Timor-Leste Adopts New Banking Compliance Regulations

Enhancing Financial Stability in Timor-Leste

The Central Bank of Timor-Leste (CBTL) has introduced new regulations aimed at strengthening banking compliance and stability in the country. The new rules, which came into effect in February 2022, focus on credit risk management, external audits, and reporting requirements for financial institutions.

Key Provisions of the New Regulations

• Credit Risk Management: Banks are required to have a comprehensive Credit Risk Management system in place that provides an overall view of the bank’s credit risk exposure.
• Reporting Requirements: Financial institutions must submit mandatory financial information on a bi-monthly, monthly, and quarterly basis using a single reporting template.
• External Audits: The new regulations emphasize the importance of regular external audits to ensure the accuracy and reliability of financial reports.

Support for Micro, Small, and Medium Enterprises

The Government has also approved a credit line called “Fasilidade Garantia Crédito Suave” aimed at supporting micro, small, and medium enterprises in obtaining financing. This measure is designed to promote business growth and sustainability while ensuring compliance with rules and implications on the use of public funds.

Broader Efforts to Strengthen Financial Stability

The new regulations are part of a broader effort by the Government to enhance financial stability and promote economic development in Timor-Leste. The country’s banking system has faced challenges, including a decline in credit growth and an increase in non-performing loans.

By introducing these new regulations, the CBTL aims to:

• Enhance Banking Sector Resilience: Strengthen the ability of banks to withstand financial shocks and maintain stability.
• Promote Efficient Financial System: Improve the overall efficiency of the financial system, reducing costs and increasing access to credit for businesses and individuals.

The implementation of these new regulations is expected to have a positive impact on the overall economy and contribute to Timor-Leste’s economic development goals.