The Bangko Sentral ng Pilipinas (BSP) has amended the way it conducts bank examination in lieu of tighter stress testing and risk-based supervision. In a new circular (BSP Circular No. 862) signed by BSP Governor Amando M. Tetangco Jr. last December 17, banks and non-bank financial institutions will be subjected to examination consistent with a risk-based approach to supervision such as the enhanced appraisal of the overall quality of corporate governance and review of overall risk profile and operations. The amended rules also improved the assessment of risk management oversight and self-assessment functions these are internal audit, risk management and compliance as well as the adequacy of policies, procedures and limits, effectiveness of risk measurement, monitoring and management information system, and internal control. As a nod to regular supervision rules and stress testing principles, bank examination also includes the evaluation of financial performance, capital adequacy, asset quality and liquidity. The term examination shall refer to an investigation of an institution under the supervisory authority of the BSP to determine whether the institution is operating on a safe and sound basis, explained the circular memo. Inquire into its solvency and liquidity, and assess the effectiveness of its compliance function to ascertain that it is conducting business in accordance with laws and regulations. The amended rules will take effect in January next year. The BSP is not the only one conducting bank examinations. …