In order to face the current and future challenges proactively, and to address the already identified deficiencies in the existing processes, the Central Bank, as outlined in its latest Strategic Plan for the medium term, expects to robustly strengthen its institutional frameworks by:  7  a) enhancing the monetary policy framework; b) strengthening the financial sector oversight; c) modernising payment and settlements; and, d) upgrading public debt management. The improved policy frameworks will enable the country to take advantage of greater integration, while mitigating the risks involved and increasing the resilience of the economy. In this respect, as already mentioned, we are steadily progressing towards an effective FIT framework to ensure price stability. At the same time, we are striving to promote a dynamic and resilient financial sector in order to lower vulnerabilities in the financial system. This is a priority for achieving objectives in relation to growth, employment and incomes. Modernising the infrastructure of the payments and settlements system to pave the path towards a less cash society and facilitating a digital economy are also important policy priorities in the medium term. We are also determined to strive for prudent debt management with a view to ensure debt sustainability, enhance effectiveness and transparency of the primary auction system, promote market development and minimise risks. Our policies are aligned to achieve these strategic priorities which will be instrumental in supporting the country’s economic and price stability and financial system stability.

Accordingly, initiatives are underway to assign ratings to banks based on a combination of quantitative and qualitative indicators that will assess their efficiency and sustainability. During the course of this year, we expect to finalise the bank examination  methodology based on the Bank Sustainability Risk Index (BSRI) to facilitate the transition from an annual ‘on-site’ examination approach to a ‘risk-based’ supervision approach. Further, we intend to incorporate BSRI to examination reports of all licensed banks and assign a supervisory rating grade for banks with effect from 2019, on a staggered basis. Banks have also been engaged in the implementation of Basel III capital standards and implementation is to be completed by 1 January 2019. While banks have been working on the improvement of their capital adequacy ratios, a capital conservation buffer and a surcharge on domestic systemically important banks have been imposed to ensure that banks actively build capital buffers. The direction to increase the existing minimum capital requirements was targeted at improving the quality of capital to ensure that these buffers are of a more resilient nature. This will help safeguard the banking sector during periods of excessive credit growth and/or adverse economic conditions. It will also minimise the systemic risk arising from the interconnectedness among banks. Under the Basel III guidelines, banks will also be required to comply with guidelines regarding a Net Stable Funding Ratio with due consideration to the composition of their assets and off-balance sheet exposures.