BANKING AND INSURANCE REGULATION

RESPONSIBILITIES OF Self Regulatory Organizations(SROs) Regulation of Market transactions Regulation of Market participants Dispute Resolution and Enforcement Actions Pre-Commitment of Resources

BANK REGULATIONS Bank Regulations are a form of Government regulations which subject banks to certain requirements, restrictions and guidelines. This creates transparency between banking institutions and the individuals and corporations with whom they conduct business among other things.

OBJECTIVES OF BANKING REGULATIONS Prudential Systematic risk reduction Avoid misuse of banks To protect banking confidentiality Credit allocation Treating customers fairly and CSR

GENERAL PRINCIPLES OF BANKING REGULATIONS Minimum Requirement Supervisory Review Market Discipline

INSTRUMENTS AND REQUIREMENTS OF BANK REGULATION Capital Requirement Reserve Requirement Corporate Governance Financial reporting and disclosure requirements Credit Rating requirements Large exposure restrictions

REGULATORY FUCTIONS OF RBI Licensing Corporate Governance Statutory pre-emptions Interest Rate Prudential Norms Risk Management Disclosure norms Know your Customer Norms Protection of Small depositors Para-banking activities

SUPERVISORY FUNCTIONS OF RBI On-site Inspection Off-site Surveillance Periodic meetings Monitoring of frauds

INSURANCE REGULATIONS No regulation in investment Discrimination No power with the Government actuary Mushroom growth of companies

FUNCTIONS OF IRDA Registering and regulating insurance companies Protecting policy holders interest Licensing and establishing norms for insurance intermediaries Promoting professional organizations in insurance Regulating and overseeing premium rates and terms of non-life insurance covers Specifying financial reporting norms of insurance companies Regulating investment of policyholders funds by insurance companies Ensuring the maintenance of solvency margin by insurance companies Ensuring insurance coverage in Rural areas

REGULATIONS AND CONTROL OF IRDA Registration and Licensing Product and its pricing Investment of Funds Solvency margin Appointment of actuary Appointment of Managing director Powers of Investigating and Inspection Accounts and Balance sheet Surveyors and Loss Assessors Intermediaries Reinsurance

OMBUDSMAN IN INSURANCE To resolve all complaints relating to the settlement of claims on the part of insurance company in a cost effective, efficient and impartial manner A person appointed to investigate grievances against mal administration is known as OMBUDSMAN Within three months Complaint when The insurer has rejected the complaint No reply was received within one month of complaint The reply was not satisfactory

TYPES OF COMPLAINTS received by OMBUDSMAN Any partial or total repudiation of claims by Insurance companies Dispute with regard to premium paid or payable in terms of the policy Dispute on legal construction of the policy wordings in case such dispute relate to claim Delay in in settlement of claims Non-issuance of any insurance document to customers after receipt of premium.

CORPORATE GOVERNANCE Corporate Governance is a system by which companies are directed and controlled Features Social Consciousness Value of ethics Universal Application Systematic approach Direction and Supervision

Need and Importance of Corporate Governance Changing ownership structure Growing popularity of the concept of Social Responsibility Growth in the number of scams Indifference on the part of shareholders Multiplicity of Takeovers and Mergers Trend towards Globalization

Need for Corporate Governance in Insurance Confidence Change management Investment Viability

RISK AND IMPLICATIONS OF RISK MANAGEMENT CHP 9 RISK AND IMPLICATIONS OF RISK MANAGEMENT

DEFINATION Risk can be defines as the degree of variation in the possible outcome from an uncertain event, or the variation in the possible outcomes

CLASSIFICATION OF RISK Financial and Non Financial Risk Static and Dynamic risk Fundamental and particular risk Pure and Speculative Risk

CLASSIFICATION OF RISK Personal Risk Arises out of some uncertainties in human element like premature death, dependent old age, sickness, disability and unemployment Property Risk Occurrences of uncertain events which cause loss to property Liability Risk Risks which creates financial liability on any person on the occurrence of an uncertain event are called liability risk. Losses which result from an intentional injury to other person or damages to their property through negligence or carelessness Risk arising from failures of others Loss resulting from the failure of another person to meet an obligation

RISK MANGEMENT Risk management may be defined as, “ the identification analysis and economic control of those risks which can threaten the assets or earning capacity of an enterprise”.

Importance of risk management Essential for effective managing of people and process Required for effective handling of spreading risk, monitoring and insuring To give advice and make suggestions for handling the risk To introduce various plan and techniques to minimize the risk To decide which risks are worth pursuing To fix sum insured under the policy To select appropriate methods or techniques to manage the risks To create awareness about risks among the people

IMPLICATIONS OF RISK MANAGEMENT Prevention of Risks and Avoiding Risks Reduction of Risks Shifting of Risks of Transferring of Risks Acceptance of Risk Spreading of Risks

RISKS IN BANKS Credit Risks Default Exposure Risk Collateral Risk Third Party Guarantee Risk Legal Risk

DERIVATIVES Forwards Futures Options Swaps

INNOVATION IN CREDIT APPRAISAL SYSTEM Creditworthiness of the Borrower Character Capacity Capital Collection of Credit Information Credit Information Bureau Borrower Information from Brokers, Traders and other businessmen Exchange of Credit information among Banks Balance Sheet and Profit and Loss account