Enforced Prudential Guidelines
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EXTERNAL AUDITING
GUIDELINES
These guidelines seek
to provide financial institutions licensed under the Banking
Act with minimum requirements in determining external auditors’
suitability for appointment. They highlight key expectations
which management should have of external auditors in the conduct
of the audit based on international best practices.
These guidelines also seek to increase financial institutions’
awareness of the external auditors’ reporting obligations
to the Central Bank regarding transactions or conditions that
impinge on the well-being of the financial institution.
INTERNAL AUDITING
GUIDELINES
These guidelines seek
to provide a framework for the performance and promotion of
a broad range of internal audit activities within financial
institutions licensed under the Banking Act. Further, they
aim to show how the work of the internal audit department/unit
could be used to inform improvements in organisational processes
and operations.
They establish the basis for measuring performance in the
internal audit function and ensuring that the institution’s
internal audit activities confirm to international best practices.
GUIDELINES ON CREDIT RISK MANAGEMENT
FOR INSTITUTIONS LICENSED TO CONDUCT BANKING BUSINESS UNDER THE BANKING ACT
These guidelines seek to promote sound credit risk management at licensed
financial institutions. They outline the minimum requirements of a comprehensive
credit risk management programme, which financial institutions should develop
and implement in accordance with a defined credit risk strategy. The guidelines
are reflective of the Basel Committee’s 17 Principles for Management of Credit Risk
(September 2000).
ANTI-MONEY LAUNDERING GUIDANCE NOTES FOR
LICENSED FINANCIAL INSTITUTIONS
The ECCB issued these guidance notes in May 1995 to assist financial institutions in
developing programmes to combat money laundering. They promote the implementation
of adequate anti-money laundering policies, procedures and controls as they relate
to customer identification, verification of transactions, record retention,
reporting of suspicious activity, recruitment and training of employees and
audit reviews.
ECCU member territories subsequently passed more comprehensive legislation and
guidance notes, which ECCB’s guidance notes are expected to complement. Where the
requirements of ECCB’s guidance notes differ with the individual territory’s guidance
notes, regulations or laws, the territory’s guidance notes, regulations or laws would
take precedence.
SYNOPSIS OF THE
ADMINISTRATIVE GUIDELINES GOVERNING ESTABLISHMENT AND MAINTENANCE
OF RELATIONSHIPS BY FINANCIAL INSTUTIONS WITH SHELL BANKS
The administrative guidelines
governing the establishment and maintenance of relationships
between financial institutions and shell banks seeks to prevent
a licensed financial institution from directly or indirectly
establishing or maintaining relationships with shell banks.
These guidelines complement the existing Anti-Money Laundering
Guidance Notes issued by the ECCB, and the guidance notes,
regulations and laws issued by ECCU member governments. Where
the requirements of these guidelines differ with the guidance
notes, regulations or laws of a territory, the territory’s
guidance notes, regulations or laws would take precedence.
SYNOPSIS OF THE PRUDENTIAL
CREDIT GUIDELINES
The Prudential Credit Guidelines
seeks to establish minimum standards for the administration,
measurement and monitoring of credit risk in the portfolios
of institutions licensed under the Banking Act. It also sets
minimum provisioning requirements and provides guidance pertaining
to the suspension of interest, treatment of renegotiated loans
and the write-off of loans classified as loss.
SYNOPSIS OF
THE PRUDENTIAL GUIDELINES: CONTROLLING RISK IN CORRESPONDENT
ACCOUNTS
The Prudential Guidelines
on Controlling Risk in Correspondent Accounts seeks to
restrict access to financial institutions licensed under the
Banking Act by financial institutions not licensed under the
Banking Act and/or supervised by the Eastern Caribbean Central
Bank.
These guidelines complement the existing Anti-Money Laundering
Guidance Notes issued by the ECCB, and the guidance notes,
regulations and laws issued by ECCU member governments. Where
the requirements of these guidelines differ with the individual
territory guidance notes, regulations or laws, the territory’s
guidance notes, regulations or laws would take precedence. top
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LIQUIDITY
RISK MANAGEMENT GUIDELINES
The liquidity
risk management guidelines seek to provide financial institutions
licensed under the Banking Act with minimum standards for
the identification, measurement, monitoring and management
of liquidity risk. They highlight key principles for the management
of liquidity risk and minimum requirements for liquidity risk
management programmes.
The guidelines indicate that at a minimum, each financial
institution is expected to be able to identify, understand
and measure the risks associated with the management of liquidity.
The importance of managing funding sources and uses, and foreign
currency liquidity is emphasised. The guidelines also advocate
the implementation of effective policies and controls and
the establishment of a contingency plan. The guidelines speak
to the active involvement of the board and management in the
management of liquidity and its associated risks.
RELATED
PARTY TRANSACTION GUIDELINES
The guidelines
seek to ensure that licensed financial institutions are not
the subject of improper dealings by related parties and that
transactions with related parties are carried out on terms
and conditions that are consistent with or substantially the
same as with a non-related parties.
The guidelines identify related parties and establish a review
process for transactions with such parties. The objective
of the review is to ensure that related parties do not improperly
use the institutions. The guidelines also seek to ensure adequate
disclosure of related party transactions in the financial
statements and to the Central Bank to facilitate transparency
of operations.
CORPORATE
GOVERNANCE GUIDELINES
These guidelines
seek to encourage a governance framework that promotes among
financial institutions, high standards of professional conduct,
prudent and diligent discharge of duties and compliance with
applicable laws, regulations and guidelines. Although the
guidelines are not intended to be prescriptive, they set out
the minimum standards the ECCB expects from financial institutions
when implementing processes, structures and information systems
used for managing the institution.
The guidelines focus on the responsibilities of shareholders,
the board of directors and each director to the overall corporate
governance process, given their level of control and influence
within the organisation.
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Enforced Prudential Guidelines