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Financial Sector Profile: Marshall Islands’ Banking Sector Remains Satisfactory

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The Marshall Islands’ financial sector continues to demonstrate a satisfactory condition, with the banking sector being well-capitalized and asset quality remaining strong. The Financial Sector Profile, compiled by the Financial Industry Supervision (FIS), highlights the sector’s performance in the fiscal year 2017.

New Developments

  • In recent developments, the FIS has added 14 reporting entities to its regulatory framework, which will be subject to prudential and anti-money laundering/counter-terrorism financing (AML/CFT) supervision.
    • The list of identified reporting entities includes banks, credit institutions, insurance companies, money transfer operators, and credit unions.

Examination Groups

  • The FIS has created three examination groups for FY 2018, each comprising banks, financial institutions, and cash dealers.
    • This restructuring aims to fairly distribute the workload among examiners and provide support to its team.

Banking Sector Report

Overall Condition

The banking sector’s overall condition remains satisfactory, with both domestic and foreign banks being well-capitalized.

Uninsured Domestic Bank

  • Improved credit underwriting and sufficient allowance for loan losses have resulted in a satisfactory asset quality ratio.
  • Earnings performance is also satisfactory, driven by the net interest margin and decrease in overhead costs.

Capital Adequacy

  • The capital adequacy of the uninsured domestic bank slightly increased from the previous quarter, exceeding the minimum tier-1 risk-based capital ratio set by the RMI Banking Commission (15%).
  • The foreign bank branch has adequate capital support from its head office.

Asset Quality

Uninsured Domestic Bank

The quality of the asset portfolio remains satisfactory, with a decline in non-performing loans (NPL) to gross loans ratio. + This improvement is attributed to enhanced credit risk management and loan underwriting processes.

Regulatory Framework

  • The FIS continues to monitor the banking sector’s capital adequacy through its offsite surveillance system, ensuring compliance with minimum standards set by the RMI Banking Commission.
  • The Banking Act 1987 requires domestic banks to maintain a minimum tier-1 risk-based capital ratio of 15%.

Conclusion

The Marshall Islands’ financial sector remains strong, with the banking sector being well-capitalized and asset quality remaining satisfactory. The FIS’s efforts to restructure its examination groups and strengthen offsite surveillance will continue to ensure the stability and integrity of the financial system.

Contact

For more information on the Marshall Islands’ financial sector, please contact:

  • [Name]
    • Financial Industry Supervision (FIS)
    • [Email]
    • [Phone]