Banks and Trust Companies (Liquidity Risk Management) Regulations 2012

I I EXTRAORDIT,{ARY OFFICIAL GAZETTE THE BAHAMAS PUBLISHED BY AUTHORITY NASSAU 2"dMarch,2}I2 (A)

BANKS AND TRUST COMPANIES (TIQUIDITY RISK MAÌ'{AGE MENT) REGULATIONS, 20t2 Arrangement of Sections Sectlon

1. Citation....,... ........,..,.,.........2 2. Interpretation .....................,2 3. Liquidity risk management strategy...,.,......,.....,...,),. ...,....,...............4 4, Review of liquidity risk management strategy... .,.......4 5. Inspector to receive copy of liquidity risk management strategy.,,,,......,....,........,4 6. Licçnsee to maintain liquidity ratio ..,,..............,..,.......5 7. Calculation ofliquidity ratio.......,....., ....,..,.,.....,...,.,....s 8. Central Bank to monitor liquidityposition of licensees.................,........,...,....,.,..5 9. Provision of Information to the Inspector.,.,.,....,...... .,...............,......5 10. Licensees to enter discussions with the Inspector,..... .......,....,.....,....5 11, Remedial action..,.,,..... .,.......................,.6 72. Liability for non-compliance...,,....... .........,.,...,...........6 13. Fines.,.,......,. .,............,........6 14. Exemption... ....................,..6 I 'i I

S.I. No. 27 of 2012 BÄNKS AND TRUST COMPANIES REGULATIONACT (CHAPTER 316) BANKS AND TRUST COMPANIES (TIQUIDITY RISK MA¡,IAGEMENT) RDçULATIONS, 2 ()I 2 The Governor of the central Bank of rhe Bahamas, in exercise of the powers conferred by section 24 of the Banks and rrust companies Regulation Act, makes the following regulations - Cltatlon. These Regulations may be cited as the Banks and rrust companies (Liquidity Risk Management) Regulations, 20 I 2. lnterpretatlon. (1) In these Regulations - r'Act" means the Banks and Trust Companies Regulation Act (Ch. 316); r.freely convertible forelgn currency" means any foreign cwrency which, at the time in question, is in the opinion of the cenhal Bani< freely negotiable and transferable on intemational exchange markets; rúllcensee" n¡eans any publio bank and or trust company which is incorporated in The Bahamas and holds a ricence granted under section 4 of the Act; 'rliquid assets" means - 2. (a) cash, including notes and coins held together with (b) (c) metal coins, which qualify as legal tender; gold and silver bullion and other precious metals; market loans, and includes - Page - 2 precious

' (i) balances with, and loans and advances to, Zone A banks including coÍespondent or clearing balances and -committed facilities with residual rça¡[rity up to one hurdred and eighty days; t t !' ' (iÐ money at call and demand balances at Zone A banks held in Bahamian dollars and or freely convoflribþ foreþ curr€ncy; (iii) negotiable Zone A banks, inclrfdlng negotiable eposits, promissory notes and other n (iv) bills, including

' l (A) bills accepted by ZoneAbanks; (B) public sector bills including Treasury bills and notes and other negotiable paper issued by Zone A counû:y cental govemments, any othèr bills guaranteed and or underwritten by Zone A oountry cenfal govemments, or any other bills that constitule an obligation of a ZoneA counhy central governmen| (v) market¿ble Zone A oountry cenhal govemment securities; and (vi) any other asset designated for the purposes of these Regulations by the Lupector; r'liquidlty" means the ability to fund increases in æsets or meet collateral obligations at a reasonable cost as they fall due without incurring unacceptable losses; "liquÍdÍty ratlo" m€ans the ratio of the sum of a licensee's ,liquid assets, in all currencies, expressed as a percentage ofthe ,ur ofit. deposit liabilities in all currørcies; ttmoneY ¡nkstt ùneans money at A banks less money at e banks; "zone.d bank" means a bank located in The Bahamas or in a zone A country whose credit rating js investment grade and excludes _ (a) any bank whose credit rating has been downgraded to rower than jnvestment gfade in the preceding trvelve months; or O) any bank which has no rating; 'täone Acountry" means

• (a) The Bahamas; Page - 3

(b) a country that is a ñrll member of the Organization for Eoonomic Co-operation and Development; (c) a çountry which has concluded special lending arr&ngements with the International Monetary Fund associated with the General Agreement to Borrow, and excludes - (Ð a country which has rescheduled its extemal debt during the preceding five years; (iÐ a country whose rating for long-term liabilities in foreign currencies is lower than investrnent grade, or which has no rating, and whose yield to maturity and remaining duration are not comparable with those of long-term liabilities with an investment grade rating; t'Z,one A country central govelnmentt' means the central government of aZone A country. (2) Words not defined in these Regulations shall, unless the context otherwise rcquires, have the same meaning ascribed to such words in the Act. Llquldlty rlsk management strategy. A licensee shall establish and maintain a liquidity risk management strategy appropriate to the nature, scale and oomplexity of its activities. Revlew of llquldlty r¡sk management Etrategy. A lioensee shall - (a) implement and adhere to its liquidity risk managþment strategy at all tiimes; and (b) review on a regular basis, and at a minimum annually, its liquidity risk management stratery to take account of changing business objectives, strategic direotion and the overall risk tolerance of the licensee. lnspector to recelve copy of llquldlty r¡sk management strategy. (1) A licensee shall provide the Inspector with a copy of its liquidity risk management sfrategy. (2) A licensee shall, where any ohange to a lioensee's risk management strategy has been approved by its Board of Direotors, notifu the Inspector of such change within fourteen days of the Board's approval and provide the Inspector with a copy of the revised risk management shategy, 4, 5. Page - 4

6. Llcensee to maintaln llquidlty ratio. (l) .subjgct to paragraph (2), a licensee shall maintain a liquidity ratio of not less than twenty per centum. (2) Paragraph (1) shall not apply to a ricensee which is subject to the provisions of seotions l9 and 20 of the central Bank of rhe Bähamas Rct (ch.351), Calculatlon of llquidtty raüo. The Inspector may, for the purpose of calcurating the liquidity ratio of a ricørsee, require by notice in writing to the licensee that lhe tiquiaity iatio áiir,. ti."nr." be calculated - (a) either on a consolidated or unconsolidated basis; or (b) on both a consolidated and unconsolidated basis. Gentral Bank to monttor ilqurdrty posrfion of ilcensees.

L (l) The Çentral Bank shall ' an ongoing basis to appropriately managed licens :e's activities. Provlslon of lnformailon to the lnspector. A licensee shall * (a) provide the Inspector with such Þarticurars of its riquidity position in such manner, frequency and iorm as may ur rri..inä¿ bt ã; Inspector; (b) inform the krspector fofhwith of any concerns it has about its current or fì¡ture liquidity position as well as plans to address such concems, Llcensees to enter discusslons wlth the lnspector. 9. ition ofeaoh licensee en liquidity risk is being e and complexity of the 10. A licensee and the Inspector shall, where the (1) of regulation 6, enter into discussions for remedial action is required. licensee is in breach ofparagraph the purpose of determining what Page - 5

11. Remedlalactlon. The krspector may issue a written directive requiring a licensee to take such remedial action as the Inspector deems appropriate to ensure compliance with paragraph (l) of regulation 6. 12, Llablllty for non-compllance, A licensee which fails to comply with a directive of the Inspeotor made under regulation 1l shall be liable to a fine.
12. Flnes. The central Bank may, where a licensee is in breach of regulations 3,4,5(l), 5(2), 6(1), 9, and or I l, impose a fine ofup to $5,000 per breach, 14, Exemptlon. The Çenhal Bank may, if it thinks fït, exempt a lioensee from the provisions of these Regulations. Made this 2nd day of Marchr20lz. Signed WENDY CRAIGG Governor of the Central Bank of The Bahamas Page - 6 --$ 1 ,1