Risk-based supervision

Risk-based supervision is a strategic approach used by regulators to focus their attention on financial entities that pose higher risks to stability or consumers. Instead of supervising all organizations equally, authorities analyze factors like financial health, compliance history, and operational practices to identify which institutions could cause problems if issues arise. They then prioritize resources and oversight accordingly, aiming to prevent risks before they materialize. This approach enhances efficiency by directing supervisory efforts where they are most needed, helping maintain a safe and sound financial system and protecting consumers and the economy.