Banking Regulation: Governance and Risk Management

Introduction The Central Payments Office has issued a new regulation aimed at ensuring the stability and integrity of the banking system in East Timor. The regulation outlines the governance structure and risk management requirements for banks operating in the country.

Governing Board and Committees

Each bank must have a Governing Board responsible for establishing policies and supervising their implementation. The board will consist of an uneven number of members, not less than three nor more than seven, who are appointed by the general meeting of shareholders for a period of not more than four years.

• The board is responsible for setting policies and monitoring their implementation.
• Each bank must establish an Audit Committee and a Risk Management Committee.

Audit Committee

• Responsible for establishing accounting procedures
• Supervises compliance with laws and regulations
• Commisions audits at the expense of the bank

Risk Management Committee

• Establishes procedures for:
  • Credit appraisal
  • Loan administration
  • Asset and liability management
• Monitors compliance with laws and regulations regarding credit and other risks

Administrators and Employees

All persons elected or appointed as administrators and employees of a bank must maintain secrecy and confidentiality regarding non-public information obtained in the course of their services to the bank. Such information includes:

• Customer accounts
• Business relationships
• Other confidential data

Prevention of Money Laundering

No bank shall conceal, convert, or transfer cash or other property knowing that such property is derived from criminal activity. Banks are required to inform the authorities responsible for combating money laundering if they have evidence that property is derived from criminal activity.

Secrecy and Confidentiality

Present and past administrators, employees, and agents of a bank must keep secret and not use for personal gain or gain by others than the bank any non-public information obtained in the course of their services to the bank. Such information includes:

• Customer accounts
• Business relationships
• Other confidential data

Risk Management

Banks are required to establish procedures for:

• Credit appraisal
• Loan administration
• Asset and liability management

The Risk Management Committee will be responsible for monitoring compliance with laws and regulations regarding credit and other risks.

Conclusion The regulation aims to ensure the stability and integrity of the banking system in East Timor by setting out clear governance and risk management requirements for banks operating in the country.