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Royal Monetary Authority of Bhutan: Strengthening Financial Regulation and Supervision

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The Royal Monetary Authority of Bhutan (RMA), established in 1982, has played a crucial role in carrying out central banking functions in the Buddhist kingdom. With the passage of the Financial Institutions Act of Bhutan in 1992, the RMA expanded its mandate to include regulatory and supervisory functions.

Evolution of Regulatory Functions

Before the Act, the RMA had no legal authority to grant licenses or oversee financial institutions. However, with its newfound powers, the establishment of the Financial Institutions Supervision Division (FISD) became instrumental in regulating, supervising, and inspecting the operations of the financial sector.

Regional Cooperation and International Membership

In 2000, the RMA joined the South Asian Insurance Regulatory Forum (SAIRF) to reinforce Bhutan’s insurance regulation and supervision. Since then, the RMA has participated in annual forum conferences with participants from Nepal, Sri Lanka, and India. In 2006, Bhutan hosted the 4th SAIRF meeting, further strengthening regional cooperation.

The RMA also joined the International Association of Insurance Supervisors (IAIS) in 2005 as a member and has attended its annual conferences to ensure the highest levels of insurance supervisory standards.

Insurance Supervision Challenges

In relation to insurance supervision, the FISD has been closely monitoring the only insurance company in Bhutan – the Royal Insurance Corporation of Bhutan (RICB) – focusing mainly on its investment activities. The division’s efforts to strengthen insurance regulation and supervision intensified when an insurance unit was created in 2003.

However, the absence of comprehensive insurance regulations compounded by insufficient trained personnel has hampered the FISD’s ability to effectively supervise the insurance business in Bhutan.

Addressing Regulatory Challenges

Seeking to address this issue, the RMA is now finalizing the draft Financial Services Act and the Insurance Regulations. These much-needed frameworks will give the RMA the necessary tools to establish a robust insurance regulatory environment that will provide improved supervision and monitoring of the insurance business in Bhutan.

International Connectivity

By staying connected with peers at SAIRF and IAIS, the RMA is ensuring that Bhutan’s financial regulatory landscape remains competitive and adaptive.