Regulatory Alerts2021-04-27
Capital Adequacy - Prudential Guideline No.1
The Central Bank of Solomon Islands issued Prudential Guideline No. 1 to mandate minimum capital adequacy ratios for all licensed financial institutions, requiring a Total Capital-to-Risk Weighted Assets ratio of at least 15% and a Tier 1 ratio of 7.5%. The guideline defines Tier 1 and Tier 2 capital components, establishes risk-weighting schedules for on-balance sheet assets, and specifies credit conversion factors for off-balance sheet items to ensure institutions maintain sufficient buffers against operational and credit risks. Compliance is enforced through quarterly reporting requirements and corrective measures, including management replacement, for institutions failing to meet these standards or submitting inaccurate data.
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