COVID-19 challenges: SBP extends timelines for various regulatory requirements

KARACHI: The State Bank of Pakistan (SBP) has decided to extend the timelines for various regulatory requirements as the banking industry is facing challenges in meeting the existing timelines due to COVID-19.

According to a circular issued Wednesday, previous timeline for the Compliance Risk Management System was March 2020 and the revised timeline is October 31, 2020. Revised timeline for formulation of Risk Control & Self Assessment (RCSA) and development of Key Risk Indicators (KRIs) is extended to October 31, 2020 instead of previous timeline of April 2020.

Timeline for first external quality review of Internal Audit Function has also been extended to December 31, 2020 from June 30, 2020. In case where the financial institution has already undergone an assessment before issuance of SBP guidelines on Internal Audit Function (IAF), the next assessment would be due after 5 years of the earlier assessment.

Existing timelines for System for Internal Audit Function was December 31, 2020 and now it has fixed at September 30, 2021.

In addition, SBP has also issued some instructions to facilitate IAF operations during Covid-19 situation. For audit/risk review of international jurisdictions, the banks with overseas operations are allowed a onetime wavier from performing annual internal audit and risk reviews of international jurisdictions for year 2020, provided that, the Board Audit Committees (BACs) of respective banks approve adoption of such measure.

Subsequently, the BAC and Chief Internal Auditor (CIA) will take all required measures to ensure that risks of these jurisdictions are properly assessed and that any major control/governance deficiencies are properly highlighted through extensive off-site assessments, full scope desktop reviews and discussions with management and other relevant stakeholders at international jurisdictions.

Regarding credit risk review of all facilities of borrowers, SBP said that in cases where the credit origination and documentation monitoring is not centralized or digitally accessible, and the risk review teams have to physically visit the branches or credit regions for review or verification of documentation and monitoring of loans; the banks are allowed a onetime relaxation from conducting physical verification of such documents till October 31, 2020.

However, the risk review function of the bank will devise a comprehensive action plan to perform credit reviews for such branches or regions following a risk based approach and must review documentation through desktop or offsite approach.

According to SBP, the risk review function will ensure that adopting such approach does not compromise on assessing the health and quality of bank’s credit portfolio and all efforts shall be made to ensure that control are properly implemented and credit risks are timely identified.

Copyright Business Recorder, 2020