Principles for Effective Supervisory Intervention

This Note is intended to assist supervisors in formulating focused supervisory interventions which comply with sound principles of intervention summarized below.

Supervisors need to:

1. Identify all material risks to their supervisory objectives.
2. Look beyond immediate problems to potential wider “root causes” when determining the expected outcome.
3. Be clear about the expected outcome of the intervention.
4. Intervene in a way that is proportionate, risk-based and consistent with the supervisor’s risk tolerance.
5. Be clear about the pathways or intermediate steps to the expected outcome.
6. Ensure that there is a shared understanding with the financial institution about the expected outcome and the steps to achieving this.
7. Specify clearly the timetables for intermediate steps and the expected outcome.
8. Decide on the most appropriate way of monitoring progress.
9. Consider whether to impose restrictions or other requirements while remediation is under way.
10. Seek firm evidence that the expected outcome has been achieved.

In setting out in detail ways in which interventions can be made as effective as possible, the Principles are fully consistent with frameworks such as ‘ladders of intervention’ which document the link between levels of risk and types of intervention at a more generic level.