Letter from the Director - Supervisory Insights on Advance Notice of Proposed Rulemaking (ANPR)
Ask any banker his view on the Basel II rulemaking and you are likely to hear conflicting responses. Given the major changes that will occur in how we measure risk-based capital adequacy at the largest, most sophisticated insured financial institutions, we should anticipate that other banks will scrutinize all aspects of the regulators' implementation plans. Many comments, including some criticism, have already been delivered by banks that will not be required to adopt Basel II.

ANPR - Risk-based Capital Guidelines - USA
The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS) (collectively, ‘‘the Agencies’’) are considering various revisions to the existing risk-based capital framework that would enhance its risk sensitivity. These changes would apply to banks, bank holding companies, and savings associations (‘‘banking organizations’’).

SBS Regulates Transparency of Information and Hiring in the Financial System
(Available only in Spanish)

With the purpose of contributing to improve the transparency of information in the financial system and the protection of the users, the Superintendent of Bank, Insurances and AFP (SBS) emitted the Resolution SBS N° 1765-2005, that regulates the Law N° 28587 and gathers all the norms that the SBS has emitted referred to the information transparency and to the responsibilities that the companies of the financial system have respect to their users and clients.

Regulation of Information Transparency and Dispositions Applicable to the Hiring with Users of the Financial System

(Available only in Spanish)

The dispositions of the present norm are applicable to the companies included in the literal A and B of the article 16° of the General Law, to the Banco de la Nación, the Banco Agropecuario Farming Bank and the Fondo de Garantía para Préstamos a la Pequeña Industria (FOGAPI), in ahead companies. Talking about the companies included in the literal B of the article 16° of the General Law and FOGAPI, the Regulation it will be applied in which it been pertinent.

SBS Foments development of the insurances market and promotes a greater culture of payment of the insurances policy

(Available only in Spanish)

With the purpose to administer better the risks of the insuring system and to foment the development and transparency of this market, the Superintendencia de Banca, Seguros and AFP (SBS), published in the newspaper El Peruano, Circular SBS N° 614- 2006, with the purpose of establishing the guidelines of information that the insurance agencies will have to send to the office of Central Risks of the SBS through of debtors Report of Insurance (RDS).

ASBA Events

ASBA activities, last trimester
(Available only in Spanish)

Editorial Note

Modification of the Core Principles
for Effective Banking Supervision
The challenges for the Region

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Bank Supervision

Sound credit risk assessment and valuation for loans
Comments from the public on all aspects of the consultative paper are welcome by 28 February 2006.
This paper is intended to provide banks and supervisors with guidance on sound credit risk assessment and valuation policies and practices for loans regardless of the accounting framework applied. As such, the principles in this paper are intended to be consistent with those set forth in the International Financial Reporting Standards (IFRS) applicable to loan impairment. Specifically, the paper addresses how common data and processes may be used for credit risk assessment, accounting and capital adequacy purposes and highlights provisioning concepts that are consistent in prudential and accounting frameworks. This guidance focuses on policies and practices that the Basel Committee on Banking Supervision believes will promote sound credit risk assessment and controls.

Critical Aspects in the Implantation and Validation of Internal Models of Credit Risk
(Available only in Spanish)
Raul García Baena, Luis González Mosquera and Maria Oroz García
Direction General of Supervision of the Bank of Spain.
 The article analyzes some aspects on the accumulated experience in the supervisor revision, which has revealed this aspect like critical in the implantation and validation of the internal models of credit risk. The importance of the qualitative factors as of the details in the numerical calculations to indicate the regulatory figure of capital.

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Recommended Readings

The future of the banking supervision in Europe
(Available only in Spanish)
Speech of Mr. Jaime Caruana, Governor of the Bank of Spain and President of the Committee of Basel of Banking Supervision, in the conference "Supervision of International Banks: A crisis is still possible?
Federación Bancaria Europea (FBE), Bruselas, Ocotober 28, 2005.

Procyclicality in the financial system: do we need a new macrofinancial stabilisation framework?

William R White Monetary and Economic Department

The successful pursuit of the objective of low inflation by central banks in recent decades has also delivered low variability of both inflation and output. At the same time, numerous financial and other "imbalances" (defined here as significant and sustained deviations from historical norms) have emerged. Should these imbalances revert to the mean, there could be significant effects on output growth. Although such an adverse outcome remains only a possibility, the question asked in this paper is whether we might still benefit from a new macrofinancial stabilisation framework in which monetary and regulatory policies gave more attention to avoiding the emergence of imbalances in the first place.

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Institutional Calendar 2006

• February 21-23
  Seminary "Validation of Systems of Internal Qualification of Risks"
  FSI, Trujillo La Libertad, Peru

• March 13-18
  Course "Analysis and Examination of Banks”
  FED, Lima, Peru •

• March 27-31
  Course "Foundations of Risk Administration of Interest rates"
  FED, Buenos Aires, Argentina

• April 2-8
  Seminary "Leadership for the Banking Supervision"
  Toronto Centre, Tegucigalpa, Honduras.

• April 24-29
  Course "Analysis and Examination of Banks”
  FED, Port Spain, Trinidad & Tobago

• May 15-18
  Course: "Supervision Focused in Risk"
  OSFI, Asuncion, Paraguay

• June 12-16
  Course “Supervision Focused in Risk and Risk Evaluation”
  FED, Santo Domingo, DominicanRepublic .

• July 11-13
  Seminary "Operational Risk in Basel II"
  FSI, México, D.F.

• July 17 to 20
  Course: "Supervision Focused in Risk"
  OSFI, Caracas, Venezuela

• August 28-September 1st
  Course "Foundations of Risk Administration of Interest rates"
  FED, Mexico, D.F.

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