National Reserve Bank of Tonga

Category: Speeches

Distinguished Heads of Financial Sector Supervisions, Commissioners, Commission Board Members and Delegates from the 14 Pacific countries represented here;

Mr. David Kloeden, Benjamin Stefanou and Nina Samuela from the Pacific Financial Technical Assistance Centre (PFTAC);

Ladies and Gentlemen

Malo e lelei, and a very good morning to you all.

It is an honour and great pleasure for me to welcome you financial supervisors back to Tonga to another annual meeting of the AFSPC and, this time, to its 17th Annual meeting.

I would like to acknowledge the Pacific Financial Technical Assistance Centre (PFTAC) and the National Reserve Bank of Tonga for co-hosting this two-day meeting to be followed by a three day workshop.

It is important at the beginning of our regional annual meetings to remind us of the national financial statutory objectives, and they are, to ensure:

  1. That the confidence in the financial markets is maintained;
  2. That the most suitable level of customer protection is ensured;
  3. That public awareness about the financial market, through imparting educational programs; is encouraged; and
  4. That financial crimes and frauds are reduced.

Furthermore to those, there are certain regulatory principles that must be in place in our national financial systems:-

  1. Senior management of all financial institutions (banks and non-banks) must be regulated so that they do not make decisions that are detrimental to the financial system;
  2. International financial standards must be maintained;
  3. Our respective country’s financial resources should be used in the most prudent and effective way;
  4. Financial regulations should be proportional to the advantages that are anticipated from them; and
  5. Innovation should be facilitated with restriction so that the financial products and services launched are compliant to the rules and regulations;
  6. There should be strict supervision on the financial market, for the purpose of minimizing harmful effects of competition.

Coming back to our gathering, our objectives as a regional group are:-

  • To facilitate the sharing and coordination of matters relating to supervision and regulation of financial institutions in our region;
  • To strengthen strong regional cooperation in the area of financial regulation and supervision;
  • To facilitate the development of a common set of prudential indicators for our members, consistent with work being done by the IMF in relation to Financial Soundness Indicators.

From our last annual meeting, hosted by Vanuatu last year, the common key risks across the region that were discussed include:-

  • the supervision of non-banks and the informal sector financial institutions;
  • the lack of prudential regulatory requirements for valuations of collaterals;
  • the cyber risks regulation and supervision;
  • the adoption of International Financial Reporting Standard 9 (IFRS9); and
  • the importance for PFTAC to follow up and review the jurisdictions’ implementation of the Supervision Framework Enhancement Program (SFEP).

The workshop to be followed after the two day annual meeting will cover some of the common issues identified last year:-

  1. the regulation and supervision of the non-bank financial institutions such as the insurance companies, retirement funds, money lenders, microfinance, credit unions, cooperative societies, money transfer operators, foreign exchange dealers and non-bank credit providers.
  2. the financial sector architecture in the Pacific, such as:-
    • credit bureaus;
    • personal property securities legislation;
    • performance of government-owned banks; and
    • the importance of retirement funds to our various jurisdiction’s financial system.
  3. National payment system is very important but it must be:-
    • demand driven and not supply driven,
    • practical to our specific domestic circumstances, and the different state of the financial institutions; and
    • safe and secure to protect the identities of customers; and
    • affordable - there is no point in buying a bus if you only need a small car.
  4. There will be sessions for participants to learn from each other on:-
    • AML/CFT Supervision;
    • cross-border banking and consolidated supervision.

The workshop agenda appears to be very full-on and busy, and I believe this is the right opportunity to utilise the wealth of knowledge in this room to enhance supervisory skills and build capacities in our region.

However, some of you have come a long way and this maybe your first visit to Tonga, and I beg the organisers, to please, please be kind to give visitors some time to visit the tourist and historical attractions here in Tongatapu before they leave our shores.

To conclude, it is with great anticipation that we all work together during this annual meeting and the workshop that will follow, to ensure that the stability and soundness of our financial systems throughout the region is strengthened and maintained. This can only be achieved if we ensure that we share our knowledge, experience, information and approaches in addressing common and emerging financial risks, both from banks and non-bank financial institutions in the region and abroad.

Last but certainly not the least, I would like to wish you all a productive and interactive meeting and workshop and I do hope that you will find your stay in Tonga an enjoyable and pleasant one.

On that note, I am extremely honoured to now declare this meeting open.

Thank you and Malo ‘Aupito

Resources

Governor Kioa's Welcoming Remarks on the Association of Financial Supervisors in Pacific Countries (AFSPC) 17th Annual Meeting
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Category: Speeches

Tapu moe ‘Otua Mafimafi ‘oku ne ‘afio he potu kotoa pe, pea ‘oku ou haka ‘i he langi kuo tau he ’oku kei lakoifie ‘a e Hau o Tonga, laumalie 'a Hou’eiki pea lelei e Tonga kotoa ‘oku fa’a fakatapua.

Fakamalo he ki he faifekau ‘i hono tataki ‘etau fakataha ’aki ha lotu.

Ms Sandy Shum (Hong Kong Department of Justice), Mr Richard Lee (AUSTRAC) and Ms Connie Chu (Macao Financial Intelligence Unit) and the rest of the international experts on FATF assessment methodology, who have accepted to work with us to determine Tonga’s levels of compliance with international AML/CFT standards.

Ms Michelle Harwood and Ms Marnie Campbell of the APG;

Hon Manakovi Pahulu (CEO for Justice), and the members of our Working Group on Serious Financial Crime;

Fellow colleagues, Ladies and gentlemen.

Good morning to you all and I wish thank our heavenly father for bringing us together here today.

It is with great honour that I welcome the team of expert assessors and the APG officials who are here for the Pre-Mutual Evaluation visit. I warmly welcome you to the Kingdom of Tonga. To the members of the Working Group on Serious Financial Crimes, thank you for availing your time to do what is expected of us by the country.

Since 2015, the law enforcement agencies started preparing for Tonga’s mutual evaluation. To become familiar with the APG Mutual Evaluation methodology and procedure, we have sent relevant officers to attend Pre-ME workshops in anticipation of this year’s assessment.

Tonga’s first national Anti-Money Laundering risk assessment was initiated in May 2015 with assistance from New Zealand experts.

Efforts have also been engaged into reviewing and proposing legislative amendments that would bring Tonga’s AML laws in line with international standards as well as the Egmont Group’s standard. This work is still in progress and we hope to have a draft amendment by the time of the on-site.

The Reserve Bank is fortunate to have received assistance from APG on developing a Risk Based Approach to improve its AML supervision function. The TA completed this work in May and my team are excited to implement its revised supervision framework in the coming months.

Tonga’s National AML Strategy is still being drafted by the members of the working group and this is to be finalised this month.

Over the past months, members of the working group have collaborated and endeavoured to complete the necessary requirements for Tonga’s assessment to the best of their abilities.

I am certain that you will give the assessors the same support and effort you have shown so far.

I understand that over the next few days discussions with the expert assessors will be on:-

  • clarifying and revising of the Technical Compliance annex report;
  • providing feedback and flagging areas to improve on Tonga’s effectiveness response;
  • gaining an understanding of Tonga’s AML risk assessment including areas of increased focus for the evaluation; as well as
  • ensuring overall understanding of the Mutual Evaluation principles and processes in preparation for the on-site in October.

I implore members of the Working Group for your contributions, as you will be called upon by the expert assessors to make comments during discussion of these aspects of the evaluation.

I wish you a fruitful discussion over the next few days and I thank you all for your continued co-operation to make Tonga’s Mutual Evaluation a success.

Malo ‘aupito

Resources

Governor Kioa's Welcoming Speech on the APG Pre-Mutual Evaluation Workshop
pdfIcon 93 KB - Download a copy of the full speech.

Category: Speeches

‘Oku ou kole keu hufanga he ngaahi fakatapu kuo ‘aofaki he kamata ‘etau polokalama kae ‘ata keu fakafofonga’i atu e Poate mo e kau ngaue ‘a e Pangike Pule ke ‘oatu ha lea talitali mo fakamalo kiate kimoutolu ‘I ho’o mou lava mai he pongipongi ni.

I wish to extend a special welcome to Lord Ma’afu, from His Majesty’s Cabinet, as well as Lord Tu’iha’angana from the Legislative Assembly. Welcome Rev Dr Taliai Niumeitolu and thank you for starting our program with that beautiful prayer and for accepting to lead our Thanksgiving Service today. A special welcome is extended to the former Reserve Bank Governor, Mrs Siosi Mafi, and her husband Dr Maletino Mafi and I welcome also the friends and colleagues of the Reserve Bank, past and present, from the public and private sectors.

We agree that this is not an occasion to be broadcasted, but an opportunity for the current staff to celebrate with their former colleagues - a milestone to be proud of. Malo ho’omou ngaue pea mo hono fataki e fatongia.

Distinguished guests, our pearl jubilee gathering today cannot be concluded without a brief history of the Reserve Bank’s set-up, and where we are today.

Prior to July 1989

  • Central banking functions were fragmented in government and in the former Bank of Tonga;
  • The Ministry of Finance administered the country’s monetary policy;
  • Former Bank of Tonga held and managed the official foreign exchange reserves;
  • The Commissioner of Currency was the Minister of Finance;
  • Ministry of Finance managed the currency issue using the Treasury accounting system and currency was stored and distributed from the Treasury vault;
  • The financial system was unsupervised consisted of the BoT and the TDB and of course a lot of credit unions, money lenders and foreign exchange dealers;
  • The exchange control was administered by the Ministry of Finance;
  • The Tongan pa’anga was pegged to the Australian dollar; and
  • Inflation rate during the 1980s and early 1990s was hovering at between 10% to 20%
  • Real interest rates were mostly negative.

Thirty years ago, 1st July 1989 was an important crossroad in Tonga’s financial history. It marked Government’s timely recognition to rationalise its financial roles and functions by consolidating and hiving off the tasks of conducting monetary policy. 

To support macro-economy stability, the prudential supervision of our very small, unsupervised financial intermediaries was also recognised.

The National Reserve Bank of Tonga was then set up, as Tonga’s central bank, with the temporary office at the Royco Building, while this building was planned for construction.

The first members of the Board of Directors were:-

  1. The Late Prime Minister Baron Vaea, Chairman of the Board
  2. Hon. Tevita P Tupou, Deputy Chairman of the Board
  3. The Late R. Albin Johansson, Director
  4. The Late S. Tsutomu Nakao, Director
  5. The Late Selwyn P Jones, Secretary for Finance (Ex-officio member)
  6. The Late Alan E Gee, Governor of the Reserve Bank (Ex-officio member)
  7. Mr. Siosiua TT Utoikamanu, Deputy Governor and Secretary of the Board

The members of the Board have changed from time to time but the institutional memories and strategic directions remained intact.

During the 30 years period, the Reserve Bank have had four Governors:-

1st Governor - the late Alan Gee (July 1989 - July 1991);
2nd Governor - Mr Siosiua TT ‘Utoikamanu (July 1991 – May 2003)
3rd Governor – Mrs Siosi Mafi (May 2003 – July 2013)
4th Governor - Sione Ngongo Kioa (August 2013 – now)

The current members of the Board are:-

  1. Mr Steve Edwards (Chairman) – since February 2011
  2. Richard Prema, Director and Deputy Chairman – Director since 2003
  3. Sinai Tu’itahi, Director since February 2013
  4. Mrs Balwyn Fa’otusia, Secretary for Finance (Ex-officio member) – Since January 2017
  5. Sione Ngongo Kioa, current Governor of the Reserve Bank (Ex-officio member) – since August 2013
  6. Jessie Cocker, Deputy Governor and Secretary of the Board since 2014

On the legislative framework, the inherent independence of the reserve bank, its objectives, its functions have evolved over the past 30 years through various amendments to the Bank’s principal legislations.

The main functions of the Reserve Bank, now, are:-

  1. Formulating and implementing monetary policy;
  2. Principal banker, fiscal agent and depository for the Government;
  3. Issuing currency;
  4. Prescribing the regime for the determination of the external value of the Tongan currency;
  5. Determining the foreign exchange rate and implementing foreign exchange policy;
  6. Exclusively holding and managing the foreign exchange reserves of the country;
  7. Regulating the supply, availability and international exchange of money;
  8. Determining and implementing financial stability policy, and overseeing the maintenance of the stability of the financial system in the country;
  9. Regulating and supervising all banks and the non-bank financial institutions in the Kingdom – these include money transfer operators, foreign exchange dealers, insurance companies, retirement funds, credit unions, microfinances, money lenders, investment funds etc.;
  10. Overseeing and promoting the efficient, sound and safe functioning of the national payment system;
  11. Regulating and supervising capital markets development in Tonga;
  12. Managing and promoting financial inclusion initiatives and related activities;
  13. Providing advises to the Government on banking and monetary matters;

In carrying out these unique functions, we (the Board of Directors, management and staff) vow that we have advanced what we inherited from our competent predecessors.

We have taken the Reserve Bank forward as expected of us and we have greeted the Reserve Bank to its 30th anniversary with a 2019 central banking global standard.

In taking stock of what we have advanced to date, I wish to highlight the achievements of Reserve Bank with regards to the four main objectives as prescribed by the law:-

1. On maintaining internal and external monetary stability;

  • which points to the stability in the value of pa’anga in terms of:
    • its purchasing power (inflation rate);
    • its opportunity cost (interest rate); and
    • its relative value to other currencies (exchange rate).
  • On internal stability (i.e. low and stable inflation): The Board adopted a benchmark of 5% inflation rate. I can proudly say that the annual inflation rate as reported by the Statistics Department for May 2019 is 1.7%, way below the benchmark.
  • On external stability (i.e. stable and comfortable level of foreign exchange reserves): The Board adopted a benchmark of 3 months equivalence of imports of goods and services. and I can proudly confirm that the level of official foreign exchange reserves was at a new historical record yesterday (11th July 2019), with $491 million (8.1 months of imports of goods and services).

2. On promoting financial stability;

  • I confirm that Tonga’s financial system can consistently supply the credit intermediation and payment services that are needed by the country to continue on its economic growth path.
    • Credit growth healthy and is currently at 9.3% per annum, which is a much desirable credit pace; a significant slow down from close to 20% in May 2017, - when the IMF was worried about an overheating Tongan economy that may repeat the financial struggles that took place during the Global Financial Crisis.
    • Due to the continuing surge in private remittances (close to 40% of GDP) from the Tongan diaspora and government budget supports from donor partners There is excess liquidity in our financial system (estimated around $100 million) looking for bankable projects.

3. On promoting a sound and efficient financial system;

  • I wish to confirm that the Tongan financial system:-
    • is well capitalised with a risk weighted capital ratio of 31.4% compared to the 15% minimum capital requirements as set by the law.
    • The financial system is sound with an average lending rate of 8%, average deposit rate of 2% and an average interest rate spread of 6%.
    • Our financial system has low level of non-performing loans (only 3.8% of total loans in May 2019)
    • The banking system has been profitable on upward trend since September 2014. The banks’ total net profit for year ended May 2019 is $22 million, compared to $20 million last year.

4. In supporting macroeconomic stability and economic growth.

  • Tonga’s current inflation rate is below 2%;
  • Credit lending is close to 10% per annum;
  • Banks are financially sound and stable;
  • Interest rates in low;
  • Non-performing loan is low;
  • Exchange rate supports the macroeconomic fundamentals; and the business community is happy
  • Economic growth is projected to be at 3.4% in 2018/19 and 3.5% in 2019/20

Lord Ma’afu and distinguished guests, I wish to also mention that the Reserve Bank’s pre-audited net profit for 2018/19 is above $6 million which is the highest ever.

We had a clean audit in 2017/18 and we expect the same in 2018/19, even with the implementation of IFRS9.

The Board of Directors have set an appropriate vision for the Reserve Bank:

“To be an effective and dynamic central bank in promoting Tonga’s economic prosperity”.

In pursuing our functions to get to our vision, we are guided by our corporate values:-

  • Being professional and exercising sound judgment - Integrity;
  • Continually improving what we do - Innovative;
  • Working together for a more effective institution - Team work;
  • and producing high quality work - Excellence.

With our pearl jubilee, 30 years old, the National Reserve Bank of Tonga has developed and is now officially a matured adult and independent and we are proud of it.

I therefore wish to thank our partners in the economic development of our Kingdom, the Government, the financial institutions, private sectors, the people of Tonga and our foreign stakeholders.

Lord Ma’afu
Thank you for your continued faith in the Reserve Bank, thank you for your continuing support in land issues relating to the mortgages in the banking system and we with the banks in Tonga shall continue to do our utmost to be worthy of His Majesty’s trusts.

I would like to thank the members of the Banks Association, Daniel Hansen of BSP (Chairman), Leta Kami of Tonga Development Bank, Mr Yeoh of MBf Bank, and David Dudley of ANZ. I wish to acknowledge the presence of Ms Tessa Price, the Regional CEO of ANZ Pacific - who is here just for today’s occasion to reassure Tonga that ANZ will remain and continue its business in Tonga for a long time.

To our partners in law enforcement who help us to ensure that Tonga meets international standards of AML/CFT during the current Mutual Evaluation of our framework thank you to you all.

To the Board of Directors, I wish to thank you all for your guidance, your strategic direction, but most importantly for your faith in us.

Lastly, but by no means the least, I wish to thank my staff, Deputy Governor Jessie Cocker, Assistant Governor Lata Tangimana and all the Reserve Bank staff. ‘Oku ou fakamalo atu moe loto hounga mo’oni kia kimoutolu hono kotoa, malo si’o mou ngaue.

Lord Ma’afu, honoured Guests, Ladies and Gentlemen, thank you all for coming to be part of this celebration.

‘Ofa atu.

Resources

Governor Kioa's Welcoming Speech on the 30th Anniversary of the Reserve Bank
pdfIcon 133 KB - Download a copy of the full speech.
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