By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Central Bank of The Bahamas has called for recovery plans for all supervised financial institutions (SFIs) to help enable them to fully restore operations after a crisis situation.

The bank, in its recently released its “Draft Recovery Planning Guidelines, 2021”, said these guidelines will apply to all banks and trust companies incorporated in The Bahamas as well as co-operative credit unions and branches of foreign banks.

In the event that a SFI is a subsidiary of a larger group that SFI should be aware of how the larger group’s recovery plan fits into what the Central Bank has laid out in its guidelines.

The bank said: “Local management must understand the SFI’s risk profile and be prepared to engage in discussions with the Central Bank as needed. The Central Bank expects SFIs to have relevant documentation in place to address these matters, as responsibility for compliance with the requirements of these Guideline remains with the SFI.”

“... Effective recovery planning makes a SFI more resilient to financial stress. The recovery plan should include both a SFI’s risk management framework for monitoring, and recovery options for responding to, a range of stress scenarios. These recovery options should help the SFI to restore itself to a stable and sustainable condition. Each aspect of the plan should be underpinned by detailed analysis.”

Outside of the standardized report features like an executive summary and organizational structure, the plan must lay out “early warning indicators and triggers” in addition to “recovery options” and their “feasibility” and “impact” and how the recovery plans are to be rolled out over time.

The bank also said: “The recovery plan should include a high-level summary that provides an overview of the plan and how it will be implemented. This includes the identification of the SFI’s critical services, stress scenarios and recovery triggers, as well as preparatory measures.

“Recovery plans should be supported by documentation, data, and management information. The plan must be clearly defined and capable of being activated by senior management in a timely and effective manner. Data and management information should identify when triggers are breached or are likely to be breached and should be integrated with other data and internal reporting aspects of the SFI’s risk management framework.

“SFIs must indicate the selection criteria for recovery options, how the trigger points were determined and provide an analysis that demonstrates that trigger points would be breached early enough to be effective. It is also important to note that early warning indicators should be linked to triggers.

“Recovery plans should be reviewed on an annual basis and regularly updated to reflect any change to an SFI’s business activities, its financial situation, its legal or organisational structure, or any other matter, which could have a material effect on or necessitate a change to the recovery plan. The recovery plan should be subject to approval by the SFI’s Board of Directors. SFIs must notify the Central Bank within one month of making any material changes to a recovery plan.”