, or the board committees must also be included.

The action plan must be built on realistic risk assessments and scientific and reasonable assumptions about economic and market conditions and the competitive situation. It must include the bank’s business model and its competitive advantage factors compared to other banks, as well as the bank’s main activities, products, and services. The action plan should also state the bank’s current administrative structure and the related anticipated changes. It must also specify the needs for increasing the bank’s workforce and the time schedule required for achieving this.

The action plan must include a marketing strategy pertaining to the new products and services that the bank will offer and the economic sectors and the geographic areas that it intends to focus on. It should also include the risk appetite and the risk profile of the bank and identify the high-risk activities and anticipated changes in the risk profile. Targets related to the capital adequacy ratio, return on equity, return on assets, and net interest margins, should also be included, as well as the bank’s dividend policy. The action plan must also reveal the bank’s goals pertaining to liquidity and the way it deals with liquidity risks.

The financial statements that must be attached to the action plan include annual budgets, projected balance sheet summaries, projected income statement summaries, projected cash flow statement summaries, and projected off-balance sheet account summaries.

The banks have to submit the strategic plans and related action plans for the first time before the end of April, 2018.