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Central Bank of Solomon Islands (CBSI) 2017 Financial Stability Report has highlighted seven macro prudential measures it has taken with the aim of mitigating risks to the financial system.
The three top measures focus on vigorous enforcement of current prudential standards, corporate governance and operational risks.
CBSI’s first measure is vigorous enforcement of current prudential standards, development of new prudential standards and lifting of loan proposal and collateral assessments.
Prudential standards were vigorously enforced in capital adequacy requirements, large credit exposures, foreign currency open positions and asset classification and minimum provisioning requirements.
CBSI also directed some financial institutions to lift their loan appraisal and collateral assessment standards and also developed new prudential standards in effort to minimise risk to the system.
The new prudential standards are business continuity management, outsourcing arrangements and practices, IT risk management, and related party transactions.
For corporate governance risk, CBSI took the initiative of directing financial institutions to review and strengthen their corporate governance framework.
In this regard, the bank directed some financial institutions (FIs) to develop risk management policies, fit and proper policies, crediting rate policies, reserving policies and remuneration policies.
The move had some FIs directed to strengthen their weekly, monthly, and quarterly prudential returns reporting.
“On top of these, CBSI had also directed some FIs to develop succession planning for persons holding responsible persons position such as board of directors and senior managerial positions. All these actions are aimed at reducing corporate governance risks”, said CBSI.
As for “operational risk”, some financial institutions were directed to review their current operational framework.
“In particular, CBSI had directed some FIs to create and instil risk culture institution-wide as a line of defence”, said CBSI.
CBSI also requested that FIs strengthen their anti-money laundering and terrorism financing framework, document and disseminate operational policies and procedures for familiarization to staff to minimize impacts of reputational risks to the system.
The remaining four macro measures include; financial institutions being directed to review their current investment framework, financial institutions in two sectors directed to strengthen their liquidity management framework, CBSI’s collaboration with bilateral and multilateral organizations and other Pacific Island Central Banks to find a regional solution and lastly, the largest FI in Solomon Islands was directed to diversify its investment portfolio to reduce concentration risk.
SOURCE: ISLAND SUN/PACNEWS
Pacific Islands News Association
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International News Safety Institute (INSI)
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