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BCTL Tightens Screws on Bank Regulation

Strengthening Financial System in East Timor

The Banking and Payments Authority (BCTL) has introduced new regulations to ensure the stability and soundness of the financial system in East Timor. The measures aim to regulate the remuneration of senior management, internal control systems, and capital requirements for banks operating in the country.

Remuneration Regulations

  • BCTL will only approve proposals on remuneration if they do not compromise a bank’s future earnings prospects or financial condition.
  • Any changes to remuneration packages must be approved by BCTL prior to implementation.

Internal Control Systems

  • The new regulations emphasize the importance of sound internal control processes designed to prevent losses, ensure reliable financial and managerial reporting, and promote stability in the financial system.
  • Banks are required to maintain proper accounts and records, prepare an annual report on their financial condition, and inform BCTL of any fraudulent acts or irregularities.

Auditor Appointments

  • Banks must appoint an independent external auditor recommended by the Audit Committee and approved by BCTL.
  • The auditor’s duties include maintaining proper accounts and records, preparing an annual report on the bank’s financial condition, and informing BCTL of any fraudulent acts or irregularities.

Conflict of Interest Prevention

  • Banks are required to ensure segregation of duties in operational functions and avoid conflicting responsibilities among employees.
  • They must also identify, minimize, and subject potential conflicts of interest to careful and independent monitoring.

Capital Requirements

  • BCTL has reiterated its sole competence and responsibility for defining the minimum capital requirements for newly licensed banks.
  • The minimum capital requirement is set at USD 2 million, determining the financial activities a bank can engage in.
  • Banks with the minimum capital can only receive deposits, buy and sell debt securities, extend credit, and provide payment and collection services.

Liquidity Requirements

  • BCTL has issued guidelines on liquidity requirements for banks licensed in East Timor to ensure that they maintain an adequate balance between their invested funds (assets) and liabilities.
  • The new regulations come into effect immediately and are aimed at enhancing the stability and soundness of the financial system in East Timor.

Contact Information

[Name] BCTL Email: [email address] Phone: [phone number]

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