Brunei finance sector unaffected

BRUNEI'S financial sector has managed to remain largely untouched by the current market turmoil due to the strong regulatory and supervisory framework that is in place which among others emphasise on increasing capital adequacy on liquidity requirements and enhancing risk management.

"It is reassuring too that so far, our financial system remains stable and robust; and our banks and financial institution remain well capitalised and resilient," said Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim, Minister of Finance II in his keynote address, yesterday.

Although, he added, the government through the Ministry of Finance recently joined other countries in the region to guarantee bank deposits within the country, the action taken were part of a precautionary measure.

"Nonetheless, we should not be complacent. In fact if anything, the current crisis should awaken us to the importance of ensuring continous effective governance, risk management and the upgrading of market skills and capabilities by all the market actors to ensure the healthy functioning of our financial system," the minister said.

This current crisis, he said, had clearly demonstrated the critical importance for market players and regulators alike, to have a comprehensive and effective grasp of the inherent risk especially in new and complex structure products, such as colateralised debt obligations (CDOs) and structured investment vehicles (SIVs) if the product were to be featured in Brunei's financial market.

"The ever changing and evolving financial market, and the growing complexities of innovative financial products have given rise to the mispricing of risks making it particularly more difficult to fully manage all the underlying risks in a structured product," adding that,"we fail to understand them at our own peril".

The minister also called for greater transparency on financial reporting such as on the disclosure a financial institution's on-and-off balance sheet risk exposures, in light of the deterioration of market confidence and a lower tolerance risk.

Corporate governance practices were also needed to be strengthened, in which the minister had called for board of directors from financial institutions to be able and capable to understand about financial and risk management well.

"The board members should also remind themselves of their fiduciary duty not just to facilitate the management of the company but also to conduct proper evaluation of the company's business and to ensure its business health and longevity by properly taking on board the interests of its various stakeholders," he said. (SHS1)