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Samoan Financial Sector Faces Multiple Threats

A recent report highlights the vulnerabilities of Samoa’s financial sector, dominated by commercial banks and Public Financial Institutions (PFIs). The study found that the four commercial banks provide almost 60% of credit to the economy, while PFIs account for around 30%.

Key Risks Identified

• High and rising non-performing loans (NPLs)
• Lack of transparency in balance sheet data

The stress tests conducted as part of the report revealed that local banks are relatively less resilient and could not withstand a severely adverse scenario. The report also highlights the vulnerability of PFIs, which are particularly exposed to shocks due to low asset quality and strong linkages with state-owned enterprises.

Recommendations for Improvement

• Close monitoring through on-site supervision and asset quality reviews
• Prompt corrective action for banks with high NPLs
• Restrict new lending in PFIs where substantial adjustments are needed
• Improve the quality and coverage of financial sector data
• Upgrade legal, regulatory and supervisory frameworks
• Build capacity and staff at the Central Bank of Samoa

Conclusion

The Samoan financial sector faces significant challenges that require urgent attention from authorities. The report’s findings highlight the need for closer monitoring, more effective supervision, and improved risk management practices to ensure the stability and resilience of the financial system.

About the Author/Organisation

[Author/Organisation] is a leading expert on financial sector policy and analysis. This report is part of its ongoing efforts to provide independent and objective assessments of financial systems around the world.