Periodic Reviews of The Financial Sector Are Critical.
The collapse of the NBF was spoken about in Parliament by Attorney-General Aiyaz Sayed-Khaiyum, who talked about how hand written notes were given to bank managers instructing who to give loans to.
The Financial Sector Stability Reviews help identify financial sector vulnerabilities with the key objective of formulating and implementing financial sector reform programmes which are supported by intensive followup technical assistance.
Fiji is only the fifth country in the world, and the first in the Pacific region to undergo a Financial Sector Stability Review (FSSR).
A team from the International Monetary Fund (IMF) was in the country in February.
The team of seven experts was headed by IMF Senior Financial Sector Expert Peter Lohmus.
If we are to avoid a debacle like the collapse of the National Bank of Fiji, it is important that such reviews are done of our financial system.
As highlighted several times, Fijians today are still paying for the collapse of Fiji’s first national bank. A financial disaster which happened under the watch of SODELPA leader Sitiveni Rabuka, who was the then Prime Minister.
To revamp our financial system, the 2018 FSSR mission has made some key recommendations for the continued strengthening of the RBF’s regulatory role, which are as follows:
(i)Given the dependence of the banking sector on foreign banking groups, supervision will need to ensure a strong link from the microsupervision analysis to macro-prudential policy.
The supervisory approach will need to continue to evolve to become more forward looking, to proactively identify and tackle risks in the banking system;
(ii)There is a need to strengthen the RBF’s capacity for the early detection of emergency stress in banks and corrective action. The RBF should introduce recovery planning requirements for commercial banks;
(iii)Thirdly, amendments to the Banking Act 1995 will be required to address deficiencies in the regulatory framework.
The current legislation is silent on key matters of consolidated supervision and major acquisitions. And this of course will be brought to Parliament in time to come soon. The collapse of the NBF was spoken about in Parliament by the Attorney-General Aiyaz Sayed-Khaiyum, who talked about how hand written notes were given to bank managers instructing who to give loans to.
We need to be able to protect ourselves and our future generations from something of this sort happening again.
The then Government issued $209 million in bonds to bail out the NBF. The funds borrowed were used to pay NBF depositors.
The overall cost including the interest payment has exceeded half a billion dollars.
Yes, exceeded half a billion dollars. The initial bonds have matured, but both the SDL Government and later on the FijiFirst Government has had to rollover this debt.
This means that we are still paying for this debt and it is likely that future generations will continue to pay for it.
This in fact has created intergenerational inequity. The current and future generation has to bear the cost burden of the mismanagement of a State Owned Bank under the SVT Government. Mr Sayed-Khaiyum had said that the situation was, exacerbated by the then senior Government ministers who “encouraged bad governance, nepotism and interference in the affairs of the NBF. People were actually given hand written notes to the Bank Manager to give loans”.
Fiji cannot afford a national bank collapse of this magnitude, but with prudent periodical reviews, we can be sure that we are able to foresee something of this sort rising in the horizons.