FSC announces the 2022 financial examination focuses
2021-12-21
FSC announces the 2022 financial examination focuses
To implement the principle of maintaining transparency of examination procedure that is set out in the "Principles for Effective Financial Examination" adopted by the FSC in July 2021, the FEB announces the 2022 financial examination focuses to help financial institutions develop an early understanding of the FSC's supervisory and examination focuses and actively strengthen their businesses and operations through self-management.
The FSC's 2022 financial examination focuses are developed with reference to: (a) the principle of risk-based and significance-oriented examination approach set out in the aforementioned "Principles for Effective Financial Examination"; (b) regulations issued by the FSC in 2021; (c) the key supervisory focuses of the FSC and three sector bureaus; and (d) the FEB's examination outcomes in 2021. Also, in response to financial market conditions and the concerns of external stakeholders, the FSC selected a total of 98 examination focuses for different sectors of the financial industry.
The 2022 examination focuses will zero in on four aspects: (a) the FSC's supervisory focuses, the concerns of external stakeholders, and the development of major business lines of financial institutions; (b) other cross-sector (or multi-sector) matters; (c) new examination items in each sector of the financial industry; and (d) other existing examination items. Among all of these focuses, the three most concerned issues for the FSC are (a) protection of financial consumers / measures to ensure friendly financial services / and treating customers fairly (including protection of the interests of the elderly and customers with physical or mental disabilities); (b) cyber security management (including digital financial services); (c) corporate governance (including the whistleblower system) and risk management (including real estate loan business and management of Mainland China exposures). The main focuses are described as follows:
A. The FSC's supervisory focuses, the concerns of external stakeholders, and development of the major business lines of financial institutions (31 focuses, or 31.6% of the total): Related examination focuses fall into the following seven different categories:
(A) Protection of financial consumers / measures to ensure friendly financial services / and treating customers fairly principles (10 focuses): These focuses mainly cover -- embezzlement of customer funds by wealth management specialists (sales representatives and employees); protection of the interests of the elderly and customers with physical or mental disabilities; and operation and overseeing of wealth management for ordinary and high-asset customers.
(B) Examination of real estate lending (3 focuses): These focuses mainly cover -- credit investigations, interest rate risk pricing, and post-loan management (including tracking of the utilization of loan proceeds) with respect to mortgage, residual stock property loans, and land as well as property development loans; the monitoring and control of concentration on guarantees for real estate sectors; and the compliance with Central Bank rules on financial institutions' real estate-backed loans.
(C) Sustainable finance / Green finance (1 focus): The key examination focus is the required information disclosure on ESG-related funds issued by securities investment trust enterprises (SITEs).
(D) Cyber security management and personal information protection (9 focuses): These focuses mainly cover -- information security governance of the board of directors; fulfillment of the functions of the chief information security officer and the dedicated information security unit; oversight by financial holding companies of their subsidiaries' system updates and network security control; prevention of irregularities in server systems and applications; cyber security measures; management of personal information and business continuity.
(E) Management of Mainland China exposures (3 focuses): These focuses mainly cover – risk management of lending and investments activities in mainland China; and management of subsidiaries and joint-investment entities in Mainland China.
(F) Prevention of conflicts of interest between fund managers and securities investment trust funds (SITE funds) and discretionary investment accounts under their management, and control of investment procedures (1 focus): The key examination focal points are – if fund managers and related parties are trading the identical securities holding by the SITE fund or the discretionary investment account under their management; and the investment procedures of a SITE fund and of discretionary investment accounts.
(G) Digital financial services (4 focuses): These focuses mainly cover -- confirmation of the identity of customers that make mobile or online insurance purchases or investments; management of the development and issuance of mobile apps; management of customer information inquiries; and mechanisms for maintaining personal information security or transaction security for customers who conduct online account openings or apply for online services.
B. Other cross-sector (or multi-sector) matters (32 focuses, or 32.7% of the total): Key focal points include the following four -- corporate governance performance; risk management mechanisms for both aggregate and individual types of risks; anti-money laundering, counter-terrorism financing, and counter-proliferation financing operations; and implementation of legal compliance systems. Risk management mechanisms cover investment and trade rooms, liquidity, and venture capital and private equity funds.
C. New (or revised) examination items in each sector of the financial industry (14 focuses, or 14.4% of the total): Key focal points include the following -- financial holding companies’ management of subsidiaries and joint-investment entities; domestic banks’ management of business operations and subsidiaries and joint-investment entities; internal audit operations of credit cooperatives; security firms’ management of internal personnel and brokerage business for foreign securities transactions; information disclosure on domestic/foreign funds and ETFs managed by investment trust enterprises, and payment of distribution fees to sub-distributors; life insurers' management of insurance product marketing and mechanisms for control of sales risks; and non-life insurers' management of insurance product marketing, selling, premium collection, underwriting, and claim settlement operations.
D. Other existing examination focuses in each sector of the financial industry: 21 focuses, or 21.4% of the total.
By issuing the 2022 financial examination focuses, the FSC hopes to help external stakeholders to better understand examination priorities and to promote the sound operations in financial institutions.
Please direct any questions or comments to: FSC Feedback Mail
To implement the principle of maintaining transparency of examination procedure that is set out in the "Principles for Effective Financial Examination" adopted by the FSC in July 2021, the FEB announces the 2022 financial examination focuses to help financial institutions develop an early understanding of the FSC's supervisory and examination focuses and actively strengthen their businesses and operations through self-management.
The FSC's 2022 financial examination focuses are developed with reference to: (a) the principle of risk-based and significance-oriented examination approach set out in the aforementioned "Principles for Effective Financial Examination"; (b) regulations issued by the FSC in 2021; (c) the key supervisory focuses of the FSC and three sector bureaus; and (d) the FEB's examination outcomes in 2021. Also, in response to financial market conditions and the concerns of external stakeholders, the FSC selected a total of 98 examination focuses for different sectors of the financial industry.
The 2022 examination focuses will zero in on four aspects: (a) the FSC's supervisory focuses, the concerns of external stakeholders, and the development of major business lines of financial institutions; (b) other cross-sector (or multi-sector) matters; (c) new examination items in each sector of the financial industry; and (d) other existing examination items. Among all of these focuses, the three most concerned issues for the FSC are (a) protection of financial consumers / measures to ensure friendly financial services / and treating customers fairly (including protection of the interests of the elderly and customers with physical or mental disabilities); (b) cyber security management (including digital financial services); (c) corporate governance (including the whistleblower system) and risk management (including real estate loan business and management of Mainland China exposures). The main focuses are described as follows:
A. The FSC's supervisory focuses, the concerns of external stakeholders, and development of the major business lines of financial institutions (31 focuses, or 31.6% of the total): Related examination focuses fall into the following seven different categories:
(A) Protection of financial consumers / measures to ensure friendly financial services / and treating customers fairly principles (10 focuses): These focuses mainly cover -- embezzlement of customer funds by wealth management specialists (sales representatives and employees); protection of the interests of the elderly and customers with physical or mental disabilities; and operation and overseeing of wealth management for ordinary and high-asset customers.
(B) Examination of real estate lending (3 focuses): These focuses mainly cover -- credit investigations, interest rate risk pricing, and post-loan management (including tracking of the utilization of loan proceeds) with respect to mortgage, residual stock property loans, and land as well as property development loans; the monitoring and control of concentration on guarantees for real estate sectors; and the compliance with Central Bank rules on financial institutions' real estate-backed loans.
(C) Sustainable finance / Green finance (1 focus): The key examination focus is the required information disclosure on ESG-related funds issued by securities investment trust enterprises (SITEs).
(D) Cyber security management and personal information protection (9 focuses): These focuses mainly cover -- information security governance of the board of directors; fulfillment of the functions of the chief information security officer and the dedicated information security unit; oversight by financial holding companies of their subsidiaries' system updates and network security control; prevention of irregularities in server systems and applications; cyber security measures; management of personal information and business continuity.
(E) Management of Mainland China exposures (3 focuses): These focuses mainly cover – risk management of lending and investments activities in mainland China; and management of subsidiaries and joint-investment entities in Mainland China.
(F) Prevention of conflicts of interest between fund managers and securities investment trust funds (SITE funds) and discretionary investment accounts under their management, and control of investment procedures (1 focus): The key examination focal points are – if fund managers and related parties are trading the identical securities holding by the SITE fund or the discretionary investment account under their management; and the investment procedures of a SITE fund and of discretionary investment accounts.
(G) Digital financial services (4 focuses): These focuses mainly cover -- confirmation of the identity of customers that make mobile or online insurance purchases or investments; management of the development and issuance of mobile apps; management of customer information inquiries; and mechanisms for maintaining personal information security or transaction security for customers who conduct online account openings or apply for online services.
B. Other cross-sector (or multi-sector) matters (32 focuses, or 32.7% of the total): Key focal points include the following four -- corporate governance performance; risk management mechanisms for both aggregate and individual types of risks; anti-money laundering, counter-terrorism financing, and counter-proliferation financing operations; and implementation of legal compliance systems. Risk management mechanisms cover investment and trade rooms, liquidity, and venture capital and private equity funds.
C. New (or revised) examination items in each sector of the financial industry (14 focuses, or 14.4% of the total): Key focal points include the following -- financial holding companies’ management of subsidiaries and joint-investment entities; domestic banks’ management of business operations and subsidiaries and joint-investment entities; internal audit operations of credit cooperatives; security firms’ management of internal personnel and brokerage business for foreign securities transactions; information disclosure on domestic/foreign funds and ETFs managed by investment trust enterprises, and payment of distribution fees to sub-distributors; life insurers' management of insurance product marketing and mechanisms for control of sales risks; and non-life insurers' management of insurance product marketing, selling, premium collection, underwriting, and claim settlement operations.
D. Other existing examination focuses in each sector of the financial industry: 21 focuses, or 21.4% of the total.
By issuing the 2022 financial examination focuses, the FSC hopes to help external stakeholders to better understand examination priorities and to promote the sound operations in financial institutions.
Please direct any questions or comments to: FSC Feedback Mail
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2021-12-22