On-Site Supervision Department
On-Site Examination/Review is the earliest established activity of the BCC and remains the core instrument of banking supervision in Lebanon.
The BCC has, at any time, around 10 on-site teams reviewing banks and other financial institutions under its supervision.
Each team is made up usually of 3 to 7 members headed by a team leader.
The frequency (and comprehensiveness) with which On-Site reviews are conducted depend on each bank’s internal risk-rating. The ratings are not published, and are restricted to the BCC Board.
The On-Site review covers several issues, through a comprehensive process (On – site Examination Manuel). The issues covered are specified in the “Outline of the On-Site Reports”, which is an internal document for the use of On-Site examiners. The review usually covers :
- Loan Portfolio : The sample covered depends on several factors and can go up to 90% of the loan portfolio of a bank. Each loan reviewed is classified by the examiners. Reserves/Provisions are set accordingly as and when needed.
- Sovereign Exposure : Banks are required to have a study that sets the ceiling of their sovereign exposures. These Ceilings would depend on factors, such as the bank’s liquidity and capitalization. The currency of debt instruments is also taken into consideration
- Banks : Exposure to other banks is analyzed. It is a requirement that exposure to other banks be set after appropriate study of each bank / correspondent and its financials and ratings.
- Capitalization, Earnings and Liquidity: of each bank is reviewed. The review covers the accuracy of numbers. More importantly, it covers their adequacy compared to norms set internationally (e.g. by Basel Committee) and locally (by the BDL & BCC).
- Management : Management systems are reviewed with close scrutiny. Both the organization and how well it functions are analyzed. Particular emphasis is given to controls. Staffing is given special attention as well, especially in terms of adequacy. Risk Management in banks has become an important part of the focus of the on-site examination. So also has Corporate Governance ; Banks are expected to comply with Central Bank regulation issued in July 2006, which is based on Basel guidelines issued in February 2006.
- Market Risks.
- Operational Risks.
- I.T. : Assessment of the banks’ Systems accuracy and security, the Business Continuity Plans…
- Anti Money Laundering: Assessment of the banks’ AML process and implementation
- Basel II / III Implementation : The On-site teams carry out an assessment of each banks’ Action Plan for the implementation of Basel accords and analyses their Pillar I Capital Adequacy in addition to their Liquidity and conduct a Supervisory Review and Evaluation Process (SREP) on the ICAAP exercises of banks.