denton rarawa : financial inclusion in the solomon islands – key areas and current status keynote address by mr denton rarawa, governor of central bank of solomon islands, at the opening of the solomon islands financial inclusion expo, honiara, 20 – 21 june 2014. * * * your excellency, deputy australian high commissioner, dr dave peebles, chief executive officers & representatives of commercial banks, national provident fund, permanent secretaries of government ministries representatives of state owned enterprises representative of non - government organizations pfip representatives members of the national financial inclusion taskforce our major sponsors of the event media representatives women ’ s groups, young people, and students ladies and gentlemen, introductory remarks good morning and a warm welcome to you all. it is a great pleasure for me to welcome you all to the opening of the first financial inclusion expo, with the theme, “ know your money, save and grow ”, organised under the national financial inclusion taskforce ( nfit ). this is an important event in our journey towards achieving greater financial inclusion in solomon islands. the hosting of a financial inclusion exposition is an idea that nfit has contemplated staging since its formation in 2011. so i am very happy indeed that we can finally witness its opening this morning. i believe, this event will greatly benefit both the consumers and the providers of financial services as we interact in this “ out of office ” environment in the next two days. nfit and financial inclusion the nfit, is a national committee set up in 2011, and comprises of stakeholders from the public, private, donor agencies, financial institutions and ngos, with the goal of extending financial services to our people especially those in rural areas. our target is to enable an additional 70, 000 ( of which 30, 000 must be women ) solomon islanders have access to financial services by 2015. i am pleased to report that our target has been achieved, some 21 months ahead of our target date. since the start of 2011 to may 2014, more than 98, 000 new accounts have been opened with the commercial banks. while we can celebrate this achievement, and i think we should, our journey has just begun. there are still outstanding areas and issues that need to be addressed. much has been said about financial inclusion and so i feel i need to explain what it means. maybe it will help us understand and appreciate its relevance to our country. the concept of financial inclusion continues to assume increasing prominence and importance across the globe and in the

generating moral hazard. such is the case of provisions for banks considered “ too big to fail. ” in addition, the tools may inhibit healthy innovation, and, as mentioned, they can boost the unregulated sector, amplifying and creating new avenues for shadow banking, at the expense of the regulated sector. finally, excessive regulation may hinder the development of the financial system, damaging long - term economic potential, something especially harmful for countries suffering from low financial penetration. mexico ’ s experience mexico has designed its financial policies on the basis of its experience with previous crises, which emerged from macroeconomic disequilibria and inadequate bank regulation. the focus has been on strengthening financial institutions, as well as helping to deepen markets. in general, measures have been based on a few rules that are transparent and predictable. much use of discretion has not proved necessary. mexico ’ s financial system is bank based, with high participation of foreign - owned institutions. foreign banks can only operate in mexico through the establishment of subsidiaries, which must comply with the same regulations on a stand - alone basis as domestic banks. strong capital and liquidity requirements were imposed even before basel iii rules became effective. specifically, as of today, mexico has been classified as compliant with those internationally enacted regulations, and certain features are even stricter. 12 in fact, in terms of bank prudential policies, mexico benefits from the following five measures. the first is capitalization rules that incorporate high weights for maturity mismatches in market risks, including the banking book in addition to the trading book. second, for foreign currency, caps govern net liabilities and net open position, while a minimum liquidity ratio is required. a third distinctive measure relates to loan - loss provisioning, based on expected losses rather than realized ones. estimation of expected losses covers information from the system as a whole, such as the level of aggregate indebtedness and payment behavior of borrowers, while it also takes into account an institution ’ s individual performance. a fourth characteristic is ring - fencing in terms of bounds on related - party lending, made tighter in the wake of the most recent financial crisis, as well as requirements for transferring assets and liabilities to related entities. for the problems related to relaxing macroprudential policies, see calomiris, c. w. ( 2013 ), “ managing the risks of the new macro - prudential policy regime, ” borsa istanbul review, 13. basel committee on banking