barry whiteside : fiji ’ s banking and licensing framework, its economy and outlook address by mr barry whiteside, governor of the reserve bank of fiji, at the soft launch of bred bank ( fiji ) limited, suva, 3 november 2012. * * * the deputy chairman of bred bank ( fiji ) limited, mr darryl constantin board directors chief executive officer, mr satish deb management and staff of bred bank ( fiji ) limited distinguished guests ladies and gentlemen introductory comments good morning, bonjour and bula vinaka to you all. i wish to thank satish for the kind invitation to officiate at this “ soft ” launch of bred bank ( fiji ) limited. this is indeed another milestone in the history of our financial system. today marks the entry of a new bank and, perhaps more significantly, not since bank of hawaii entered our financial system in 1993 have we had a bank start from “ scratch ” and be challenged to build its operations from the ground up. before i turn to some background information about bred bank i would like to make some general comments about banking and our licensing framework. banking & licensing entry into our banking system is quite deregulated. however, i must say that while anyone can apply to establish a bank in fiji, they must meet our fairly comprehensive licensing requirements, which play an integral role in ensuring we are dealing with reputable, tried and proven players. historically, we have had banks withdraw from the country for various reasons. some contend that this indicates that the country is sufficiently banked. the reserve bank of fiji, however, does not presently have a policy on limiting the number of players in the industry. we do like to ensure that those institutions that do come in are strong and have the appropriate backing to take them forward. may i add that the decision to commence full banking operations in a new jurisdiction is not a spur of the moment thing and is certainly not taken lightly. banking is a relatively difficult and complex business to establish. set up and operating costs are extremely high. just look around you and take a guess at how much has been spent on this fit - out. a new institution trying to position itself in an already competitive market must be prepared to do more to secure a share of that market. there are strenuous compliance requirements set by the regulators that must first be met before the business can even think of taking in the first deposit, or giving out the first loan. these compliance measures have been further strengthened since the global financial

open up a growing array of delivery channels. online banking, in all its increasingly varied forms, is poised to become a key channel for transacting banking business. the importance of physical branches in a cyber - world may decline and the nature of the services that branches provide will probably change. technology is here to stay, and the challenge is for bankers to embrace technology to their own and their customers ’ advantage. secondly, in europe, economic, monetary and financial unity has implied increased competition among banks and is forcing them to seek ways to cut costs and to increase market share. thirdly, it is believed that the banking and securities industry might in time consolidate into about 15 world mega - firms and that the financial institutions that do not merge soon, increase their size and obtain market share might be left in the cold. fourthly, it is believed that banks might become too small to compete effectively, except in niches, either in terms of products or geographically. in several countries, governments and regulators are urging banks to merge not because the merger would make them better, safer or more profitable, but because it would allow them to compete internationally with the main american and european banks. what governments and regulators should keep in mind is that, very often, the best way to create local banks that can compete internationally is to allow international banks to compete locally. fifthly, the choicest merger partners are taken up very rapidly. it is believed that if a bank does not act soon, it might be left with an unattractive merger partner. 6. disadvantages of bank mergers as long as barriers keep out international competitors, mergers may reduce competition and may hurt consumers. bigger banks are not necessarily safer than smaller ones. in a report published recently by the bank for international settlements, it is stated the current restructuring of the banking industry could cause constraints as competitive pressures interact with stubborn cost structures and heightened incentives for risk taking. this trend is especially dangerous since bigger banks are more likely considered to be “ too big to fail ”. the international movement towards the consolidation of banking systems has held promise for more efficient, better diversified banks, with more intense competition in local markets. in many cases, especially when acquirers paid a reasonable price and manage the resulting post - merger organisational problems effectively, this promise has certainly come true. there is, however, accumulating evidence in surveys and empirical research that the promise has not always been fulfilled for retail customers in local banking markets. in many cases, neither greater efficiency nor