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Financial Institution Risk Management in Solomon Islands Falls Under Regulatory Framework

The regulatory framework for the financial sector in Solomon Islands is comprised of legislation, primarily the Central Bank of Solomon Islands (CBSI) Act and Financial Institutions Act (FIA), as well as a system of agreed prudential standards under FIA. While CBSI expects licensed financial institutions to self-regulate to a large extent, banking supervision plays a key role in monitoring adherence to these standards to mitigate risk.

The “Rules and Regulations” Governing the Financial Sector

The Financial Institutions Act 1998 (as amended) outlines the rules and regulations governing the financial sector. This act provides a supervisory umbrella and addresses issues such as:

Defining financial institutions and banking business
Ownership rules
Licensing requirements
Minimum capital requirements
Restrictions on business activities
External auditor roles and duties
Depositor protection measures
Supervision and examination systems

Situations Where CBSI May Intervene

The regulatory framework also outlines situations where CBSI may intervene in the operations of a financial institution, including:

Transfer of ownership or control
Sanctions for non-compliance by financial institutions or their officers

CBSI’s Supervisory and Examination System

CBSI’s supervisory and examination system is a continuous cycle comprising four components:

Goals and Objectives

Monitoring and Planning Phase

On-Site Examination Phase

Reporting and Corrective Actions Phase

This framework aims to ensure the stability and resilience of the financial sector in Solomon Islands.