14 March, 2018, 12:00 am
RECOMMENDATIONS have been made by the International Monetary Fund (IMF) to amend Fiji’s Banking Act 1995 in order to address deficiencies in the existing regulatory framework.
This was highlighted in Parliament yesterday by Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum while presenting the IMF’s 2018 Financial Sector Stability Review (FSSR) on Fiji.
The review, Mr Sayed-Khaiyum said, was conducted by an IMF mission comprising seven experts who visited Fiji from February 14 to 27.
Highlighting key findings from the review, Mr Sayed-Khaiyum said the current legislation — Banking Act 1995 — was silent on key matters of consolidated supervision and major acquisitions.
This, he said, would be brought to Parliament in the time to come soon.
Mr Sayed-Khaiyum said to revamp our financial system, the IMF made key recommendations for the continued strengthening of the Reserve Bank of Fiji (RBF) regulatory roles.
“Given the dependence of the banking sector on foreign banking groups, supervision will need to ensure a strong link for the micro supervision analysis to macroprudential policies,” Mr Sayed-Khaiyum told Parliament.
“The supervisory approach will need to continue to evolve to become more forward looking to proactively identify and tackle risks in the banking system.
“There is a need to strengthen the RBF’s capacity for the early detection of emergency stress in banks and corrective action.”
Mr Sayed-Khaiyum said the IMF also concluded the 2018 FSSR for Fiji with a stress test assessment indicating that the banking system in Fiji as a whole appeared to be resilient to shocks similar to those experienced in the past 15 years.
“However we need to be mindful of certain institutions that are vulnerable to downturns in specific sectors due to their concentrated loan books and significant large commercial exposures,” Mr Sayed-Khaiyum said.
“It is therefore fundamental to have a sound, stable and healthy financial system to ensure trust in the system, the efficient allocation of resources and distribution of risks across the economy.”
Realising the need to have necessary safeguards in place to ensure financial stability, Mr Sayed-Khaiyum said Government had requested the IMF to undertake a review of the Fijian financial sector.
“It was good to get a third party assessment,” he said.
“The review provided a number of critical insights and recommendations that could be implemented in a coherent and systematic manner.
“The mission team had consultations with the Reserve Bank of Fiji, the Ministry of Economy, the Auditor-General’s office, the FNPF, FDB, Housing Authority, commercial banks, credit institutions and unions and insurance companies.”
He said there was a similar review that was conducted in 2006 under the IMF’s Financial Sector Assessment Program or FSAP.
The key recommendations of the 2006 FSAP, he said, led to some significant reforms in the past five to eight years.
This included the reforms to the Fiji National Provident Fund, the strengthening of the supervisory capacity of the RBF to a more risk based approach and the review of the Companies Act.
“The implementation of the recommendations has improved some of the key institutions in our financial system and the legislative regulatory frameworks in which they operate,” he said.