By Azlan Othman
With the consent of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam, the government through the Ministry of Finance will guarantee all Brunei dollars and foreign currency deposits of individual and non-bank customers in Islamic, conventional banks and finance companies, licensed and regulated by the Ministry of Finance.
The guarantee is with immediate effect and will be valid till December 31, 2010, the Ministry of Finance said in a statement yesterday amid global financial turmoil affecting the world's economy today.
The ministry also said that all depositors, both corporate and individual, will be protected by the government for the duration of the guarantee.
The ministry stated the world is experiencing an extremely challenging financial environment and these events are causing wide-ranging repercussions, in particular, significant capital and liquidity constraints to banks in developed markets.
Praise to Allah, despite the financial crisis, Brunei Darussalam's financial system remains stable and robust, as a consequence of strong fundamentals that underpin Brunei's economy.
Banks together with other financial institutions that preside within Brunei's financial system continue to be well capitalised, strongly regulated and supervised on a continuous basis within a prudential framework of the respective statues governing their operations.
Consequently, their operations are stable and public confidence in these institutions remains high.
Several major economies affected by this turmoil have responded with a series of actions to stabilise financial markets and restore public confidence.
In particular, recent measures by the European and US governments to recapitalise their banking system and guarantee bank borrowing in the wholesale markets have enhanced the level of capital and liquidity in the market.
Given the stability and continuing orderly function of its financial system, Brunei has not had to undertake similar extraordinary measures.
However, regional authorities have responded with pre-emptive announcements to guarantee bank deposits or else risk compromising the competitiveness of their financial system and their participants.
In view of this latest development, the government of His Majesty also needs to take similar pre-emptive and precautionary measure to ensure a level international playing field for its financial institutions, so that the integrity and stability of its financial system remains uncompromised.
In making the announcement, the Ministry of Finance has also reminded all financial institutions of their obligation to abide by the relevant rules and regulations governing their business and to conduct their business responsibly, prudently and with due care, especially in respect to assuming and managing risk.
The provision of the above guarantee and undertaking must in no way be misused or abused to the detriment of their intended purposes. The Ministry of Finance, through the Financial Institutions Divisions will closely monitor and supervise all the financial institutions covered by the guarantee.
The Government of His Majesty through the Ministry of Finance will continue to enhance its supervisory capabilities and its regulatory mechanism, by introducing additional measures to strengthen its regulatory system and consequently, the health and soundness of the financial institutions in Brunei, so that they are on par with the best in the region.
- Borneo Bulletin
(22nd Oct 2008)