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Assessment Report: Compliance of Legal Framework for Banking Supervision

Introduction

This report assesses the compliance of the legal framework for banking supervision in a particular country with international standards, specifically the Core Principles for Effective Banking Supervision. The report evaluates the country’s laws, regulations, and practices against five core principles.

Core Principles for Effective Banking Supervision

Principle 1(3): Authorization of Banking Establishments

  • A suitable legal framework is necessary, including provisions relating to authorization of banking establishments and their ongoing supervision.

Principle 1(4) & Principle 1(5): Suitable Legal Framework for Banking Supervision

  • A suitable legal framework for banking supervision is also necessary, including powers to address compliance with laws as well as safety and soundness concerns.
  • A suitable legal framework for banking supervision is also necessary, including legal protection for supervisors.

Assessment Findings

Compliant Provisions

  • The country’s law empowers the supervisor (BNA) to:
    • Grant and withdraw banking licenses (Article 2, paragraph 1, and Article 9, paragraph 1 of the Banking Supervision Ordinance 1994)
    • Set prudential rules administratively without changing laws
    • Require information from banks in any form or frequency deemed necessary (Article 14)
    • Impose fines for late reporting (Article 46) and up to NA f. 500,000 with imprisonment up to four years for the violation of all provisions
  • The supervisor has powers to address compliance with laws and safety and soundness concerns:
    • Require prompt remedial actions from banks and/or impose a range of sanctions, including revocation of banking licenses (Article 9)
  • Legal protection exists against lawsuits for the supervisory agency and its staff for actions taken while discharging their duties in good faith.

Non-Conforming Findings

  1. Lack of explicit legal provisions protecting civil servants from lawsuits on grounds of good faith exercise of duty.
  2. No mention of the protection of the supervisory agency and its staff against costs of defending their actions.

Conclusion

The country’s legal framework for banking supervision is generally compliant with international standards, but there are areas where it could be strengthened or clarified.