Financial Institutions and Financial Service Providers Policy
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Principles of formulating financial institution and financial service provider policy
The BOT formulated its financial institution and financial service provider policies and supervisory standards under 4 following principles.
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4 Principles of Formulating Policy
1. Prudent and Efficient
Applies a risk-proportionality approach to the supervision under the optimal combination frameworks of (1) a rule-based approach to set standards or minimum requirements and (2) a principle-based approach that enables financial institutions and financial service providers to adopt risk management processes that are suitable to their risk profiles.
2. Good Governance
Ensures that directors, executives, and staff members of financial institutions and financial service providers perform their duties with integrity, along with mechanisms that support effective operations and internal controls as well as promote a risk culture, fair treatment, and transparency into account.
3. Fair and Customer Protection
Requires financial institutions and financial service providers to disclose sufficient information, provide fair and sincere customer services, and avoid encouraging an over-indebtedness for safeguarding the well-being and interests of consumers
4. Macro Prudential
Applies regulatory policies as tools to maintain an equilibrium of economic, with the key to provide financial institutions and financial service providers the flexibility to be able to timely adapt in a rapidly changing environment, as well as to support an overall economy to be resilient toward changes in a sustainable manner.
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Process of policy formulation and implementation
The BOT has prudent and concise procedures for making policies and regulations for supervising financial institutions and financial service providers through the Regulatory Impact Assessment process (RIA), which is a systemic approach to critically assessing the problem's cause, outcomes, and proper alternatives, by taking into account the proportionality, cost-benefit impacts, risk reduction approaches and hearing from the public including the consideration of Financial Institutions Policy Committee (FIPC) as well.
After imposing the policies and regulations, the BOT will closely monitor and reviews the principle to ensure its effectiveness and not be an unnecessary burden on financial institutions and financial service providers.
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Recovery and Resolution
In addition to regulating and supervising financial institutions ensuring their stability and soundness, the BOT also requires financial institutions to develop a recovery plan to ensure that financial institutions are well-prepared in advance for handling potential distress that may arise in the future. This shall be developed while financial institutions are robust. A systemic preparation would be one of the mechanisms that help strengthen the overall economic and financial stability. Moreover, the BOT established a resolution framework with a transparent and prudent decision-making process, along with sufficient recovery tools to ensure the continuity of critical functions and avoid significant adverse effects on the overall economy and financial system.
