Strengthening Bank Resolution and Bank Supervision in São Tomé and Príncipe
Project Development Objective (PDO)
The aim of this project is to assist the authorities in improving financial stability, through increasing supervisory capacity for both off- and on-site supervision, and strengthening the regulatory framework for bank resolution
With funding from the FIRST Initiative, the World Bank has been providing technical assistance to the São Tomé and Príncipe’s Central Bank (BCSTP) to develop a 2016-2020 National Financial Sector Development Implementation Plan (FSDIP) which focuses on policy reforms and actions in three key areas: (i) strengthening financial sector supervision, (ii) increasing financial inclusion, and (iii) upgrading financial infrastructure. An important pillar of the FSDIP is a stable and sound financial sector. Specific recommendations included the adoption of a new law on bank resolution, which was passed into law by the National Parliament in December 2015. Following passage of the law, the World Bank received a request from the Governor of the BCSTP to provide support in developing the regulations necessary to implement the new Bank Resolution Law and capacity building on different resolution techniques. BCSTP also requested support on implementation of the prompt corrective actions framework, contained in the new law. This project seeks to respond to that request and is fully aligned with the recommendations of the FSDIP.
Activities / Output
The technical assistance project will include the following activities:
1. Strengthening the capacity for effective banking supervision and help establish a framework for
prompt corrective actions (PCA). It includes the development of an action plan for the
introduction of a more proactive monitoring and risk-focused approach to supervision and for the
development of skills necessary for assessment of banking soundness and triggers for PCA. At
present, there is no PCA framework requiring supervisory action or automatic triggers associated
with capital, liquidity, and asset impairment indicators.
2. Drafting regulations and guidelines necessary to implement the new bank resolution law. This will
include support for preparation of all draft regulation consistent with the provisions of the bank
resolution law, drafting of implementation guidelines and manuals, and training for BCSTP staff
on the new guidelines and manuals. Other specific activities include workshops with supervisors
on the adoption of the new regulatory framework to implement the bank resolution law.
The main expected outcomes of the project include the following:
1. Strengthened banking prudential regulations and supervision capacity
2. Strengthened bank resolution regulations and capacity