Shaping the future of the financial sector

The Brunei Darussalam Financial Sector Blueprint 2016 – 2025 was published by Autoriti Monetari Brunei Darussalam (AMBD) in 2016. The blueprint sets out the vision of a dynamic and diversified financial sector for Brunei Darussalam by 2025. This vision intends to support Brunei Vision 2035’s third goal of transforming Brunei Darussalam into a dynamic and sustainable economy which delivers a level of income per capita within the top 10 nations in the world.

PILLAR I: MONETARY AND FINANCIAL STABILITY

Brunei monetary system is based on the Currency Board Arrangement, which is underpinned by the Currency Interchangeability Agreement between Brunei Darussalam and Singapore. Under this arrangement, the currency boards back up the total amount of currency issued in the economy with an equivalent amount held in reserves of the currency board. In Brunei Darussalam, the local currency is pegged to the Singapore dollar at par. Under the Currency Order, 2004, only AMBD is allowed to issue Brunei notes and coins. Additionally, the Currency Order, 2004, also requires AMBD to back up every note and coin issued with foreign exchange reserves. This is to ensure confidence and stability in the Brunei dollars, and hence, eases trade and investment. As the Singapore dollar anchors the Brunei dollar, Singapore’s monetary policy has a direct influence on monetary conditions in Brunei Darussalam. Singapore uses the exchange rate as its monetary policy tool. The longstanding monetary policy framework based on the Currency Interchangeability Agreement, has been beneficial for macroeconomic stability. Indeed, inflation in Brunei Darussalam has also been low and stable, averaging 1.1 per cent over 1983–2018.

PILLAR II: COMPETITIVE AND INNOVATIVE FINANCIAL INSTITUTIONS AND SERVICES

To grow in an intensely competitive environment, our financial institutions must be innovative and responsive to changing trends in the financial industry. In encouraging competition, AMBD has deregulated banks’ interest/profit rates to allow them to price lending/financing rates based on their internal risk appetites and borrowers’ credit-worthiness. Deposit rates have also been deregulated to allow banks to price the deposit rates based on their funding needs.

In promoting innovation, AMBD encourages FinTech experimentation through its FinTech Regulatory Sandbox. The sandbox enables financial institutions and other FinTech players to experiment with innovative financial products or services in a relaxed regulatory environment but within limited boundaries and duration.

To date, five start-up companies have been approved to enter the sandbox to test their FinTech products and services including an e-wallet service and a digital remittance service. In developing this area, AMBD leverages on regional cooperation and has signed a FinTech Cooperation Agreement with the Monetary Authority of Singapore (MAS) to share information and encourage joint
innovation projects.

PILLAR III: ROBUST AND MODERN INFRASTRUCTURE

A robust and modern financial infrastructure is vital to facilitating greater access to finance and safeguarding financial stability. The quality of the financial infrastructure also determines how well the financial system can fulfil its functions. Key financial infrastructure elements include credit bureaus, collateral registries, and payments and settlement systems.

AMBD’s Credit Bureau commenced its services in 2012. It supplies credit information to all licenced banks and finance companies operating in the country including to Perbadanan Tabung Amanah Islam Brunei (TAIB). In 2014, the Credit Bureau introduced a self-inquiry and dispute resolution service, which allows members of the public to check and request modification of an inaccurate credit history.

PILLAR IV: ENHANCED INTERNATIONAL INTEGRATION

Enhanced international integration can open up new opportunities for domestic financial institutions. The Blueprint recommends active participation in ASEAN and regional economic integration initiatives, particularly initiatives towards the successful implementation of the ASEAN Economic Community (AEC).

The AEC 2025 Blueprint specifies adoption of ISO 20022, a common global standard for financial messaging, as a key objective for regional financial integration and development of payments and settlement systems within the ASEAN markets. Brunei Darussalam became the first country in ASEAN to adopt ISO 20022 in the National Payments and Settlement Systems.

PILLAR V: HUMAN CAPITAL DEVELOPMENT

As a knowledge-based industry, the success of the financial sector is underpinned by a skilled workforce and knowledgeable financial consumers. The Blueprint outlines two main strategies in this area, firstly, upgrading the financial sector workforce’s knowledge, skills and competencies, and secondly, promoting financial literacy.

The Centre For Islamic Banking, Finance and Management (CIBFM), a training institute under the purview of AMBD, plays a key role in facilitating human capital development for the financial sector. CIBFM delivers training programmes in various topics in the areas of Islamic banking, finance and management. CIBFM has collaborated with leading regional and international training institutes such as the International Centre of Education in Islamic Finance (INCEIF) of Malaysia and the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IDB) in delivering high quality Islamic finance programmes.