The Central Bank of The Bahamas (CBOB) yesterday released a framework for commercial banks to have in place enterprise risk management (ERM) moving forward, the CBOB said in a press statement.

The CBOB said the release of the guidance notes means supervised financial institutions (SFIs) - commercial banks - will be required to submit their enterprise-wide risk management assessments by September 30.

"These guidance notes provide the industry with the Central Bank's minimum expectations when developing an ERM framework that enables SFIs to develop and implement strategies, policies, procedures and controls to effectively manage risks. SFIs are encouraged to tailor their framework to align with the nature, size, and complexity of their business and risk appetite," the CBOB statement said.

"SFIs are expected to notify the Central Bank of any changes or deviation from their board-approved risk management framework."

The CBOB's guidance notes explained that the new protocol is also for co-operative credit unions, but does not apply to nominee trusts companies or restricted trust companies that conduct business on behalf of a client or clients who are members of the same family.

The Central Bank requires the ERM to be approved by the bank's governing body.

The guidance notes explain that the ERM should explore risks that include at minimum credit risk, compliance risk, fiduciary risk, interest-rate risk, legal risk, liquidity risk, market risk, operational risk, reputation risk, settlement risk, technology risk, or any other risk the SFI might identify as relevant to its operation.

"SFIs should have a comprehensive risk management framework, including effective board and senior management oversight to identify, measure, evaluate, monitor, report and control or mitigate all risks on a timely basis, and to assess the adequacy of their capital and liquidity in relation to their risk profile and market and macroeconomic conditions," the guidance notes explain.

"This extends to the development and review of contingency arrangements, including recovery plans, which take into account the specific circumstances of the SFI on a consolidated basis.

"SFIs that are a part of a banking group may rely on the risk management function within the group, where the risk management function satisfies the criteria set out below."

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