The Central Bank last week said it has now set up a new “Resolution Division” to take all necessary measures to address financial problems of some of the troubled Registered Finance Companies (RFC) expeditiously. This specialized Division will help the Monetary Board to implement necessary policy measures on a fast track basis.
“A new set of regulatory and supervisory measures will be introduced in due course in line with the above joint initiative. The examination and supervision methodology has already been revisited to assess the financial condition and the business models of the regulated entities by focusing on material risks to their future sustainability of businesses in place of the history-based assessment. In this context, the respective Boards of Directors will be directly responsible for early resolution of supervisory concerns over such risks,” the Central Bank said in a statement.
Noting that the financial market regulator has attached the highest priority to the resurrection of these companies, the statement pointed out the latest initiative in this regard includes joint action by the Government, Central Bank and Finance House Association (FHA) in launching a new policy to resolve financial problems of these companies.
As announced in the Government Budget 2016, the Financial Asset Management Company (FAMA) is to be set up in due course to help these companies to recover and manage their non-performing loans with state support in line with a model adopted by East Asian Countries.
The FHA is proposed to help by arranging for leading finance companies and their investors to provide funding support to these companies for business operations in the interest of safeguarding and promoting the non-banking financial sector as a whole. The Central Bank will provide regulatory facilitation and arrange infusion of fresh capital from investors. A good number of investors with overseas links are in negotiation with the Central Bank.
“As a policy, the Central Bank will not issue any new licenses and, therefore, licenses of existing companies will have a high market value in the future which is a key factor encouraging new investors. A major overhaul of the regulatory framework to strengthen the safety and soundness of the sector as a whole is also an essential component in this process,” the Bank noted.
It added that the financial system stability of the country is one of the two statutory objectives of the Central Bank, supported with a large number of statutory powers and, therefore, the Central Bank will continue to resolve all problems affecting the financial system stability. However, the Central Bank alone is not able to do it and the support of all other stakeholders would also be necessary.