• Impact and risk ratings

    • 3.1.8

      The impact and risk rating is an assessment of the potential adverse consequences that could follow from the failure of, or significant misconduct by, a firm. The potential adverse consequences include not only the direct financial impact on such firm's customers, counterparties and stakeholders, but also the potential for damage to our reputation and objectives.

    • 3.1.9

      In assessing the impact rating, we will consider a variety of factors such as:

      (a) the complexity of the firm's activities and structure, which is dependent on the nature and type of Regulated Activities it conducts. For instance, a firm that holds customers' deposits and assets will be operationally more complex and more difficult to resolve any issues or to supervise into compliance, as opposed to a Regulated Activity that does not involve accepting / holding customers' assets;
      (b) the scale of the firm's activities and its linkages with other financial institutions and the wider financial system.

    • 3.1.10

      The risk rating is an assessment of the firm's level of risk exposure or probability of failure across a wide range of risk factors. It takes into consideration a number of broad risk groups, including:

      (a) Financial Strength
      (b) Liquidity
      (c) Credit Risk
      (d) Market Risk
      (e) AML/CFT and Financial Crime
      (f) Conduct Risk
      (g) Operational Risk
      (h) Corporate Governance
      (i) Internal Control System
      (j) Business Model Risk

    • 3.1.11

      The combination of the risk and the impact will determine the level and intensity of supervision. Firms with higher ratings will be subject to higher supervisory intensity. Our supervisory oversight of these firms will entail more frequent and routine engagements and on-site visits to oversee the activities and developments in the firm. These engagements would typically involve discussions with the board and senior management, business and compliance heads, auditors and risk managers of the firm and, in the case of overseas financial Groups, its head office staff and home country regulators.