Administrative Penalties

Prudential Statement No. 3

Revised in 2017

In terms of Section 18 of the Financial Institutions Act, 2004 the Reserve Bank may impose administrative fines not exceeding $5,000 plus $1,000 per day for each day of contravention

Liquidity

Prudential Statement No. 5

Revised in 2012

This statement is issued in terms of Section 15(3) of the Financial Institutions Act, 2004.

It is the responsibility of the board of directors and management of a licensed financial institution (LFI) to implement and maintain a liquidity management strategy that ensures that the LFI has sufficient liquidity to meet its obligations as they fall due under a range of operating conditions.

Capital Adequacy

Prudential Statement No. 6

Revised in 2017

This statement is issued in terms of Section 15(3) of the Financial Institutions Act, 2004.

Section 12 of the Financial Institutions Act requires that every licensed financial institution (LFI) under the Act maintain: (a.) if incorporated in Tonga, paid up capital and reserves; and (b.) if incorporated abroad, assigned capital and reserves in Tonga; in such minimum amount and proportion as the Reserve Bank may specify having regard to internationally accepted capital standards. Such proportion shall not be less than 8 percent of the total risk weighted assets for a licensee incorporated in Tonga. The Act also states that the minimum amount specified for the issue of a licence may not be less than $2,000,000.

Audit Arrangements

Prudential Statement No. 7

Revised in 2017

This statement is issued in terms of Section 15(3) of the Financial Institutions Act, 2004.

The Reserve Bank’s supervisory process depends on information provided by LFIs. The Reserve Bank needs to be assured of the accuracy and integrity of the information provided to be confident that its judgements about the bank’s management practices and compliance with prudential requirements are well informed and soundly based. Arrangements with a bank’s external auditors operate to enhance the credibility of the information provided.

Fit & Proper Requirements

Prudential Statement No. 8

Revised in 2014

This statement is issued in terms of Section 15(3) of the Financial Institutions Act, 2004.

This Statement aims to ensure that a licensed financial institution (LFI) is well managed and that persons occupying key positions within the institution have the degree of probity and competence commensurate with their responsibilities. These key positions include directors and senior managers as defined in this Statement. Many of the factors outlined in this Statement are also applicable to the assessments of whether a person, company or partnership are fit and proper to acquire or retain a substantial shareholding in a licensed financial institution.

Governance

Prudential Statement No. 9

Revised in 2014

This statement is issued in terms of Section 15(3) of the Financial Institutions Act 2004 to establish a minimum guideline to promote sound corporate governance practices for LFIs in Tonga.

Lending Limits

Prudential Statement No. 10

Revised in 2017

This statement is issued in terms of Section 15(3) of the Financial Institutions Act 2004.

The Reserve Bank expects LFIs to implement prudent measures and limits to monitor and control the risk of credit concentrations in respect of large exposures to individual counterparties or groups of related counterparties on a consolidated basis.

Foreign Exchange Risk Management

Prudential Statement No. 11

Revised in 2017

This statement is issued in terms of Section 15(3) of the Financial Institutions Act 2004.

This statement outlines the Reserve Bank’s expectations in relation to the management and control of risks arising from a LFI’s foreign exchange activities, maximum limits and reporting requirements in relation to prudent management of the foreign currency exposures of LFIs.

Banking Licensing Requirements

Prudential Statement No. 12

Revised in 2017

This statement is issued in terms of Section 15(3) of the Financial Institutions Act 2004.

This policy outlines the minimum license application requirements that applicants must submit to the Reserve Bank as part of their proposal to set up a bank or a credit institution in Tonga.

Syndicated Lending

Prudential Banking Standard No. 13

Effective on 1 July 2021

This Prudential Banking Standard is established under Section 20(3) of the Banking Act 2021 (the Act).

This standard sets out the minimum standards which banks operating in Tonga should adopt for the identification and management of risks associated with syndicated lending

Operational Risk Management

Prudential Banking Standard No. 14

Effective on 1 July 2021

This Prudential Banking Standard is established under Section 20(3) of the Banking Act 2020 (the Act).

This banking standard sets out the minimum standards which licensed financial institutions (Banks) operating in Tonga should adopt for the identification and management of operational risk.

Cybersecurity

Prudential Banking Standard No. 15

Effective on 1 July 2021

This Prudential Banking Standard is established under Section 20(3) of the Banking Act 2020 (the Act).

This Prudential Banking Standard aims to ensure that Banks have in place a cybersecurity governance and risk management framework commensurate with the Bank’s inherent cybersecurity risk, so as to ensure the business impact from the occurrence of cybersecurity vulnerabilities or cybersecurity incidents are kept to a minimum and are within the Bank’s risk tolerance levels.