The Supervision Department is responsible for the implementation and oversight compliance with the New FIA of 1999 and applicable regulations issued by the Central Bank of Liberia ( CBL ). Against this background, it regulates, and supervises the financial institutions in Liberia with the aim of ensuring the safety and soundness of the financial system as a whole.
The objectives of the Department are primarily to:
- Ensure the safety and soundness of the financial system;
- Ensure compliance with the FIA and applicable regulations as well as international standards and best practices;
- Adopt and implement strategies for distressed banks resolution, including receivership and liquidation; and
- Facilitate the development of an enabling environment that should give rise to a robust financial system.
TOOLS FOR THE SUPERVISION OF BANK AND NON-BANK FINANCIAL INSTITUTIONS
In pursuing the objectives outlined above, the Department utilizes the following tools:
- On-Site Examination;
- Off-Site Surveillance;
- Promulgation and enforcement of regulations/directives;
- Reorganization and/or liquidation of troubled institutions; and
- Licensing and training
THE EXAMINATION FUNCTION
In pursuance of its goals, the Department has an Examination Section that conducts examinations, monitors, and reports on, the overall condition of financial institutions. The Section has two Units: Off-Site Surveillance and On-Site Examinations.
The On-Site Examination
The Off-Site Surveillance Unit monitors, reviews, and analyzes financial institutions' returns and prepares reports based on said returns and serve as an early warning device to detect emerging problems before they lead to an opened crisis. The returns are used by the supervisors/examiners for the purpose of determining banks' exposures to risk, the effect on banks' profits, etc. Some basic ratios (the financial soundness indicators) are computed from these returns and are used to analyze such important areas as Capital Adequacy, Assets Quality, Earnings Sufficiency, and Liquidity Adequacy.
The Off-Site Surveillance
The On-Site Examination Unit conducts periodic examination and special visits in supervised institutions. This Unit also complements the Off-Site in the verification of information provided on the returns submitted to the CBL.
The Promulgation and Enforcement Fuction
The Regulations and Enforcement Section of Supervision is responsible to monitor and reinforce banks' compliance with the FIA , regulations, guidelines, directives, MOUs, as well as other recommendations emanating from examination reports. The Section also has discussions with banks' external Auditors and Management and/or Banking Operation Department on issues affecting the individual banks and the banking review performance and risks management practices.
The Receivership and Liquidation Function
This Section is responsible for the management of the assets of problem banks and the settlement of claims in the event the bank is liquidated. This includes a comprehensive and up-to-date database of the financial and other records of the problem institutions.
The Licensing and Training Functions
This is the responsibility of the Operations Section of the Supervision Department. The Section receives and analyzes the applications for operations by banks and non-banks, and, based on the attainment of certain minimum requirements, grants license for operation. The Section also engages in the training of staffs of the Department, banks, and non-banking institutions with the view of creating an informed environment to serve as the basis of attaining and maintaining safety and soundness in the financial system.