Financial Stability Nepal Rastra Bank

Financial Stability Framework Institutional Financial Stability Oversight Committee Financial Stability Sub-committee Financial Stability Unit FIU Regulation, Supervision and Payment System Dept. Policy Financial sector Development Strategy Nepal Rastra Bank Act, 2002 Bank and Financial Institution Act , 2006 Unified Directive- Corporate Governance, Basel III, Sectoral Limits, Single Obligor, Financial Inclusion etc Financial Stability Report – Biannually

An Overview and Performance of the Financial System As of Mid-July 2016   Types of Fis Number Share in Financial Assets 1 Nepal Rastra Bank 1  21.46  Licensed By NRB 1.1 Commercial Banks 28 47.77 1.2 Development Banks 67 7.67 1.3 Finance Companies 42 2.26 1.4 Microfinance Development Banks 2.20 2 Insurance Companies  26 3.46 3 Contractual Savings 3.1 Provident Fund 4.92 3.2 Investment Trust 1.82 4 Cooperatives( saving & Credit) 33599 8.44

Major FSIs

Implementation of Macro-Prudential Policies and Tools Primary Basel III – Counter Cyclical Buffer, Leverage Ratio, Capital Conservation Buffer DSIFI – identification process Loan to Value – 50% SOL – 25 to 50 % Sectoral limit – 40 % ,Real Estate 25% Others Deposti Gurantee CDS IPS, NCHL Merger and Acquisition by Law Bank resolution

Systemic Risk Monitoring and Supervision Policy Risk based supervision Guideline AML/CFT supervision Manual System Audit Guideline Supervision Risk Based supervision of Commercial Banks AML/CFT risk Based Supervision

Recovery and Resolution Planning Power conferred by NRB Act ,2002 Problem Bank Resolution by law, 2015 Improving Management Changing the management Prohibition in trasaction Selling assets Consolidation Good assets/Bad assets classification Bridge Bank

Challenges and Way Forward New subject/Lack of experience Weak institutional framework/ca. Poor coordination Implementation of international standards – Basel III, AML/CFT, IFRS Presence of unregulated sector/parallel banking activities Way Forward Identified as a critical subject High level coordination mechanism Some of the tools being used- Basel III, Risk based supervision