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East Timor’s Banking Regulation Seeks Stability and Integrity through Governance and Risk Management

In a move aimed at bolstering the stability and integrity of its banking system, East Timor’s Central Payments Office has unveiled a new regulation outlining governance and risk management requirements for banks operating in the country. The regulation seeks to ensure that financial institutions operate in a responsible and transparent manner, safeguarding customer interests and maintaining public trust.

Key Features of the Regulation

• Establishment of a Governing Board at each bank, responsible for setting policies and overseeing their implementation
• The board will consist of an uneven number of members, ranging from three to seven, appointed by the general meeting of shareholders for a term not exceeding four years
• Banks must establish both an Audit Committee and a Risk Management Committee

Audit Committee Responsibilities

• Establish accounting procedures
• Supervise compliance with laws and regulations
• Commission audits at the bank’s expense

Risk Management Committee Responsibilities

• Develop procedures for credit appraisal, loan administration, and asset and liability management
• Monitor compliance with laws and regulations regarding credit and other risks

Secrecy and Confidentiality

All individuals appointed or elected to positions at the bank are required to maintain secrecy regarding non-public information obtained during their service to the bank, including:

• Customer accounts
• Business relationships
• Other confidential data

Anti-Money Laundering Measures

• Prohibition of concealing, converting, or transferring cash or property derived from criminal activity
• Notification of authorities responsible for combating money laundering if evidence of illicit activities is found

Risk Management

The regulation highlights the importance of risk management in banking, requiring institutions to:

• Establish procedures for credit appraisal, loan administration, and asset and liability management
• Monitor compliance with laws and regulations regarding credit and other risks

Conclusion

East Timor’s new banking regulation aims to ensure the stability and integrity of its financial system by setting clear governance and risk management requirements for banks operating in the country.