Page 24 - Annual Report 2022 EN

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Supervisory priorities for 2023
The QFCRA’s supervisory priorities are determined
through a thorough assessment of risks and
vulnerabilities facing authorised firms. These priorities
are driven by the global economic landscape and reflect
the outcomes of supervisory reviews and interventions.
As a risk-based regulator, the process aims to efficiently
allocate supervisory resources to address risks to
our regulatory objectives. The QFCRA continuously
monitors these priorities and adjusts them as necessary
in response to changes in the risk landscape.
i. Strengthening governance and risk management
frameworks to deal with immediate
financial and geopolitical shocks.
a. The rapid increase in interest rates and
heightened volatility in bank funding costs.
b. Deterioration in asset quality due to high inflation
and reduced debt servicing capacity of borrowers.
c. Asset concentration, particularly in commercial
real estate, and higher risk premiums leading
to further volatility in real estate prices.
T ABLE OF C ONTENT S
The recent failures of several banks in US and Europe Risk Assessment Visits (RAVs) Thematic reviews
underscore the importance of robust governance,
risk management, and control frameworks to Arising from the focus areas mentioned, the BIS The QFCRA is committed to the implementation of best
navigate a volatile risk environment effectively. supervisory programme focused on the following areas: practices in relation to standards of governance across
all authorised firms and considers that remuneration
The following thematic reviews were conducted by QFC: and incentive standards that align with best international
• Assessment of firms’ compliance with the regulatory
expectation contained in the Governance and practice helps strengthen the prudent and sound
i. Cyber security and third-party risk management Controlled Functions Rules 2020 (CTRL) and management of financial institutions within the QFC.
Digital transformation and the associated IT security Customer and Investor Protection Rules 2019 (CIPR) BIS is conducting a thematic review on remuneration
and cyber risks remained a significant risk. The • Targeted reviews focusing on the across authorised firms to further understand and
Supervision team continues to work with the financial resilience and asset quality of portfolios assess compliance with best practices, with a particular
services industry to enhance management of these sensitive to macro-financial shocks focus on the governance of remuneration practices.
risks. Regular updates on emerging trends and
• Targeted reviews on Asset and Liability Management
vulnerabilities are shared with authorised firms.
(ALM) and Interest Rate Risk in the Banking
Supervisory Colleges
ii. Climate-related financial risks Book (IRRBB) risk management frameworks
Climate and environmental risks gained prominence • Assessment of soundness and resilience BIS participated in one supervisory college for an insurer.
within the banking sector, with growing recognition of funding and liquidity plans Four supervisory colleges were attended by IMAS team
of the financial implications of climate change. members, 2 for Investment Managers and 2 for Advisors.
BIS conducted 5 RAVs at banks and insurers in
iii. International Financial Reporting
2023. Overall, the results of the RAVs conducted
Standard 17 (IFRS 17) for Insurers
were satisfactory and in line with previous years.
The QFCRA has been working on the implementation
of IFRS 17 standard for the authorised firms. In
this regard, a townhall meeting was held in October
2023 wherein the new IFRS 17 prudential returns
and reporting requirements were discussed with all
the stakeholders, including authorised firms, QCB,
and the external auditors. The QFCRA subsequently
issued the new IFRS 17 prudential returns along
with the instructions to complete these returns to
authorised firms and has required them to submit
the 2023 annual prudential returns based on
the new returns. In addition, authorised insurers
are required to continue submitting prudential
returns based on IFRS 4. This parallel run is
expected to continue until the end of 2024.