The Central Bank of Solomon Islands (CBSI) was established under the Central Bank of Solomon Islands Act 1976 and carries out the duties contained therein. Included in its responsibilities is the supervision of the financial sector in the Solomon Islands. Within CBSI, this responsibility is undertaken by Financial Market Supervision Department (FMSD).

FMSD regulates the business of banking; and the licensing, regulation and supervision of financial institutions carrying on banking businesses in Solomon Islands.

This power to supervise and license financial institutions carrying on banking business in Solomon Islands is provided in the Financial Institutions Act 1998 (as amended). The department therefore administers the requirement of the Financial Institutions Act (FIA).

To assist in the prudential supervision of the licensed financial institutions, the department issues prudential guidelines based on best banking practices to support and enhance the licensed financial institution’s own internal control and risk management systems.

Apart from the supervision and regulation of banks, FMSD also performs the supervisory roles for the Insurance Industry under the Insurance Act 1985, the Solomon Island National Provident Fund Limited as deemed license under the Financial Institutions Act and performs administrative and supervisory role on behalf of the Registrar of Credit Unions under the Credit Union Act of 1976.

The other responsibilities of the department include:

• Supporting the promotion and establishment of rural micro financial institutions in the rural areas of Solomon Islands. 

The financial institutions currently licensed under the Financial Institutions Act are:

Commercial Banks:

     1. ANZ Banking Corporation Limited
     2. Bank South Pacific
     3. Westpac Banking Corporation Limited

Other Financial Institutions:

     4. Solomon Islands National Provident Fund
     5. Development Bank of Solomon Islands

Credit Institutions:

     6. Credit Corporation (SI)

The departments's approach to the prudential supervision of financial institutions is predicated on the view that the prime responsibility for the prudent management of a financial institution's business lies with the board and management of the financial institution which will assess the risks in the activities the financial institution undertakes and continually monitor and control those risks.

To assist the board and senior management of the licensed Financial Institutions, the FMSD has issued a series of Prudential Statements as guidelines:

1. Prudential Statement - Capital Adequacy
2. Prudential Statement - Asset Quality
3. Prudential Statement - Large Exposures
4. Prudential Statement - Liquidity 
5. Prudential Statement - Corporate Governance
6. Prudential Statement - External Audit

Employees and management of all licensed Financial Institutions and of CBSI are encouraged to familiarise themselves with the Prudential Statements.

CBSI intends to formalise those Statements into CBSI regulations and then issue a set of Prudential Guidelines with which Financial Institutions should conform.