Central Bank of Trinidad and Tobago Introduces New Guidelines for Financial Institutions
Enhancing Corporate Governance Practices, Risk Management, and Compliance
The Central Bank of Trinidad and Tobago has introduced new guidelines for financial institutions aimed at enhancing corporate governance practices, risk management, and compliance with regulations. The guidelines came into effect in March 2021 and cover key areas such as capital adequacy, liquidity planning, anti-money laundering (AML), combating the financing of terrorism (CFT), counter proliferation financing (CPF), risk management, internal controls, outsourcing, business continuity, and information technology systems.
Key Responsibilities
Financial institutions are expected to:
- Maintain effective relationships with the Central Bank through regular communication
- Set a sound corporate culture that reinforces ethical, prudent, and professional behavior
- Establish an effective system for compliance with all applicable laws and regulations
- Oversee material commitments, including major capital expenditures and outsourcing arrangements
- Promote a risk-aware culture and ensure that risk management practices are aligned with the institution’s strategic, capital, and financial plans
Board Responsibilities
The guidelines also outline specific responsibilities for members of the Board, including:
- Exercising a “duty of care” and “duty of loyalty” to the financial institution
- Overseeing material commitments and ensuring that risk management practices are aligned with the institution’s risk appetite and risk limits
- Ensuring that the institution maintains an effective relationship with the Central Bank through regular communication
- Setting standards of business conduct and code of ethics for directors, senior management, and other personnel
Risk Management
The guidelines emphasize the importance of an effective risk governance framework, including a strong risk culture and well-defined responsibilities for risk management. Financial institutions are expected to establish an Enterprise-wide Risk Framework that sets out basic goals, benchmarks, and limits with respect to their risk appetite.
Business Continuity and Disaster Recovery
Financial institutions are also required to oversee and approve business continuity and disaster recovery policy/frameworks, including strategies for preserving critical operations and services during times of stress.
Compliance
The guidelines emphasize the importance of compliance with all applicable laws and regulations. Financial institutions are expected to ensure that they have an effective system in place for compliance and to cooperate promptly and fully with requests for information from the Central Bank.
Conclusion
Overall, the new guidelines aim to enhance corporate governance practices, risk management, and compliance within the financial sector in Trinidad and Tobago. By adhering to these guidelines, financial institutions can ensure a stable and secure environment for their customers and stakeholders.