The FSA’s role is to oversee and regulate non-bank financial entities, promoting stability, public awareness, and confidence in these licensed operators. The FSA uses a risk-based approach to ensure that these institutions are effectively supervised and that potential threats and risks are promptly identified and addressed.
The FSA also employs internationally recognized prudential standards to evaluate the financial health and stability of the institutions it oversees (IFRS, CAMELS, PEARLS, BASEL I, and some aspects of BASEL II, IACS-ICPs).
The FSA is focused on enhancing financial stability to guarantee that institutions are properly supervised and that new threats and risks are swiftly recognized and managed. A stable financial system is essential for achieving other goals like maintaining market confidence, protecting consumers, and minimizing financial crime.
The FSA frequently monitors an institution’s financial and operational status to ensure compliance with the minimum prudential requirements set by relevant laws. These tasks are mainly conducted through off-site surveillance and on-site inspections. Off-site supervision involves reviewing regulatory reports and financial statements and conducting periodic trend analysis of selected ratios.
The on-site inspection involves assessing the qualitative risks that cannot be assessed offsite. On-site assessment aims at verifying the compliance with the requisite laws and regulations. It is the cornerstone of the supervisory process and involves the evaluation of an institution’s corporate governance through interviews with management, inspecting the written policies and procedures of the institution and the degree to which those written policies and procedures are followed, evaluating whether the institution’s financial statements accurately show the profitability and capital, checking the accuracy of accounting records, evaluating the adequacy of internal controls and the audit function as well as looking at investments and the risk appetite of the company.
On-site and Offsite supervision are mutually reinforcing and are designed to rapidly identify and diagnose emerging problems in individual institutions with a view to prescribing the most efficient resolution directed towards ensuring continued public confidence in the financial system.
