The Financial Services Commission is pleased to announce that following extensive consultation with the industry and other stakeholders it is today publishing its Action Plan 2012-16 outlining its core areas of activity for the next five years, today, 25 Apr 2012.

The Action Plan draws together and addresses the recommendations contained in recent reports from the International Monetary Fund; the Toronto Centre; and the Caribbean Financial Action Task Force, and was given renewed impetus following the closure of TCI Bank in April 2010. These reports, plus earlier work performed in the 2009 Foot Review of the Opportunities and Challenges facing the British Crown Dependencies and Overseas Territories, highlighted areas of the regulatory and supervisory regimes in the TCI that required development, and were used as the basis in drawing up the Action Plan, which will be made available on the FSC’s web site and be periodically updated.

His Excellency Governor Ric Todd said: “I congratulate the FSC on this initiative. The publication of an Action Plan is an important step in demonstrating the commitment of the Financial Services Commission, and by extension the Interim Administration, to the future of financial services in the Turks and Caicos Islands. The Action Plan charts a positive way forward for the sector and describes the steps that will be taken to ensure the TCI keeps pace with the latest international regulatory standards. I am sure the private sector will rise to the challenges ahead and work with the FSC to ensure that TCI’s reputation as a financial services centre is enhanced.”

Errol Allen, Chairman of the FSC, added: “The Action Plan is the culmination of a great deal of work by the FSC and its partners in the financial services sector, and represents a summary of our objectives for the next five years. Completion of these objectives will provide the TCI with an extremely robust and practical legislative and regulatory framework designed to support the industry into the future.”

FSC Action Plan: 2012-2016

Introduction

The Financial Services Commission (FSC) was established in 2001 as an independent statutory body with responsibility for the administration of the regulatory framework for all financial services in the territory.

As a result of the Caribbean Financial Action Task Force (CFATF) Report in 2008 and the Foot Review in 2009 it was recognised that there was a need for significant institutional strengthening if the FSC was to meet international regulatory standards.

The closure of TCIB in April 2010 resulted in several focused reviews of the FSC; firstly, the Non-Executive Directors Report on the FSC’s supervision of TCIB and secondly, the Toronto Centre Report of the Assessment of Supervisory Methodology and Practices for Banks. In addition the IMF conducted two missions in March 2011 (Exploring Depositor Protection Options) and September 2011 (Establishing a Special Bank Resolution Regime and Deposit Insurance Follow-Up).

The Action Plan that follows is designed to address the recommendations contained in the above reports. The Plan organised by regulatory departments viz Banks and Trusts, Insurance (Domestic and International) and Securities (Mutual Funds and Investment Dealers) under the headings of “the Supervisory Methodology, the Legal Framework and the Professional Resources”. The final section deals with the overall administration of the Commission itself.

Banks & Trusts Department

Supervisory Methodology

Supervisory Manual- The existing manual requires review and updating. Current best practices utilised by the FSC will be documented and areas such as “Problem Bank Resolution and Crisis Management” will be added.
Regulatory Reporting- The current suite of statistical returns for banks requires revision. For example, there is a need to provide for more detailed reporting on Liquidity, in particular mis-matched positions, to clearly define the instruments that constitute liquid assets as well as to specifically provide for the banks reporting of their compliance or non-compliance with the prevailing regulatory minimum Liquidity Ratios.
Secondary Source Reporting- There is a need to institutionalise the use by the FSC of the banks’ existing internal information sources. In addition to the annual audited financial statements, the FSC will require the submission of reports by the banks’ Internal Auditors, Compliance Officers etc. to facilitate its own off-site surveillance processes.
Guidelines- The FSC will complete its framework of guidelines to the industry covering such issues as Licensing, Capital, Liquidity, Loan Classification, Loan Loss Provisioning, Interest Non-Accrual etc.
Market Information- The FSC will produce a Quarterly Statistical Report containing the consolidated figures for the banking industry, based on the regulatory returns, for website publication.

Legal Framework

The present legal framework for banking in the territory is out dated. The FSC proposes to have the following new legislation enacted:

Financial Services Commission Ordinance
Banking Ordinance
Bank Insolvency Ordinance
Deposit Insurance Ordinance
Trustees Ordinance

Professional Resources

Recruitment- The FSC expects to seek to expand its existing Banking & Trust team through the recruitment of additional experienced bank and trust regulators.
Training- The FSC is applying for membership in the two premier regional institutions that provide professional training in supervision and regulation viz ASBA (The Association of Supervisors of Banks of the Americas) and CEMLA ( The Association of Caribbean and Latin American Central Banks) to allow its staff to have access to the most advanced training resources in the region. In addition, the FSC will incorporate the completion of online training programs into the performance evaluation of entry level staff members.
External Expertise- The FSC will continue to utilize external experts to bolster its regulatory processes, particularly in such areas as the preparation of industry guidelines and the conduct of its on-site examination program.

Insurance Department

1. Domestic

Supervisory Methodology

Supervisory Manual- The FSC does not presently have a manual for supervision of the insurance sector. It is proposed that a manual based on the International Association of Insurance Supervisors (IAIS) core principles will be commissioned to document procedures for both off-site surveillance and on-site examinations.
Regulatory Reporting- In 2010 the FSC introduced quarterly reporting for domestic insurers however such returns remain rudimentary. It is proposed to utilise the suite of returns developed by CARTAC for the Caribbean Association of Insurance Regulators (CAIR) to improve the comprehensiveness of the data collection effort.
Secondary Source Reporting- In addition to the submission of the annual audited financial statements, the FSC will institutionalise the submission of reports by Actuaries, Internal Auditors and Compliance Officers etc. in order to enhance its off-site surveillance methodology.
Guidelines- The FSC will commence the development of a framework of industry guidelines for domestic insurers dealing with such issues as Licensing, Capital, Restricted Deposits, Solvency, Eligible Assets etc.

Market Information- – The FSC will produce a Quarterly Statistical Report containing the consolidated figures for the domestic insurance industry, based on the regulatory returns, for website publication.

Legal Framework

The present legal framework for domestic insurers proved inadequate when faced with the failure of CLICO and British American in 2009. In addition to developing a network of Memoranda of Understanding with regional insurance regulators it is therefore proposed to enact a new modern domestic insurance ordinance.

Professional Resources

Recruitment- The FSC proposes to expand its regulatory team with the recruitment of additional insurance analysts and senior insurance regulators.
Training- The FSC will utilise the IAIS online training modules for on-going staff training and the Toronto Centre Leadership Program for more advanced technical education.
External Expertise- The FSC will continue to utilise external expertise to ensure that the new laws and regulations are IAIS compliant as well as to provide guidance when it commences the introduction of on-site examinations for insurers.

2. International

Supervisory Methodology

Supervisory Manual-There is a need to clearly document the current regulatory practices for Captive insurers and PORCS. In particular there is a need for greater clarity in the definitions for each category of insurer and reinsurer.
Regulatory Reporting- There is a need to ensure that each insurance manager is providing current information on international insurers for which they are responsible and it is proposed to introduce quarterly reporting for insurance managers.
Guidelines- The FSC will issue industry guidelines dealing with such issues as the Role of the Insurance Manager, Restricted Deposits etc.

Legal Framework

The industry has requested amendments to the existing ordinance in connection with the definitions of PORCS.

Professional Resources

Recruitment- The FSC expects to recruit additional insurance administrators.
Training- The FSC will utilise the online options available (IAIS) as well as the annual educational offerings of the Offshore Group of Insurance Supervisors (OGIS).

Securities Department

Supervisory Methodology

Supervisory Manual- The FSC does not presently have a manual governing the supervision of the securities sector. It is proposed that a manual based on the IOSCO core principles will be commissioned to cover both on and off-site supervision procedures.

Legal Framework

The FSC will seek amendments to the ordinance to facilitate the licensing of Investment Advisors.
The FSC will seek amendments to the securities ordinances to bring them in line with IOSCO recommendations.
The FSC will seek membership in IOSCO.

Professional Resources

Training- The FSC will utilise the annual educational offerings of IOSCO to upgrade the skills of existing staff in the department.

The Commission

The Commission has completed Phase 1 of its relocation exercise with the transfer of the Banks & Trusts department and the Finance & Administration department to the Providenciales offices. It has now commenced Phase 2, the relocation of the Insurance department. To date the Domestic Insurance Unit has been transferred while the International Insurance Unit’s transfer is awaiting the acquisition of additional office space in Caribbean Place.

Appendix I: FSC Project Priority List


Project	Priority High/Medium/Low	Estimated Completion Date

Banks: risk-based framework, incl Manual and guidance	H	Dec 2012
Banks: regulatory reports update	H	Dec. 2012
Banks internal & external audit	M	June 2013
Market information – banks & insurers	M	December 2013
FSC Ordinance amendments	M	June 2013
Banking Ordinance – new	M	June 2013
Bank insolvency and resolution	M	Dec. 2013
Deposit Insurance	M	June 2014
Private Trustee regime	M	Dec. 2013
Trustee Licensing Ord – new	L	June 2015
Domestic Insurers – manual and guidance	M	Dec. 2013
Domestic insurers – supervisory reporting	M	June 2013
Insurance Ordinance (domestic)	H	June 2012
International Insurers – manual, guidance and reporting	M	Dec. 2013
International Insurers – new Ordinance	L	Dec. 2015
Investment Business licensing amendments	M	Dec. 2014
Investment Business manual and guidance	M	Dec. 2014
Investment Business – new legislation	L	June 2016