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Regulatory Requirements for Financial Institutions in Timor

The Central Bank of Timor-Leste (CBTL) has recently issued several instructions aimed at strengthening the regulatory framework for financial institutions in the country.

Credit Classification and Regulatory Provisions

In order to ensure that banks promptly identify and monitor their non-performing credit products, the CBTL approved Instruction No. 17/2022, which sets out rules on credit classification and regulatory provisions. This instruction aims to establish a solid and consistent standard of credit risk management for all banks operating in Timor-Leste.

Credit Risk Management

The CBTL also issued Instruction No. 16/2022, which establishes the requirements for credit risk management by banks. Banks are now required to have a credit risk management system in place that is proportionate to their activities and provides an overall view of their credit risk exposure.

External Audits of Banks

Through Instruction No. 15/2022, the CBTL established rules for the external auditing of financial statements of banks, including subsidiaries of foreign entities.

Presentation of Reports by Financial Institutions

The CBTL also issued Instruction No. 14/2022, which aims to automate the supervisory function of the financial system and promote data quality for prudential analysis. Under this instruction, financial institutions must submit mandatory financial information on a bi-monthly, monthly, and quarterly basis.

Other Developments

In addition to these instructions, the government has also issued several decrees aimed at strengthening public financial management and increasing transparency and accountability in various sectors.

Public Financial Management

The government approved Law No. 2/2022, which establishes a new legal framework for the state budget, general account, and budgets of subsectors. This law aims to facilitate public management and increase transparency, responsibility, and control of services and entities of the public administrative sector.

Real Estate and Construction

Decree-Law No. 9/2022 established the legal framework for licensing and supervision of urban planning operations, including allotment operations, urbanization works, and construction and use of edifications.

The government also approved Decree-Law No. 28/2021, which amended the legal regime for old age and disability pensions and the legal regime for death benefits.

For further information on these developments, please contact Ricardo Alves Silva at ricardo.silva@mirandalawfirm.com.