2009 - Reserve Bank of Fiji

Reserve Bank of Fiji

2009 Annual Report

The principal purposes of the Reserve Bank shall be

• to regulate the issue of currency, and the supply, availabilityand international exchange of money

• to promote monetary stability• to promote a sound financial structure and• to foster credit and exchange conditions conducive to the

orderly and balanced economic development of the country

Section 4, Reserve Bank of Fiji Act (1983).

• Enhance our role in the development of the economy

• Provide proactive and sound advice to Government

• Develop an internationally reputable financial system

• Conduct monetary policy to foster economic growth

• Disseminate timely and quality information

• Recruit, develop and retain a professional team

Our Mission

Our Values• Professionalism in the execution of our duties

• Respect for our colleagues

• Integrity in our dealings

• Dynamism in addressing our customers’ needs

• Excellence in everything

Leading Fiji toEconomic Success

Our Vision

National Survey and National ConferenceBy the mid-1990s, a few government and non-government organisations were providing microfinance inFiji. In 1996, a national survey on the informal financial sector was conducted by the Reserve Bank of Fijiwith technical assistance from the United Nations Economic and Social Commission for Asia and thePacific (UNESCAP) to assess the availability and quality of services available to assist in poverty alleviationand promote economic activities. A national conference on microfinance was organised by the ReserveBank and the Ministry of Finance in 1998. One of the outcomes from this Conference was the establishmentof the National Microfinance Unit (NMU) by Government. The NMU was set up to conduct pilot projectson different models of micro-lending to determine the best model for Fiji.

Microfinance Policy Guidelines and ConferenceIn April 2009, the Reserve Bank announced that all commercial banks would be required to set upmicrofinance units and to provide essential financial services to the unbanked in Fiji. Subsequently, followingconsultation with commercial banks in October 2009, the Reserve Bank issued a policy on the MinimumRequirements for Commercials Banks on Internal Microfinance Divisions and Units in December 2009,which became effective from 1 January 2010.

The Reserve Bank, supported by the Pacific Financial Inclusion Programme, organised a National MicrofinanceWorkshop in November 2009 to assist commercial banks and relevant stakeholders with the optionsavailable for microfinance units and to map out a Medium Term Strategy for Financial Inclusion in Fiji.

Local Value Added ContentIn April 2009, the Reserve Bank announced a number of new policy initiatives to support and promotethe efficient use of local resources, and safeguard and protect the local environment, as well as to preserveforeign reserves.

The objective of this policy is to encourage local value added content requirement and environmentalprotection and rehabilitation for a sustainable tourism industry. It is also supportive of Government’simport substitution initiatives and the national balance of payments.

Prime Minister’s Award for Local Value Added in the Tourism IndustryIn April 2009, the Reserve Bank announced an annual Prime Minister’s Award for Local Value Added inthe tourism industry, which the Bank will also sponsor.

The first Award will be granted in 2010. It will be given to the hotel/resort that best utilises local products(such as in food & beverage preparation, furnishing & refurbishment etc) and undertakes environment-friendly practices including the use of renewable energy.

Scholarship to Study Local Value Adding in Food Preparation in the Tourism IndustryIn April 2009, the Reserve Bank also announced that it will fund a short-term attachment scholarship fora local chef from the Training and Productivity Authority of Fiji (TPAF) to undertake specialised trainingon innovative ways of incorporating local food in the preparation of hotel menus. The training attachmentwill be conducted in Malaysia in 2010.

What is Microfinance?Microfinance is the provision of financial services for the extremely poor and lower income people. These financialservices include savings, transfers, insurance and credit. Microfinance is based on the principle that those livingaround the poverty line need to have access to a range of financial services just, like everybody else.

Microfinance has been around for a very long time. The earliest forms of microfinance included small informalsavings and credit groups, which have been known to exist in traditional societies in Mexico, Ghana and India.Examples of other early pioneers include: the Grameen Bank in Bangladesh, which started out as an experimentby Professor Muhammad Yunus; Americans for Community Co-operation in Other Nations (ACCION)International, which began in Latin America and then spread to the United States of America and Africa; andthe Self-employed Women’s Association Bank in India, a bank owned by a women’s trade union. These institutionscontinue to thrive today and have inspired countless others to replicate their success.

Developing a Microfinance Sector in FijiThe Reserve Bank of Fiji has been involved with the development and promotion of microfinance in Fiji for the lasttwo decades. This journey began in the early 1990s when staff were sent abroad to learn about microfinance andits relevance to supporting economic and financial sector development in Fiji.

There was growing awareness of microfinance in assisting the poor. As more countries became involved in microfinance,and were able to assist the very poor, it gained its foothold in Asia, South America and Africa and gathered supportfrom the more developed countries. In 1993, the Ministry of Women, Social Welfare and Poverty Alleviation setup the first microfinance units to assist the poorer communities in Fiji.

Letter to the Minister 01Our Functions 02Governor’s Foreword 03Organisation Structure 06Board of Directors 08Executive Management 09Corporate Governance 10Economic Overview 13

Conduct Monetary Policy to Foster Economic Growth 16Monetary Policy Formulation 16

Chronology of Monetary Policy Actions 16Monetary Policy Outcomes for 2009 17

Monetary Policy Implementation 19Open Market Operations 19Foreign Reserves Management 19Exchange Rates 20Forward Facility 20Foreign Currency Payments 20Exchange Control 20

Develop an Internationally Reputable Financial System 21Financial System Regulation and Supervision 21

Supervisory Developments 21The Financial System 22The Banking Industry 23Credit Institutions 25The Insurance Industry 25Fiji National Provident Fund 26Capital Markets 26Complaints Management 27Meetings 27

Combating Money Laundering 28Currency 30FIJICLEAR 33

Enhance Our Role in the Development of the Economy 34Assistance to the Export Sector 34IMF Visits and the Article IV Mission 34Flood Assistance 34Local Value Added 34Small and Micro Enterprises and Microfinance 35Local Advisory Board 35Remittances 35RBF in the Community 36

Provide Proactive and Sound Advice to Government 37Policy Coordination 37Registry and Banking Services 37

Disseminate Timely and Quality Information 39Financial Performance 39Publications/Press Releases 40Information Technology 40Records Management and Library 40Domestic Relations 40International Relations 41

Recruit, Develop and Retain a Professional Team 42Staffing 42Management Remuneration in 2009 42Staff Development 42Employment Relations Promulgation 43Health and Safety in the Workplace 43Service Recognition 43Quality Performance Management 44General Administration Services 44Plant and Building 44Acknowledgement 44

The Year Ahead 45Financial Statements 46Selected Events in 2009 77Fiji: Key Economic and Financial Indicators 78Abbreviations 79

Contents

01

RESERVE BANK OF FIJI

29 March 2010

RBF Annual Report and Accounts 2009

In terms of Section 56(1) of the Reserve Bank of Fiji Act, and on behalf of theReserve Bank of Fiji, I submit the following:

(i) A copy of the RBF Annual Accounts for the year ended 31 December 2009certified by the Auditors.

(ii) A report on the RBF’s Operations for the 2009 fiscal year.

Commodore Josaia Voreqe BainimaramaMinister for Finance and National PlanningMinistry of Finance and National PlanningRo Lalabalavu HouseVictoria ParadeSUVA

Dear Minister

Governor

Yours sincerely

Sada S ReddyGovernor

Postal: Private Mail Bag, Suva, Fiji Tel: (679) 331 3611 Fax: (679) 330 1688 Email: [email protected] Website: www.rbf.gov.fj

Annual Report 2009

LETTER TO THE MINISTER

02

OUR FUNCTIONS


To achieve these requirements, the Bank registers andlicenses financial institutions and uses a risk-basedsupervision system. The Reserve Bank acts as bankerto the commercial banks and provides payment andsettlement services through FIJICLEAR.

Furthermore, on 13 August 2009, the responsibilitiesof the Capital Markets Development Authority(CMDA) were transferred to the Reserve Bank underthe Capital Markets Decree (2009).

Currency

Pursuant to Section 22(1) of the RBF Act (1983), theBank has the sole right to issue currency in Fiji. TheReserve Bank is the sole entity responsible for theprinting of banknotes and minting of coins and is alsoresponsible for the destruction and disposal of usedand unserviceable currency. The Reserve Bank alsodetermines the denominational structure, design,content, material and composition of Fiji’s currency,subject to the approval of the Minister for Finance.

Other

The Bank provides banking and registry, as well asforeign exchange services to Government and is alender of last resort. Policy advice to Government isprovided through participation in various committeesand upon request.

Details of the Reserve Bank Board of Directors areprovided on page 8 and the roles of the Board,Management and Governance structure are describedon pages 10 and 11. The Bank’s organisation structureis illustrated on page 6.

Monetary Policy

Under Section 4(b) of the RBF Act, the Bank is requiredto promote monetary stability through low and stableinflation and to maintain an adequate level of foreignreserves. The Bank performs this responsibility throughthe formulation and implementation of monetarypolicy. Policy tools include open market operations,Statutory Reserve Deposits (SRD), and direct andindirect controls.

In managing the country’s foreign reserves, the ReserveBank also utilises and administers exchange controlpolicies under the Exchange Control Act (rev 1985).

Financial Stability

The RBF Act (1983) requires the Bank to promote asound financial structure. In undertaking thisfunction, the Bank licenses and supervises institutionsin the banking, insurance and superannuation indust-ries, as well as foreign exchange dealers.

In addition to the legislative environment for theseindustries, licensed institutions are required to complywith prudential policies and guidelines issued by theBank. These policies and guidelines complement theBank’s supervisory function with the aim of fosteringfinancial stability through sound licensed institutions.The licensed financial institutions, including the FijiNational Provident Fund (FNPF), are required tocomply with the RBF Act (1983), Banking Act (1995)and the Insurance Act (1998).

Maintaining financial stability also encompasses theresponsibility of combating money laundering andterrorist financing under the Financial TransactionsAct (2004) and the Financial Transactions ReportingRegulations (2006).

The Reserve Bank of Fiji (RBF) is the country’s central bank.

gainst the backdrop of an unravelling globalfinancial crisis and continued weak domesticeconomic conditions, the year 2009 began with

suboptimal conditions, as foreign reserves, a key policyobjective of the Reserve Bank, plummeted in the firstquarter. Foreign reserves fell rapidly reaching a lowof $430 million, which was equivalent to 1.5 monthsof imports of goods and non-factor services. Con-sequently, liquidity also trended sharply down tobelow $20 million in March.

Difficult policy decisions had to be taken to correctthe situation, including devaluing the Fiji dollar by20 percent on 15 April. While the devaluation wasa key policy response to address the situation in lightof the downturn of the global economy and weakdomestic economic activity, the total package ofmonetary policies put in place served to set theplatform for recovery and by the end of the year,foreign reserves had recovered to comfortable levels.

At the end of 2009, foreign reserves were $1,091million, equivalent to around 3.7 months of importsof goods and non-factor services. Foreign reserveslevels were also boosted by the International MonetaryFund’s (IMF) additional allocation of Special DrawingRights (SDR) of F$188 million during the year. Basedon the performance of foreign reserves, Standard &Poor’s Ratings Services upgraded Fiji’s outlook fromnegative to stable in December 2009. Furthermore,liquidity conditions improved to close to $300 millionby year end. Adequate liquidity in the financialsystem is critical for credit growth and ultimately,economic growth.

Although inflation, the other key policy objective ofthe Reserve Bank, rose from the effects of thedevaluation, year-end inflation was well within initialexpectations. At the end of 2009, inflation was 6.8percent and is expected to peak in the early monthsof 2010 before subsiding to around 2.0 percent bythe end of 2010. Several risks surround this outlookand price developments will continue to be monitoredclosely to ensure proactive policies are implementedto mitigate inflationary pressures.

Annual Report 2009

Monetary policy, going forward, will continue toensure that foreign reserves are at comfortable levelsand inflation is low.

In 2009, Fiji’s economy is estimated to have declinedby 2.5 percent, largely a reflection of the impact ofthe global financial crisis on the domestic economyand natural disasters. This impact was acute in thetourism sector as visitor arrivals fell by 7.8 percent in2009. However, tourism picked up strongly in thesecond half of the year, benefiting from the deval-uation, aggressive marketing campaigns and the grad-ual recovery of the global economy.

In 2009, the Reserve Bank played an active role indeveloping the economy. The Reserve Bank alsoworked closely with Government in developingmacroeconomic policies and structural reformpackages. Work on this wider role is expected to gathermomentum in 2010.

To further foster economic growth conditions,monetary policy directives were issued to commercialbanks and licensed financial institutions, in the formof a ceiling on lending rates and a minimum interestrate spread. These controls were lifted by the end of2009, as interest rates and margins fell to benchmarklevels.

Fiji’s economy is projected to grow by 1.9 percent in2010, led by the recovery in global demand, part-icularly through the tourism sector, as well asimprovements in gold and timber. To further assistin the recovery process, certain exchange controls,which were implemented in April 2009 to safeguardforeign reserves, were redelegated to commercialbanks in January 2010. Supportive fiscal measuresare also expected to boost economic growth outcomes.Monetary policy will continue to stand ready to supp-ort the economic recovery process.

A comprehensive review of the RBF Act wasundertaken in 2009, in consultation with key stake-holders. The Act was reviewed to ensure it alignedwith international best practice, good governance and

GOVERNOR’S FOREWORD

A

03

04 Reserve Bank of Fiji

transparency and that monetary policy processes wereefficient and effective. The revised Act is expected tobe tabled in Cabinet in 2010.

Several aspects of the conduct and implementationof monetary policy were reviewed during the yearand are expected to be executed in 2010. As a result,the framework that monetary policy operates underwas also reviewed to ensure consistency and effect-iveness. Changes to these frameworks are expectedto be announced in 2010.

Despite the adverse macroeconomic conditions, Fiji’sfinancial system remained stable during the year. Theinsurance industry performed satisfactorily, whilethe FNPF continued to grow. In 2010, the focus willbe on the reforms of the FNPF so that it remainsstrong and sustainable in the future.

During the year, the Reserve Bank widened its scopefrom its traditional activities to play a more effectiverole in developing the economy and in advisingGovernment on key reforms. Consequently, severalorganisational developments took place. The ReserveBank set up the Financial Systems Development andCompliance (FSDC) Group in April 2009 to focuson microfinance initiatives and developing small andmedium enterprises (SMEs). The FSDC Group isalso responsible for the oversight of local advisoryboards for foreign bank operations, complaints againstfinancial institutions, the development of ruralbanking and financial literacy. It is also working on alocal value added policy for the tourism industry,which will link tourism sector domestic borrowingsto local value added content and environmentalprotection. This policy is expected to be rolled out in2010.

Another key organisational development was thetransfer of the administration of the CMDA to theReserve Bank in August 2009. The transfer served toconsolidate the supervision and regulation of thefinancial system of Fiji. As a result, a Capital MarketsUnit was set up within the FSDC Group to handlethe developmental and supervisory aspect of thecapital markets.

An Export Proceeds Monitoring Unit (EPMU), asannounced by the Prime Minister and Minister forFinance in the 2010 National Budget address, iscurrently being set up in the Reserve Bank. The Unitis charged with the responsibility of ensuring allexport proceeds are remitted to Fiji in compliancewith the Exchange Control Act, Cap 211. The Unitwill also deal with transfer pricing issues. An Inter-

agency Committee, comprising senior representativesfrom the Fiji Islands Revenue and Customs Authority(FIRCA), the Financial Intelligence Unit (FIU) andthe Reserve Bank, was also established to strengthenthe role of the EPMU. The EPMU is expected to befully operational in early 2010.

In 2009, the Reserve Bank played a more active rolein advising Government on key reforms, particularlyfor the National Budget process. Several presentationswere made and policy briefs circulated to Governmentto assist in the development of fiscal policies, incl-uding policies on import substitution and renewableenergy. Government was encouraged to pursue target-oriented fiscal policies to ensure that policies wereeffective, well monitored and accountable. Goodfiscal and monetary coordination are essential inaddressing the various economic challenges that Fijifaces. The Reserve Bank will continue to work closelywith Government to achieve sustainable economicgrowth.

Garnering the support of international multilateralagencies and donors is also vital for Fiji’s economicrecovery. To this end, the Reserve Bank worked closelywith the IMF during the year to ensure that the Fundwas well informed of Fiji’s economic progress. Theclose work with the IMF has paved the way todiscussions with other multilateral organisations onplanning the way forward and close internationalliaison will be instrumental in the recovery process.The IMF completed its 2009 Article IV Report onFiji late last year, which was subsequently discussedby the IMF Executive Board in early 2010.

In other major developments, the Reserve Bank issuedsmaller and lighter coins into circulation indenominations of 5, 10, 20 and 50 cents in February2009. An exhaustive nation-wide old coin collectionprogramme was also conducted in tandem.

As required under the RBF Act (1983), the ReserveBank submitted its audited accounts and operationalreport for the year ended 2009 to the Minister forFinance on 29 March 2010. The Reserve Banktransferred a total of $39.2 million to Governmentin April 2010. This consists of its entire profit of$16.6 million for the financial year 2009 and $22.6million, which represents one-fifth of the RevaluationReserve. The total transfer in 2009 was $33.0 million.

It was only through strategic policy decisions that adeeper economic crisis was averted in 2009. Foreignreserves are now at reasonably comfortable levels andinflation is expected to moderate by the end of 2010.


Annual Report 2009

However, there are several risks to these outcomes,including an upward trend in global oil prices and afragile domestic economic recovery process.Consequently, the Reserve Bank will remain vigilantand proactive in its decision making. Close monetaryand fiscal coordination is also imperative in ensuringa sustained economic recovery.

The Reserve Bank will continue to play an active andmore influential role in developing the economy.Work related to microfinance and SMEs developmentis expected to gather pace in 2010. The Reserve Bankwill focus on raising financial inclusion, financialliteracy and improving access to financial services,particularly for marginalised communities. Excitingtechnological changes are expected to deliver imp-

roved money and banking services across the wholecountry. In addition, the Reserve Bank will continueto work closely with Government in all aspects and,in particular, through its participation on theEconomic Reform Programme on structural reforms.

I would like to take this opportunity to thank theBoard of Directors for their support and guidanceduring 2009. I wish to also acknowledge the cordialrelationship that we have had with the Fiji Bank andFinance Sector Employees Union in all our industrialrelations matters. Finally, I extend my deepappreciation to Team Reserve Bank for their hardwork, commitment and co-operation in 2009.

05


Sada ReddyGovernor and Chairman of the Board

06

ORGANISATION STRUCTURE

Boardof Directors

Governor andChairman of the

Board

DeputyGovernor

Currency andCorporateServices

Currency, accounting, human resou-rces, information technology, generalservices, records management, library,corporate projects, security and plants& properties.

ExecutiveServices

Provide advice to the Governors oneconomic, financial, communications,international liaison and other Bankpolicy matters and board secretariatservices.

FinancialMarkets

Exchange rates, foreign exchange deal-ings, market monitoring, foreign exch-ange reserves management, exchangecontrol, open market operations, regi-stry and liquidity forecasting.

Economics

Economic analysis and research, mon-etary and macroeconomic policy, pub-lications, forecasting financial and eco-nomic statistics.

Financial SystemsDevelopment

and Compliance

Microfinance, financial institutionscomplaints, remittances, small med-ium enterprises, rural banking, finan-cial literacy, capital market develop-ment, settlements and middle officefunctions, and payment services thro-ugh FIJICLEAR.

FinancialInstitutions

Financial system supervision, develop-ment and implementation of pruden-tial supervision policies, licensing andexamination of licensed financial insti-tutions.

Financial intelligence policy advice,formulation, compliance, supervision,training implementation and monitor-ing, national and international liaison.

FinancialIntelligence

Unit


ith 12 years experience in selling handicraft, Vasemaca Senilagakaliis today a successful small entrepreneur. She currently employs

20 women to assist her in producing handicraft, which she sells fromher handicraft business in Newtown. This was possible throughmicrofinance, where she took small loans to purchase materials to makethe handicraft. From the loan, she expanded her handicraft businessto include a funeral package which includes mats, coffins and casketssprays.

Small Business Handicraft Seller

W

SUCCESS STORY

PROPRIETOR:

Vasemaca Senilagakali

08

BOARD OF DIRECTORS


Deo Saran

Appointed to the Board on 11February 2009. Term expireson 11 February 2012. Chair-man of the Governance Com-mittee of the Board. He is theChief Executive Officer of theFiji Sugar Corporation Lim-ited and a former President ofthe Fiji Institute of Account-ants. He has also served on theStakeholder Council of theGlobal Reporting Initiative.

Sada ReddyGovernor and

Chairman of the Board

Governor since 15 April 2009for a 3-year period. AlternateGovernor for Fiji in the Inter-national Monetary Fund andin the Asian DevelopmentBank. Deputy Chairman ofthe Executive Committee of theFiji National University. For-mer Chairman of Fiji Schoolof Medicine and Housing Aut-hority, and Deputy Chairmanof Capital Markets Develop-ment Authority.

Iowane Naiveli

Appointed to the Board on 1January 2000. Term expireson 31 December 2010. Chair-man of the Reserve Bank of FijiBoard Audit Committee andmember of the GovernanceCommittee of the Board. Solepartner of I. Naiveli & Com-pany Chartered Account-ants. Director of Fijian Hold-ings Limited. Former Chair-man of the External AuditCommittee of the InternationalMonetary Fund. President ofFiji Institute of Accountants,Financial Advisor to the FijianAffairs Board and Trustee ofUnit Trust of Fiji.

Robin Yarrow

Appointed to the Board on 5August 2005. Term expires on6 August 2011. Member of theBoard Audit Committee andGovernance Committee of theBoard. Retired from the FijiGovernment after 30 years ofservice which included seniorpositions with the Minis-triesof Agriculture, Tourism,Foreign Affairs and NationalPlanning. Currently serves ona number of organisations andboards including VodafoneFiji, the Fiji Red Cross Societyand the National Trust of Fiji.Was appointed in 2009 asRegional Councillor for Ocea-nia for the World Conservat-ion Union.

Adish Narayan

Appointed to the Board on 3August 2007. Term expires on3 August 2010. Member of theGovernance Committee of theBoard. Lawyer by professionand sole proprietor of AKLawyers and is a member ofthe Legal Aid Commission.

Dr. Chandra Dulare

Appointed to the Board on 11January 2008. Term expireson 11 January 2011. Memberof the Board Audit Committeeand Governance Committeeof the Board. Dr. Dulare, amonetary economist, is anAssistant Professor at the FijiNational University and theCoordinator, Western Camp-uses. He is also the Director ofthe Fiji Institute of AppliedStudies. His work experiencesinclude lecturing at the Univer-sity of Fiji, University of Quee-nsland, Griffith Universityand University of the SouthPacific.

John Prasad

Acting Permanent SecretaryMinistry of Finance (Ex-officio)

Appointed as Acting Perm-anent Secretary for Ministryof Finance on 31 March 2009.Chairman of the Water Auth-ority of Fiji and Higher Sala-ries Commission. Board mem-ber of the Fiji Islands Revenue& Customs Authority and FijiIslands Trade & InvestmentBureau.

Razim BukshDirectorFinancial

Intelligence Unit

Jitendra SinghChief Manager

Economics

Ariff AliChief Manager

Financial Markets

Filimone WaqabacaChief Manager

Financial SystemsDevelopment and

Compliance

Esala MasitabuaChief Manager

Financial Institutions

09

EXECUTIVE MANAGEMENT

Annual Report 2009

Barry WhitesideDeputy Governor

Lorraine SeetoAdvisor to the

Governors

Subrina HanifSecretary to

the Board

Inia NaiyagaSenior Advisor

to the Governors

Susan KumarActing Chief Manager

Currency and CorporateServices

The Reserve Bank of Fiji is fully owned by the Government of Fiji. The functions and duties of the Reserve Bankare specified in the RBF Act (1983), the Banking Act (1995), the Insurance Act (1998), the Exchange ControlAct (rev 1985), the Financial Transactions Reporting Act (2004) and the Capital Markets Decree (2009). Theselegislations define the boundaries of the Bank’s responsibilities and accountabilities.


Board Committees

There are two sub-committees of the Board, the AuditCommittee and the Governance Committee. TheBoard Committees comprise non executive members.Decisions of the Committees are submitted to the fullBoard for ratification.

The Audit Committee monitors the adequacy of theaudit function in the Bank and assists the Board infulfilling the requirements of the RBF Act in relationto the Bank’s accounting and reporting practices. Incarrying out these functions, the Committee:

• Reviews the audit plan of the external and internalauditors;

• Evaluates the Bank’s accounting control system byreviewing audit reports and monitoring manage-ment’s responses and actions to correct any noteddeficiencies;

• Reviews the annual financial statements of theReserve Bank; and

• Reviews accounting policies to ensure compliancewith laws, regulations and accounting standards.

The Audit Committee met on four occasions in 2009.

On 23 April 2009, the Governance Committee of theBoard was established to strengthen the governanceof the Bank and to make the Office of the Governormore accountable to the Board. All Board Directorsare members of the Committee except the Governor.The main functions of the Committee are to reviewexpenditure in relation to travel, entertainment, motorvehicle, telephone, leave and any other expenditure ofthe Governor’s Office. The Committee will alsoundertake the annual performance appraisal of theGovernor and Deputy Governor based on agreed keyperformance indicators.

The Governance Committee also took on the functionsof the former Staff Committee, which are to reviewand approve strategies on terms and conditions of

he Reserve Bank’s performance is documented inan Annual Report and tabled in Parliament everyyear. Under Section 56 of the RBF Act (1983), the

Annual Accounts and a Report of Operations of theBank must be submitted to the Minister for Financeno later than 31 March of the following year. Moreover,under the Insurance Act (1998), the Bank’s InsuranceAnnual Report has to be submitted to the Ministerfor Finance by 30 June of the subsequent year and isalso tabled in Parliament. The Financial IntelligenceUnit and Capital Markets Unit also publish AnnualReports.

The Bank has a Vision statement - “Leading Fiji toEconomic Success” - and also subscribes to Missionstatements and Values which are on the inside coverof this Report.

The Governor

The Governor, who is the Bank’s Chief ExecutiveOfficer, is responsible to the Board for the managementof the Bank and the execution of its policy. The currentGovernor, Mr. Sada Reddy was appointed on 15 April2009 following the abrogation of Fiji’s Constitution.Mr. Reddy has been appointed for a period of threeyears.

Board of Directors

The Board comprises the Governor, who serves asChairman, the Permanent Secretary of the Ministryof Finance, as an ex-officio member, and five othernon executive members. Under the RBF Act, theMinister for Finance appoints the Directors. Directorsmay hold office for a period not exceeding three yearsbut are eligible for reappointment. Board Director Mr.Iowane Naiveli’s term ended on 31 December 2009but was renewed for a year on 1 January 2010. OtherBoard Directors holding office in 2009 were Mr. RobinYarrow, Mr. Adish Narayan, Dr. Chandra Dulare, Mr.Deo Saran and Mr. John Prasad.

Board Meetings

Under the RBF Act, the Board is required to meet atleast 10 times in a calendar year. During 2009, theBoard met on 11 occasions - there were 10 ordinaryboard meetings and one special board meeting. FourDirectors form a quorum for a meeting of the Board.In the absence of the Governor, the Deputy Governormay participate in Board meetings and is entitled toexercise a vote.

CORPORATE GOVERNANCE

T Board Meetings in 2009 - Attendance by Directors

Director Attended Eligible Minimum Number of to Meetings as Required

Attend by the RBF Act (1983)

Sada Reddy 9 9 10Savenaca Narube 2 2 10Iowane Naiveli 10 11 10Robin Yarrow 9 11 10Adish Narayan 7 11 10Dr. Chandra Dulare 9 11 10Deo Saran 11 11 10John Prasad 4 9 10Peceli Vocea 1 2 10

11Annual Report 2009

employment for executive management and staff. TheCommittee also reviews and approves strategies on theremuneration policy for all staff.

The Governance Committee met four times during2009.

Bank Management

The executive management of the Reserve Bankcomprises the Governor, Deputy Governor, SeniorAdvisor, Advisor and Heads of Groups. The Governoris advised by a number of internal committees withinthe Bank:

• Executive Management Committee, which meetsweekly to consider the management and day-to-day operations of the Bank;

• Monetary Policy Committee, which meets quart-erly to discuss economic and monetary developments;

• Market Operations Policy Committee, which meetsquarterly to discuss the Bank’s foreign reserves anddomestic investment management strategies;

• Financial System Policy Committee, which meetsquarterly to review financial system developmentand consider policy issues on the soundness andefficiency of the financial system;

• Currency and Corporate Services Policy Commit-tee, which meets quarterly to discuss issues relatingto currency and internal services;

• Information Technology (IT) Steering Committee,which meets quarterly to discuss IT developmentand operations; and

• Business Continuity Management Committee,which meets quarterly to formulate and initiatestrategies to address risks faced by the Bank.

The Governor chairs all the above Committees.

Delegation of Authority

The Delegation of Authority sets out the frameworkfor the Governor’s delegation in the operations of theReserve Bank, together with the associated account-abilities. All activities and expenditure in the Bankmust be authorised in accordance with the respectivedelegations, policies and procedures. The InternalRules and Orders of the Bank and the Code of Ethicsand Business Conduct policy provide guidance oncompliance on ethical standards. The Declaration ofCompliance, signed annually by staff, ensures thatthey have complied with the Code of Ethics; Delegationof Authority; Internal Rules and Orders and IT policiesof the Bank.

Reserve Bank of Fiji Act

Work on the review of the RBF Act (1983) commencedin 2009. The draft new legislation will be presentedto Cabinet in 2010.

Strategic Plan

During the year, the Reserve Bank continued toimplement its 5-year Strategic Plan for 2009-2013.The Plan is continuously reviewed to ensure that italigns with changing circumstances. The Plan is postedon the Bank’s Intranet and is available to all staff.

Corporate Plan

Corporate planning is carried out annually in theReserve Bank. The formulation of the Bank’s workplanfor the following year commences as early as May, witha review of its Vision and Mission statements. Groupstrategies are reviewed accordingly. All Groups reviewtheir progress for the first six months of the year andsubmit a report to the Board in July. Extensivediscussions are held during the interactive planningworkshops and feedback is obtained from internal andexternal stakeholders in August. The output andresources are matched, and the workplan and budgetare presented to the Board for approval in November.

The workplan is presented according to the Missionstatements of the Bank. Every strategy, output andprocess must identify with a Mission statement whichwill lead to the achievement of the Vision of the Bank.Each Mission statement has a list of key performanceindicators (KPIs). Resources are applied to theworkplan. The Bank uses zero based budgeting for itsfinancial resources. Heads of Group are responsibleand accountable for their respective Group’s KPIs andbudgets. These indicators are monitored quarterly bythe Governors and bi-annually by the Board.

In November 2009, the Board approved the annualworkplan and budget for 2010.

Risk Management

Risk management is an integral aspect of the ReserveBank’s daily operations. The Bank faces many risks –some general, while others are unique to central banks.Relevant committees are set up to ensure that risk isappropriately managed. The Bank needs to be vigilant

Annual Planning Cycle

Review of GroupStrategies

Approval of NewGroup Strategies

Board Approval ForWorkplan/Budget

Develop & FinaliseNext Year’s

Workplan/Budget

Review ofVision & Mission

May

June

JulyReview of Work

Progress

July

Presentationof Workplan

January to thefollowing year

September/October

November

InteractiveWorkshop

July/August



in its monitoring of economic developments and pre-emptive in its formulation of monetary policy. This isto ensure that the financial system is sound and stableto minimise risks to the economy and the Bank’sreputation and credibility is maintained. Other risksinclude:

• The holding of foreign reserves, like credit, interestand exchange rate risks;

• Small organisations, such as loss of staff due toemigration;

• Currency, such as counterfeit, adequacy and safetyissues; and

• The operations of Fiji’s payments system, FIJI-CLEAR, due to technical issues.

The Business Continuity Plan, which was approvedby the Board in 2007, continued to be rolled out during2009. Training was conducted for fire evacuation forBank staff and tenants. The Bank also embarked onother initiatives like planning for a possible avianinfluenza pandemic and documenting procedures for

reference, as well as strengthening procedures in thecase of natural disasters.

Work on the Reserve Bank’s Business Resumption Site(BRS), which commenced with the ground breakingceremony in late 2008, continued during 2009. Theproject is expected to be completed in 2010. The BRSwill act as a backup for critical operations if the ReserveBank’s main building is, for some reason, inaccessible,or if the systems in the building are inoperable. Criticaloperations include foreign reserves management,settlements and some domestic market processesincluding FIJICLEAR operations.

The Middle Office continued to monitor theperformance and operational procedures of the Bankwith regard to its external and domestic investments.An outsourced internal audit function provided theBank with information on risk areas that need to beaddressed. The Board and the Board Audit Committeealso contributed to the review and strengthening ofthe Bank’s risk management process.



ECONOMIC OVERVIEW

International Economic Developments

onetheless, the pace of recovery is slow, andactivity remains far below pre-crisis levels. TheIMF has warned that the recovery would be weak

by historic standards and restoring banks to healthremains a priority. The rebound is expected to besluggish, credit constrained and, for quite some time,unemployment rates are expected to be high.

All of our major trading partner economies loweredtheir key interest rates progressively throughout theyear to record lows, in response to the financial crisisand the resulting waning global demand. However,Australia became the first industrialised country toraise borrowing costs as the central bank raised rateson three occasions in late 2009. The gradual globalunwinding of stimulus policies was led by a reboundin consumer confidence, increasing demand forexports and better economic prospects.

The United States (US) economy recorded its firstback-to-back positive growth in the last two quartersof 2009 since the June quarter of 2008. Nonetheless,the economy is estimated to have contracted by 2.5percent in 2009, largely underpinned by weakmanufacturing and high unemployment, whichaffected consumer confidence and spending. Theoutlook for the Japanese economy is still uncertain.Despite emerging from recession in the second quarterof 2009, the Japanese recovery is still hampered bydeflation and an appreciating Yen which is having anegative effect on exports. The IMF expects theeconomy to contract by 5.3 percent in 2009. The Eurozone and New Zealand economies are also on therecovery path, after slipping into recession in 2008,and are estimated to contract by 3.9 percent and 2.2

percent, respectively in 2009. The contractions of bothareas are mainly attributed to high unemploymentand stronger currencies which are affecting trade. In2009, the Australian economy is estimated to havegrown by 0.7 percent, the only industrialised economythat evaded a recession, underpinned by rising retailsales, confidence and increasing demand for exports.

Economic Developments in Fiji

The Fiji economy is estimated to have declined by 2.5percent in 2009. Growth rates for the periods 2006to 2008 were also revised. In 2006, the economy isestimated to have grown by 1.9 percent, followed bya 0.5 percent contraction in 2007 and a further declineof 0.1 percent in 2008.

Lower tourist arrivals, particularly in the first half of2009 affected the transport, storage & communication;wholesale & retail trade; and hotels & restaurantssectors while a fragile sugar industry as well as weakglobal demand adversely impacted the agriculture &forestry and manufacturing sectors. Lower Govern-ment spending relative to 2008 resulted in declinesin the public administration & defence; education;and health & social work sectors.

In contrast, positive contributions were noted in theconstruction, mining & quarrying and financialintermediation sectors. The fishing, real estate & otherbusiness services, electricity & water and the othercommunity, social and personal services were alsopositive but their contributions were relatively flat tohave any major impact on the overall gross domesticproduct (GDP).

In 2009, the world witnessed the worst economic downturn since World War II as many industrialised economiesplunged into recession. The IMF estimated that the global economy contracted by 0.8 percent in 2009, comparedwith a growth of 3.0 percent in 2008. Nonetheless, some improvements were evident towards the middle of 2009,driven mainly by massive stimulus packages which moved growth into positive territory for many economies.Consequently, the outlook for 2010 is much improved with the IMF expecting the world economy to recover to agrowth of 3.9 percent. Growth and stabilisation is mainly attributed to the strong public policies across the globe,coupled with impressive performances of the Asian economies. A quick rebound is expected for emerging anddeveloping economies, mainly driven by China and India, supported by improving global trade and financialconditions.

World GDP Growth Rates

Source: IMF World Economic Outlook (January 2010)

2004

2005

2006

2007

2008

6

5

4

3

2

1

0

2003

2002

Pe

rce

nt

2009

(e)

2010

(f)

-1

-2

N

Fiji’s GDP Growth Rates

Sources: Fiji Islands Bureau of Statistics and Macroeconomic Committee

2003

(r)

2004

(r)

2005

(r)

2006

(r)

2007

(p)

2008

(p)

6

4

2

0

-2

-4

2002

(r)

2001

(r)

Pe

rce

nt

2009

(e)


2008, a result of soaring global oil and food prices inthat year. Nevertheless, inflationary pressures mountedafter the devaluation in April 2009. However, weakdemand conditions and lower oil prices compared toa year ago offset the impact of the exchange rateadjustment by a large degree. Since the primary sourceof inflation was external, it was neither prudent noreffective to utilise monetary policy to contain prices.In any case, monetary and fiscal policies were tight formost parts of 2009. This helped restrain domesticprice pressures. Therefore, at the end of the year,inflation was 6.8 percent, compared to 6.6 percent in2008.

Developments in money and credit aggregates largelyreflected the stabilisation of foreign reserves duringthe year. On an annual basis, broad money rose by 7.4percent in December, compared to a 6.9 percentdecline in 2008. The turnaround was underpinnedby a strong growth in time deposits during the year, aswell as a rapid improvement in the level of demanddeposits. In the same period, domestic credit rose by4.1 percent led by a steady rise in claims against theGovernment, which rose by 64.9 percent in the yearto December. However, commercial banks’ creditslowed considerably during the year, on account ofsubdued economic activity in 2009. Outstandingcommercial banks’ credit rose by 0.9 percent inDecember, compared to a growth rate of 11.6 percentin 2008. The slowdown was a result of a contractionin credit, mainly to the professional & business services,agricultural, manufacturing and the real estate sectors,along with a slowdown in lending to other remainingsectors.

Following the interest rate regulations announced inApril, the lending rate trended down while depositrates rose. The commercial banks’ weighted averagelending rate fell to 7.52 percent in December 2009,compared to 7.72 percent a year ago. In the same per-iod, the commercial banks’ time deposit rate rose to5.83 percent from 3.00 percent in December 2008.Similarly, the savings deposit rate rose by 28 basispoints to 0.92 percent.

In line with weak economic activity, domestic demandremained soft in 2009 as suggested by partialindicators. Value Added Tax (VAT) collections fell by10.7 percent. Imports of consumption goods showedan annual decline of 6.1 percent in the year toSeptember. The lower consumption activity was mainlyinfluenced by weak employment conditions andresultant restrained incomes.

The partial indicators for investment, on the otherhand, recorded mixed outcomes. Lending for invest-ment purposes registered an annual growth of 3.2percent in 2009. In contrast, a 4.8 percent decline inimports of investment goods was noted in the firstnine months of 2009. In the construction industry,lower activity by the private sector was underpinnedby an 8.2 percent annual decline in the total value-of-work-put-in-place up to September 2009. Hence,investment for 2009 is estimated at 13.0 percent ofGDP, compared to the prior two years’ level of 15.0percent of GDP.

The Government’s activities in 2009 were mostlycentred on raising economic growth and alleviatingpoverty. Hence, a 3.0 percent deficit was budgeted for2009. However, with the Government’s commitmentto fiscal consolidation, the deficit level is estimated tobe much lower at 2.5 percent. The relatively lower fis-cal stimulus also affected growth in 2009.

Employment conditions remained subduedthroughout the year. In 2009, new taxpayer regist-rations, a partial indicator of employment, noted anannual 47.3 percent fall to 3,960 registrations. Apartfrom the mining & quarrying sector, which recordedan improvement after a rebound in mining and explor-ation activity, new taxpayer registrations fell across therest of the sectors. The fall was mainly underpinnedby the electricity & water; construction; wholesale &retail trade, restaurants & hotels; manufacturing; andfinance, insurance, real estate & business services sec-tors.

While the fall in new taxpayer registrations waspartially influenced by the increase in the income taxthreshold on 1 June 2008, weaker demand emanatingfrom both the external and domestic fronts are alsoresponsible for subdued labour market conditions.

Similarly, recruitment intentions were also weak. Thenumber of jobs advertised in 2009 declined by 7.5percent over 2008. The sluggish global demand andthe estimated contraction for the year may havecontributed to this outcome.

Inflation eased further in the early months of the yearfollowing the 20-year high of 9.8 percent in September

Commercial Banks’ Lending and Deposit Rates

Source: Reserve Bank of Fiji

10

8

6

4

2

0

200820072006

Loans

Savings Deposit

Time Deposit

2009

Pe

rce

nt

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

ECONOMIC OVERVIEW


Fiji’s overall trade performance improved in 2009,largely underpinned by a decline in imports. Lessdesirable was a fall in export proceeds. Cumulative toSeptember 2009, exports receipts fell by 11.7 percentcompared to a 22.4 percent growth during the sameperiod in 2008.

Imports also fell in the same period, by a greater 18.7percent, compared to a 26.0 percent growth in thecomparable 2008 period. The trade deficit cumulativeto September 2009, improved to $1.2 billion from$1.5 billion in the same period in 2008.

Trade Deficit

Source: Fiji Islands Bureau of Statistics

2001

2004

2005

2006

2007

2008

0

-400

-600

-800

-1,200

-1,600

-2,000

-2,400

2002

2003

$ M

illi

on

2009

(up

to

Sep

)

ECONOMIC OVERVIEW


In February, following further signs of weakening inglobal economic conditions and concerns over theimpact of the floods on domestic economic activity,the Reserve Bank maintained a tight monetary policystance in order to protect foreign reserves. Later inMarch, delegated limits to authorised foreign exchangedealers on overseas travel allowances as well as creditand debit card payments were reduced.

Due to the slow recovery in sectors affected by the flo-ods, the Reserve Bank established a $20 million FloodRehabilitation Facility on 1 April to expedite economicrebuilding. The facility allowed affected businesses toaccess funds at concessionary interest rates throughcommercial banks and the Fiji Development Bank(FDB). Furthermore, to assist banks with liquidityneeds and ensure sufficient liquidity in the financialsystem, the Reserve Bank also reduced the SRD require-ment of commercial banks from 6 to 5 percent.

However, due to the rapid deterioration in foreign rese-rve levels and to stem speculative outflows of foreignreserves following the abrogation of the Constitution,the Reserve Bank tightened exchange controls on 14April. To supplement these measures, the Fiji dollarwas devalued by 20 percent on 15 April, to restore thecompetitiveness of domestic exports and provide aboost for tourism during a time of dwindling exportreceipts and soaring import bills. The devaluation wasan important factor in addressing the current account,which recorded a substantial deficit of 17.7 percentof GDP in 2008.

MONETARY POLICY FORMULATION

Chronology of Monetary Policy Actions

he series of external and internal shocks, whichhit the domestic economy in 2008 and 2009,posed severe challenges for the formulation of

monetary policy in 2009. Huge increases in oil andother commodity prices in 2008 contributed to a sharpdeterioration of the balance of payments position. Inaddition, the global financial crisis also led to recessionsin most of our major trading partner economies, whichresulted in declining exports and lower personal remit-tances. Fiji’s international competitiveness declinedconsiderably as a result of an overvaluation in the Fijidollar, stemming largely from the rapid weakening ofboth the Australian and New Zealand dollars in early2009. Furthermore, domestic capacity was severelyaffected by excessive floods in January, the worst intwo decades, further threatening macroeconomicstability. As a result, foreign reserves fell sharply to$430 million in March 2009, equivalent to 1.5 monthsof imports of goods and non-factor services, while liq-uidity contracted significantly.

Concerns over the threat posed by contracting liquidityon the availability of credit to priority sectors of theeconomy, as well as sectors affected by the floods inJanuary, prompted the Reserve Bank to lower interestrates on its lending facilities to commercial banks.Interest rates on secured and unsecured borrowingswere reduced to 3 and 11 percent, from 6 and 16 per-cent, respectively. This was aimed at assisting comm-ercial banks manage their respective short-termliquidity positions and hence ensure minimal disrup-tion to economic activity, as well as facilitate the rebu-ilding of productive capacity in sectors affected by thefloods in January.

CONDUCT MONETARY POLICYTO FOSTER ECONOMIC GROWTH

MISSION:

The Reserve Bank of Fiji, as the country’s central bank, is entrusted with the conduct of monetary policy in thecountry. The objectives of monetary policy are formally established in the RBF Act (1983). They are to maintainlow inflation and an adequate level of foreign reserves.

Monetary policy formulation faced difficult and exceptional circumstances in 2009, as foreign reserves plummetedto critical levels early in the year. However, stringent monetary policy measures ensured that the reserves positionstabilised by the year end.

T

STORE

parama and Sulita are a happily married couple.They utilised their knowledge about starting small

businesses to begin a business selling pre-mix fuel andlater used the opportunity through microfinance toestablish a small store in Nasilai village in Rewa.Eparama also secured a loan to buy an outboard motorboat to expand into fishing. The couple hopes tofurther their business opportunities in other fields.

E

PROPRIETOR:Eparama & Sulita


Further measures necessary to provide support forcredit in an environment of weak economic growthwere announced by the Reserve Bank. Regulations oncommercial bank and credit institution lending rates,as well as commercial bank interest margins wereimposed on 15 April. In addition, commercial bankswere directed to set up specialised microfinance servicecentres by 2010 to assist vulnerable sectors of the pop-ulation, directly and indirectly affected by the econ-omic downturn, to participate in economic activityand thereby support their livelihoods.

On 25 April, further measures were announced tosupplement policies targeted at protecting the balanceof payments and foreign reserves position, which incl-uded the promotion of local value adding, as well aspolicies to discourage excessive inventory holdings andimportation of high-end luxury items.

During April, the Export Finance Facility (EFF) wasalso reviewed and extended from non-traditional toall exports. The usual EFF terms and conditions rem-ained, with the normal exporter application processingand assessment done by the commercial banks. Therevision became effective on 25 May.

As part of the IMF’s assistance to member countriesaffected by the global financial crisis, Fiji received atotal of $188 million in SDR in two separate allocationsin August and September. These injections of fundshugely facilitated the stabilisation of foreign reserves.By the end of August, foreign reserves had comfortablyreached $926 million while liquidity was around $272million.

In September, the Reserve Bank removed the ceilingon private sector credit, earlier imposed in December2006, returning banks’ discretion over the allocationof credit. However, banks were encouraged to focustheir lending to priority sectors of the economy thatsupported economic recovery and long-term sustain-able growth. Foreign reserves also crossed the $1 billionmark in the same month.

In October, foreign reserves continued to rise andliquidity reached $331 million. However, given thethreat posed by excess liquidity to foreign reserves, the

SRD requirement was raised to 7 percent, effectivefrom 7 December.

In November, the Reserve Bank announced the removalof direct controls on lending rates and interest marginswith effect from 1 January 2010. However, financialinstitutions were advised to maintain prevailinginterest rates. Furthermore, commercial banks wereadvised that any increase in the lending rates andinterest spread needed to be fully justified and explai-ned to the Reserve Bank.

In December, reflecting stability in foreign reservesand improving prospects for the economy in 2010,the Standard & Poor’s Ratings Services revised itsoutlook on the Fiji economy from negative to stable.

Monetary Policy Outcomes for 2009

Monetary policy continued to focus on thedevelopments in its twin objectives of inflation andforeign reserves during the course of the year. Whilethe once-off impact of the devaluation on inflationsaw inflation rise, foreign reserves closed the year at$1.1 billion.

Inflation at the end of 2009 was 6.8 percent, close tothe projection of 7.0 percent. The favourable outcomefor inflation, compared to previous periods of deval-uation, was assisted by subdued global and domesticdemand conditions and the weakening of the US dollaragainst the Fiji dollar after the devaluation.

Foreign Reserves


1,200

1,000

800

600

400

200

0

2002

2003

2004

2005

2006

2007

2008

$ M

illi

on

2009


depreciation of the Fiji dollar against the basket ofcurrencies. The Real Effective Exchange Rate (REER)Index, a gauge of Fiji’s international competitiveness,fell by 14.5 percent during the same period, indicatingan improvement in Fiji’s international competitiveness.This outcome was largely underpinned by thedevaluation of the Fiji dollar.

Movements of the Fiji dollar in 2009 were largelyunderpinned by the once-off impact of the devaluationand developments in major trading partner economiesduring the year. The Nominal Effective Exchange Rate(NEER) Index, which indicates the aggregate move-ments in the Fiji dollar vis-à-vis the currencies of Fiji’smajor trading partners, contracted by 18.9 percentover the year to December 2009. This indicated a

Inflation (Annual Percent Change)

Source: Fiji Islands Bureau of Statistics

10

8

6

4

2

0

200820072006 2009

Pe

rce

nt

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

REER/NEER (Monthly Average)


112

108

104

100

96

92

88

84

80

2005 2006 2007 2008

Ind

ex

2009

REER

NEER

MISSION: CONDUCT MONETARY POLICY TO FOSTER ECONOMIC GROWTH MONETARY POLICY FORMULATION


MONETARY POLICY IMPLEMENTATION

Open Market Operations

The implementation of monetary policy through openmarket operations (OMO) has been suspended sinceJune 2007. Prior to this, the Reserve Bank conductedOMO with its own securities and the monetary policystance was expressed in terms of changes to the 91-day RBF Note rate, also known as the policy indicatorrate.

Although there was no cost in relation to OMO, theBank incurred monetary policy cost on SRDs. In 2009,the monetary policy cost associated with SRDsdeclined to $1.4 million from $2.4 million in 2008.The lower cost was primarily due to the downwardrevision of the interest rate paid on SRDs. The annualinterest paid on SRDs was fixed at 0.5 percent fromDecember 2009.

Foreign Reserves Management

The Reserve Bank is manager and custodian of Fiji’sforeign exchange reserves under the RBF Act (1983).In managing the foreign reserves, the Reserve Bank isconcerned with ensuring capital safety, maintainingsufficient liquidity and maximising income.

Strong credit criteria ensure that the Reserve Bankinvests in securities issued or guaranteed by foreignGovernments and issuers of high standing. Similarly,deposits and foreign exchange deals are transacted withcounterparties who meet minimum credit require-ments. For liquidity requirements, the Reserve Bankensures that all investments are easily convertible intocash with minimal cost. Additionally, the Bank atte-mpts to maximise income within approved guidelines.

The composition of RBF holdings of foreign reservesis determined by weightings of the Fiji dollar basketcurrencies, namely the US dollar, Euro, Japanese Yen,Australian and New Zealand dollars. Foreign reservesholdings also include SDR at the IMF and gold.

Fiji’s foreign reserves increased significantly in 2009,surpassing the $1 billion level. The rise in the level ofreserves was underpinned by the devaluation of theFiji dollar in April and the allocations of SDR by theIMF in August and September. With higher foreignreserves, some monetary policies implemented tomitigate liquidity and credit risks were relaxed to allowgreater investment options.

The performance of the RBF’s foreign reserve invest-ments is regularly monitored and measured against abenchmark1. In 2009, investment of foreign reservesearned a return of 3.6 percent compared to the returnof 3.4 percent earned on the benchmark portfolio2.The outperformance by the actual portfolio was dueto higher returns achieved on both the cash and bondportfolios.

With interest rates in trading partner nations at recordlow levels for most of 2009, there was a marked declinein foreign interest income compared to 2008. The netinterest income in 2009 declined to $23.8 millionfrom $36.5 million in 2008.

Management of currency risk continued in line withthe approved benchmark3 and strategies. Due to the20 percent devaluation of the Fiji dollar in April 2009,the Revaluation Reserve Account (RRA) recorded asignificant gain of $99.7 million compared to a $1.7million gain in 2008.

The RBF Act (1983) mandates the RBF to transfer 20percent of the RRA balance to Government annually.At the end of 2009, the RRA balance was $113.2million, of which $22.6 million will be transferred toGovernment in 2010. In 2008, $2.6 million wastransferred under this provision.

1 The RBF benchmark portfolio uses a customised version of the JP Morgan Index.2 The impact of the devaluation has been removed from returns on the benchmark and actual portfolios.3 Since December 2003, the hedging strategy adjusts the currency composition to take into account the holdings of the SDR portfolio.

MISSION: CONDUCT MONETARY POLICY TO FOSTER ECONOMIC GROWTH MONETARY POLICY IMPLEMENTATION

Return on Investments


Actual10

8

6

4

2

02006 2007

Pe

rce

nt

2008 2009

RBF Benchmark

Return on External Reserves ($ Million)


2007 2008 2009

Net interest income on Investible Reserves 32.6 36.5 23.8

Gains/Losses on Currency Trading 0.0 -0.1 0.0

Gross Income 32.6 36.4 23.8

Average Month-End Level of Investible Reserves 654 577 813

Annual Return on:

RBF Benchmark (%) 4.4 7.4 3.4

RBF Portfolio (%) 5.7 6.0 3.6

Exchange Rates

The Reserve Bank determines the rate at which theFiji dollar (FJD) is exchanged for foreign currencies ona daily basis. The prevailing rates of the Fiji dollarbasket currencies are used to establish the FJD-USdollar rate at 9.00am on each business day. This rateremains unchanged for the day and is used by comm-ercial banks to establish the exchange rates for theircustomers. Retail spreads on all currencies in theFiji dollar basket are regulated by the Reserve Bank.

Forward Facility

The Forward Foreign Exchange Facility continued tobe monitored for compliance with the RBF guidelines4.In comparison to the previous year, the volume of new


forward exchange contracts written declined slightlyin 2009.

Foreign Currency Payments

The RBF also administers foreign currency paymentsfor certain organisations, including the Fiji Govern-ment, other central banks, statutory bodies, and severalsupranational institutions5.

Exchange Control

In April 2009, to stem the decline in foreign reserves,exchange controls were tightened on all capitaltransactions and for most current payments. Thesechanges included the suspension of certain facilitieswhile application for other facilities by customers requ-ired the approval of the Reserve Bank. Certain pay-ments continued to be delegated to Authorised ForeignExchange Dealers but at lower limits.

With the improved levels of foreign reserves at the endof the year, the Reserve Bank eased exchange controlsover several categories of foreign currency payments,effective 1 January 2010.

The Reserve Bank remained vigilant in ensuringcompliance with exchange control policy guidelinesduring the course of 2009.

MISSION: CONDUCT MONETARY POLICY TO FOSTER ECONOMIC GROWTH MONETARY POLICY IMPLEMENTATION

Revaluation Reserve Account


140

120

100

80

60

40

20

0J F M A M J J A S O N D

$ M

illi

on

2009

4 Commercial banks are allowed to write forward sales contracts only to the extent of their forward purchases; except for additional forward sales cover on investment related projects are available upon application.

5 This includes the Asian Development Bank, International Bank of Reconstruction and Development and the International Monetary Fund.


FINANCIAL SYSTEM REGULATIONAND SUPERVISION

Supervisory Developments

n 2009, the Reserve Bank revised and issued super-vision policies on the Offshore Placement ofInsurance Business, and the Guidelines for Loan

Classification and Provisioning for Impaired Assets.The Reserve Bank also issued policies to commercialbanks regarding Minimum Guidelines on the Estab-lishment of a Local Advisory Board, Policy Guidelineson Complaints Management and Minimum Requir-ements for Internal Microfinance Divisions and Units.

The Reserve Bank also developed supervision policieson the Minimum Requirements for the managementof operational risks for licensed financial institutions(LFIs) and Minimum Requirements for a risk mana-gement framework of licensed insurers. These policieswere issued to the industry for comments, as part ofthe consultation process, and are expected to beimplemented in the first half of 2010.

As part of the Reserve Bank’s supervisory cycle, severalon-site examinations of LFIs, as well as spot checks forforeign exchange dealers and money changers wereconducted. These visits ensured that the relevantinstitutions complied with applicable legislativerequirements, RBF supervision policy requirementsand RBF requirements for the annual renewal oflicences.

Supervision of the FNPF continued to be a challengeand following on from assistance from the IMF in2008, the Reserve Bank continued to develop its riskbased framework for the FNPF. This approach evolvedinto the identification of activities that expose theFNPF to key risks, an assessment of inherent riskswithin these areas with recommendations to reduceand or mitigate these risks. Within this framework,the Reserve Bank also carried out prudential consult-ations with the FNPF and undertook both off-sitesupervision and on-site examinations.

The Reserve Bank’s controllership of the Asset Mana-gement Bank (AMB) entered its third year in 2009. Itis envisaged that significant steps towards winding upof the AMB will occur over the coming year. Mean-while, the management of the wind up of the InsuranceTrust of Fiji continued in 2009 and will continue intothe foreseeable future as a number of insurance policiesremain in force and recovery of outstanding loans casescontinue.

In other developments, the Reserve Bank began a selfassessment of its compliance with the Revised BasleCore Principles for Effective Banking Supervision.This Financial Sector Self Assessment will be comp-leted and the results published in 2010.

DEVELOP AN INTERNATIONALLYREPUTABLE FINANCIAL SYSTEM

MISSION:

In order to promote a sound financial structure, the Reserve Bank regulates and supervises the financial system,which comprises the banking and insurance industries, the FNPF, foreign exchange dealers, credit institutionsand the capital markets.

Regulation and supervision is undertaken through the administration of various legislations such as the ReserveBank Act, Banking Act, Insurance Act, Exchange Control Act, and the Capital Markets Decree. These legislationsvest the Reserve Bank with powers, including the issuance of licence, regulations, prudential policies and directivesto the financial institutions and to conduct off-site supervision and on-site examinations.

Fiji’s financial system remained stable over 2009, underpinned by a sound banking sector with strong capitaland satisfactory earnings. The insurance industry continued to perform satisfactorily despite subdued domesticeconomic conditions, while the FNPF continued to grow but remained vulnerable to longevity and strategic risks.Despite the macroeconomic challenges, the financial system remained sound.

I


exchange dealer licence of Galaxy International Li-mited.

With regard to the capital markets, five categories oflicences (consisting of 51 individual applicants) wererenewed during the year in accordance with the CapitalMarkets Decree (2009). These included licences thatare renewed annually for the SPSE, unit trusts,investment advisors, brokers, dealers and their repre-sentatives. No new licences were issued in 2009.

During 2009, commercial banks increased their pointsof access to the public with more EFTPOS (electronicfunds transfer at point of sale) facilities and ATMs(automated transfer machines).

In 2009, the total gross assets of the financial systemgrew by 7.7 percent to $10.3 billion, led by the 10.7percent growth in the banking industry’s gross assetsto $4.5 billion. The banking industry and FNPFaccounted for the majority of the assets of the financialsystem at 46.6 and 37.1 percent, respectively. Insurancecompanies and other NBFIs accounted for 8.9 and 7.4percent, respectively.

Scheduled developmental work on stress testing andproduction of a Financial Stability Report was deferredin 2009 due to reprioritisation of work.

The Reserve Bank also continued to strengthen itsstress testing techniques to supplement its off-sitemonitoring of the banking system. In this regard,technical assistance was provided by the IMF. Stresstests, however, have been conducted on a limited basis,generally focussed on credit and liquidity risk, andcomplemented by the quarterly compilation ofFinancial Soundness Indicators on an industry-widebasis. Stress testing will be developed further in 2010.

The Financial System

Fiji’s financial system comprises the banking andinsurance industries, FNPF, restricted foreign exchangedealers and money changers, non-bank financialinstitutions (NBFIs), the South Pacific Stock Exchange(SPSE) and capital market intermediaries. As theadministration of the CMDA was transferred to theReserve Bank in 2009, the supervision scope of theReserve Bank was expanded to include the SPSE, listedcompanies, unit trusts and investment advisors.

The number of banks and credit institutions licensedunder the Banking Act (1995) remained at five andthree, respectively, with no new licences issued in2009. Although a number of applications for a licenceto conduct banking business in Fiji were processed,licenses were not issued for various reasons. In othermajor developments, Bank South Pacific acquired theCommonwealth Bank of Australia’s shares in ColonialNational Bank and Colonial Fiji Life Limited. All threeinstitutions remained under close scrutiny throughoutthe acquisition process that will be completed in 2010.

For the insurance industry, two life insurance comp-anies, eight general insurance companies, four insur-ance brokers and 320 agents were licensed under theInsurance Act (1998) in 2009. Seven restricted foreignexchange dealers and three money changers werelicensed under the Exchange Control Act (1985). Dur-ing the year, the Reserve Bank revoked the foreign

Licensed Financial Entities including Branches/Agencies (Number)


2005 2006 2007 2008 2009

Commercial Banks1 6 6 6 5 5Branches/Agencies 106 108 110 120 120ATMs 111 122 132 154 164EFTPOS 1,130 1,202 1,320 1,589 1,785

Credit Institutions 3 3 3 3 3Branches/Agencies 9 11 11 11 12

Life InsuranceCompanies 2 2 2 2 2General InsuranceCompanies2 8 8 8 8 8Insurance Brokers 4 5 5 4 4Insurance Agents3 314 336 385 378 320Foreign ExchangeDealers 8 8 8 8 7Money Changers 4 4 3 3 3Securities Exchange 1 1 1 1 1Unit Trusts 6 6 6 3 2Property Trusts - 1 1 1 1Investment Advisers 11 11 13 10 11Brokers 3 3 3 3 3Dealers 2 2 2 2 2

1 AMB is excluded from 2008 and 2009, when it went under the controllership of the RBF. It is currently being wound up.

2 Includes FAI (Fiji) Limited, which is currently being wound up.3 An agent may hold more than one licence to sell various classes of insurance in a calendar

year.

FRUIT SELLER & VEGETABLES

anueli Ratulevu has been selling a range of fruit andvegetables for close to 8 years now. He transports the

produce from his farm in Naraivawa Village in Namosi.He obtained small loans to help him with his business,which he pays off from his weekly savings. He also usedthe loan to invest in his farm and expand to four marketstalls. He intends to obtain another small loan to invest ina van to reduce transport costs. He also contributes hissavings to projects in Naraivawa Village.

M

PROPRIETOR:

Manueli Ratulevu


The value of the capital markets totalled $4.0 billion,an increase of 1.3 percent over 2008.

The Banking Industry

The overall performance of the banking industry in2009 was satisfactory. All commercial banks were wellcapitalised and while asset quality and liquiditycontinued to improve, profitability declined duringthe year.

The banking industry expanded over the year by 11.1percent to $4.5 billion in 2009, a marked improvementfrom the sluggish growth of 1.2 percent recorded in2008. The robust growth performance in 2009 waslargely due to the improvement in liquidity, bolsteredby the improvement in foreign reserves. Settlementbalances with the Reserve Bank increased by $241.5million to $296.6 million.

Credit growth, on the other hand, remained subduedpartially due to the credit and interest controls imposedb y the Reserve Bank. Loans and advances grew by2.8 percent over the year to $3.0 billion. All sectors ofthe loan portfolio recorded an increase except forlending to NBFIs and private sector business entities,which declined by $6.4 million and $6.2 million,respectively. Loans to private sector business entitiescontinued to dominate the loan portfolio at $1.9billion, followed by private individuals at $0.8 billion.Of the total loans to private individuals, $0.6 billionwas disbursed to first home owners.

Investment in Government and Government-guaran-teed securities grew by 21.3 percent to $312.9 million.

With regard to commercial banks’ liabilities, depositsgrew by 7.9 percent to $3.4 billion in 2009. This wasattributed to the increase in time and savings deposits,by 24.6 and 6.0 percent, respectively. In contrast, dem-and deposits fell by 6.3 percent.

Sectorally, private individuals accounted for the majo-rity of total deposits, amounting to $1.2 billion (35.3percent), followed by private business entities at $1.1billion (31.8 percent).

Capital and reserves increased by 15.8 percent to$476.4 million. The rise was due to the accumulationof profits by commercial banks.

In 2009, the capital adequacy ratio increased to 16.8percent compared to 14.5 percent in 2008. All thecommercial banks complied with the minimum capitaladequacy requirement of 8.0 percent. The total riskweighted assets of the banking industry increased by0.4 percent to $2.8 billion.

MISSION: DEVELOP AN INTERNATIONALLY REPUTABLE FINANCIAL SYSTEM FINANCIAL SYSTEM REGULATION AND SUPERVISION

Gross Assets of the Financial System ($ Million)


1 Includes FDB, Housing Authority and Unit Trust of Fiji but excludes FNPF and AMB.2 Excludes Reserve Bank of Fiji.

2005 2006 2007 2008(r) 2009

Regulated Financial Entities

Commercial Banks 3,043 3,547 3,962 4,008 4,452

Credit Institutions 362 401 370 348 372

Insurance Companies 711 705 825 804 921

FNPF 3,074 3,337 3,437 3,696 3,841

Total 7,190 7,990 8,594 8,856 9,586

Non Regulated Financial Entities

Other NBFIs1 647 736 738 748 761

Total 647 736 738 748 761

Total FinancialSystem2 7,837 8,726 9,332 9,604 10,347

Components of Deposits


Demand Deposits

Time Deposits

Savings Deposits

2005 2006 2007 2008 2009

1.800

1,600

1,400

1,200

1,000

800

600

400

200

0

$ M

illi

onComposition of the Capital Markets ($ Million)


1 Based on the market capitalisation of the listed companies.2 Based on the funds under management.3 Based on outstanding bonds.

2005 2006 2007 2008 2009

Equities Market1 1,024 1,060 810 1,002 902

Unit Trust Market2 162 165 148 138 116

Bonds Market3 2,510 2,733 2,750 2,827 3,003

Total 3,696 3,958 3,708 3,967 4,021

Asset Quality


160

140

120

100

80

60

40

20

02005 2006 2007 2008 2009

$ M

illi

on

8

7

6

5

4

3

2

1

0

Total Past Due

Impaired Assets

Classified Exposures

Classified as % of Lending

Pe

rce

nt

Commercial Banks’ Assets


Loans, Lease and Advances

Balances due from Banks

Investments

Other Assets5,000

4,000

3,000

2,000

1,000

02005 2006 2007 2008 2009

$ M

illi

on


The consolidated banking industry’s before-tax returnon average assets, as at December 2009, declined to 3.2percent from 3.8 percent in 2008.

Despite the decline in overall net profits, the commercialbanks’ combined efficiency ratio was 45.3 percent in2009. The improvement in the efficiency ratio was ledby a 7.1 percent increase in operating income, comparedto a 3.7 percent increase in operating expenses.

In 2009, the banking industry’s annual spread7 fell to 5.4percent from 5.7 percent in 2008, led by the larger relativedecline in the yield on earning assets vis-à-vis the fall inthe cost of funding liabilities.

Total liquid assets of the banking industry improvedsignificantly during the year, by $315.2 million to $955.9million. The growth in liquid assets was largely due tohigher exchange settlement balances held with theReserve Bank.

In 2009, the ratio of marketable assets (liquid assets tototal deposits) improved to 28.0 percent from 20.2percent in 2008. On the other hand, the 15 largest

The asset quality of the banking industry remained at asatisfactory level during the year. Classified exposuresincreased by 6.2 percent over the year to $92.2 millionor 3.1 percent of gross loans and advances. Of theseclassified exposures, 61.1 percent was impaired, consistingof substandard ($36.7 million), doubtful ($27.3 million)and loss ($28.2 million) accounts.

In line with the increase in classified exposures, past dueaccounts increased by $7.8 million to $66.3 million. Pastdue accounts over 2 years doubled to $15.6 million.Majority of the problem loans were concentrated in thewholesale, retail, hotels and restaurants sector, accountingfor 42.0 percent of total problem loans, followed byprivate individuals at 23.3 percent. Special mentionaccounts6 rose by 288.1 percent over the year to $193.0million, as a result of prudent risk grading practicesimplemented by the commercial banks.

During 2009, there were changes in the allocation ofprovisions for loans and advances (specific provisions toindividual assessed provisions; and general provisions tocollectively assessed provisions), in line with the revisedReserve Bank guidelines. Individual and collectivelyassessed provisions adequately covered 50.4 percent ofthe classified exposures portfolio. Commercial banks alsocreated a general reserve for credit losses, which accountedfor 1.5 percent of the net loan portfolio.

The banking industry’s profits (before-tax) for the 2008-2009 financial year-end fell to $127.3 million from$143.5 million in the previous comparable period. Thereduction in profits was largely underpinned by thewriting off and provisioning of bad debts, coupled withthe slow growth in net interest income.


Summary of Commercial Banks’ Profitability1 ($ Million)


2005 2006 2007 2008 2009

Net interestincome 117.0 142.3 153.3 187.4 190.4

Add: Non interest income 91.6 89.2 90.8 96.5 113.5

Income from overseas exch -ange transact -ions 32.4 36.4 38.8 44.3 46.4

Commission and Charges 52.1 51.4 48.4 54.2 56.6

Other income 7.0 1.4 3.6 (2.0) 10.5

Total operatingincome 208.6 231.6 244.1 283.9 303.9

Less: Operating expenses 98.3 108.4 121.7 133.0 137.8

Less: Bad debts and Provisions 7.6 (1.4) 19.5 7.3 38.8

Profit before-taxand extraordinaryitems 102.7 124.6 102.8 143.5 127.3

Less: Tax 29.9 36.8 30.1 41.8 38.1

Net profit after-tax 72.9 87.7 72.7 101.7 89.2

Add/Less: Extra- ordinary items 0.0 0.0 0.0 0. 0.0

Net profit after-taxand extraordinaryitems 72.9 87.7 72.7 101.5 89.2

Average Assets 2,543.0 2,941.0 3,403.0 3,766.7 4,033.5

After-Tax Return onEquity (%) 38.9 39.7 28.4 32.2 21.1

Efficiency (%) 47.1 46.8 49.9 46.9 45.3

Yield on EarningAssets (%) 5.9 7.0 8.8 7.5 7.3

Cost of FundingLiabilities (%) 0.8 1.7 3.8 1.9 1.9

1 Financial year-end profits for all commercial banks used.

Commercial Banks’ Profitability (% of Average Assets)1


2005 2006 2007 2008 2009

Net Interest Income 4.6 4.8 4.5 5.0 4.7

Charges for Bad& Doubtful Debts 0.3 (0.1) 0.6 0.2 1.0

Non InterestIncome 3.6 3.0 2.7 2.6 2.8

OperatingExpenses 3.9 3.7 3.6 3.5 3.4

Net Profit Before -Tax 4.0 4.2 3.0 3.8 3.2

Net Profit After -Tax 2.9 3.0 2.1 2.7 2.2

1 Financial year-end profits for all commercial banks used.

Commercial Banks’ Annual Spread


109876543210

2005 2006 2007 2008 2009

Pe

rce

nt

Yield on Earning Assets

Cost of Funding Liabilities

Spread

Deposits Coverage


Short-Term Deposits

Readily Marketable Assets

15 Large Depositors

40

35

30

25

20

15

10

5

02005 2006 2007 2008 2009

Pe

rce

nt

6 These accounts reflect a higher than normal degree of risk or where borrowers are experiencing difficulties.7 The annual interest rate spread is based on the financial year-end profits for all commercial banks. At the end of December 2009, the monthly interest rate spread was 3.8 percent.

depositors as a percentage of total deposits fell from26.9 percent in 2008 to 23.9 percent in 2009. Thebanking industry’s short-term deposits rose to $1.1billion in 2009, compared to $0.9 billion in 2008.

Credit Institutions

The credit institutions’ overall performance was againsatisfactory in 2009. Similar to the outcome for comm-ercial banks, credit institutions’ total assets expanded,with strong capital levels and improved liquidity.However, the asset quality deteriorated further during2009 and earnings declined.

In 2009, the total assets of credit institutions expandedfor the first time in 2 years, by 6.8 percent to $371.8million. This growth was largely underpinned by anincrease in balances due from banks ($22.5 million),followed by higher loans and advances ($3.6 million).Demand deposits held with the commercial banksincreased by $24.5 million to $32.2 million.

Gross loans, advances & leases grew marginally (1.2%)to $292.8 million. Lending to private individualsincreased by $5.9 million to $115.3 million, whileloans to private sector business entities recorded adecline of $2.4 million to $177.3 million. The loanportfolio of the credit institutions was similar to thatof the banking industry, dominated by private sectorbusiness entities (60.5%), and followed by privateindividuals (39.4 %).

Investment in Government and Government-guara-nteed securities fell by 5.3 percent over the year to$26.2 million in 2009.

Regarding the liabilities of credit institutions, depositsrose by 15.3 percent to $193.0 million. These depositswere mainly held by private individuals and privatebusiness entities, which accounted for 53.1 and 25.4percent of total deposits, respectively. Borrowing fromshareholding companies fell to $63.9 million in 2009,from $75.9 million in the previous year.

All the credit institutions complied with the minimumcapital adequacy requirement of 10 percent. In 2009,the capital adequacy ratio for credit institutions was26.2 percent, compared to 25.2 percent in 2008. Totalrisk weighted assets fell by 1.1 percent compared to a3.0 percent increase in total capital.

Credit institutions’ asset quality deteriorated furtherduring 2009 and will be closely monitored in 2010.Classified exposures rose by 61.6 percent to $31.7million, while impaired assets increased by 42.1


percent to $31.4 million. The ratio of classified expos-ures to loans, advances & leases increased to 10.8percent from 6.8 percent in 2008. Past due levels roseto $22.7 million in 2009, from $18.3 million in 2008,with major increases noted in the over 2-year category.Collectively and individually assessed provisions cov-ered 55.4 percent of classified exposures.

Profits (before-tax) of credit institutions for the 2008-2009 financial year-end fell to $18.0 million from$18.6 million in the previous comparable period.Underpinning the poor profit performance was a 5.4percent fall in operating income to $33.2 million,while operating expenses rose by 5.7 percent to $11.6million. The decline in net profits was somewhat offsetby the reduction in bad debts and provisions by $1.9million to $3.6 million.

In 2009, credit institutions’ before-tax return onaverage assets was 5.4 percent compared to 5.3 percentthe year before. Credit institutions’ return on equityalso declined to 27.0 percent from 30.8 percent in2008.

The efficiency ratio of credit institutions deterioratedto 35.0 percent in 2009 from 31.3 percent in 2008.

In 2009, the interest spread of credit institutions fellslightly to 8.6 percent from 8.8 percent in 2008,underpinned by a larger fall in the yield on earningassets compared to the decline in cost of funds.

During the year, credit institutions’ total liquid assetsgrew significantly, by 56.1 percent to $58.4 million,resulting in improvements in the liquidity ratios.

The Insurance Industry

Fiji’s insurance industry continued to perform satis-factorily in 2009 despite subdued domestic economicconditions. As at 31 December 2009, the insuranceindustry continued to be solvent with adequate capitallevels8, while the industry’s total gross premium poolrose annually by 2.2 percent to $206.1 million.

Combined industry assets rose by 14.6 percent to$921.3 million. This growth was attributed to higherinvestments by both the life and general insurancesector. The asset distribution pattern remained con-sistent over the year with investments into Governmentsecurities and commercial bank deposits dominating.These investments accounted for 73.0 percent of totalassets, compared to 72.0 percent in 2008.


8 Section 31 of the Insurance Act (1998) requires all licensed insurers to maintain, at all times, a minimum surplus of assets over liabilities, known as the required solvency margin.

Credit Institutions’ Assets


400

300

200

100

02005 2006 2007 2008 2009

$ M

illi

on

Other Assets

Fixed Assets Balances due from Banks Investments

Loans, Lease and Advances

Credit Institutions’ Annual Interest Rate Spread


16

14

12

10

8

6

4

2

0

Pe

rce

nt

2005 2006 2007 2008 2009

Spread

Yield on Earning Assets

Cost of Funding Liabilities


Reserve Bank received technical assistance from theIMF and World Bank to develop a suitable supervisoryframework and work on this continued in 2009. Theon-site examination conducted during the year broadlyfocused on operational risk management, as well asfollowing up on pending issues and recommendationsraised in previous visits.

Capital Markets

Fiji’s capital market consists of the equities market,debt market and the managed funds industry. Theequities market comprises the stock exchange, the over-the-counter registry, public capital raising and privateplacement activities by commercial companies, whilethe debt market is largely made up of the bond market.The managed funds industry includes the unit trustsand the property trusts.

Although the volume of trade in the SPSE fell, thevalue of trades increased. The total volume of sharestraded fell by 66.9 percent to 6.1 million. The numberof transactions, on the other hand, rose to 789 trades,valued at $43.5 million, compared to 757 trades,valued at $26.1 million in 2008.

For the over-the-counter market, which includes fourunlisted public companies, a total of 34 trades tookplace involving 313,228 shares, valued less than $1.0million.

Market capitalisation declined by 11.2 percent to$901.6 million, underpinned by a reduction in shareprices.

In 2009, one company was listed and one delisted. Asat 31 December 2009, 16 companies were listed onthe SPSE, the same number as in 2008.

In addition, the general insurance sector recorded anincrease in amounts due from reinsurers on out-standing claims. This was a result of the floods earlyin the year, which also led to an increase in under-writing provisions (liability).

In 2009, the net premium income for the insuranceindustry fell slightly by 0.7 percent to $174.2 million.The life insurance sector reported higher premiums,while there was a fall in premiums for general insu-rance. Net claims paid rose by 16.9 percent to $111.6million in 2009, compared to $95.4 million in theprevious year. This was mainly attributed to higherclaims paid by the general insurance industry, followingthe floods, part of which were recovered throughreinsurance.

The Reserve Bank continued to assess and allowinsurance cover to be placed offshore, provided thatthe cover was not available locally or where the localpremium is 15 percent more expensive than the off-shore premium. During 2009, the Bank approved 621offshore placements, a reduction of 26 applicat-ionscompared to the previous year. As a result, totalpremiums remitted in 2009 declined to $23.2 million,compared to $24.8 million in 2008.

Fiji National Provident Fund

At the end of 2009, the total assets of FNPF increasedby 3.9 percent to $3.8 billion. This was underpinnedby higher investments in Government securities, andlending to the private and quasi-government sectors.

The FNPF’s asset base continued to be dominated byinvestments, which amounted to $3.7 billion or 97.4percent of total assets. The asset allocation continuedto reflect the Fund’s investment strategy. Of totalinvestments, cash and fixed interest-bearing securitiesaccounted for 85.3 percent, while growth assets madeup 14.7 percent of the portfolio.

In 2009, members’ balances grew by 3.7 percent to$2.7 billion, compared to a growth of 5.5 percent in2008. The slowdown in 2009 was mainly a result ofhigher withdrawals.

Overall, reserves declined by 2.3 percent to $945.1million, compared to a growth of 9.5 percent in 2008.This was underpinned by a decline in the pensionbuffer reserve, which fell by $21.6 million due to highannuity payments (net of transfer to and from thepension buffer reserve).

Total contributions collected by FNPF during 2009rose by 4.4 percent to $302.0 million. Withdrawalsincreased by 11.2 percent to $318.2 million, under-pinned by the high utilisation of the FNPF FloodAssistance Withdrawal Scheme in the March quarter.

Supervision of the FNPF continued to be a challengefor the Reserve Bank, given the nature and magnitudeof the Fund’s operations. Over the recent past, the


Market Capitalisation


1,200

1,000

800

600

400

200

02005 2006 2007 2008 2009

$ M

illi

on

Value and Volume of Shares Traded


50

45

40

35

30

25

20

15

10

5

02005 2006 2007 2008 2009

$ M

illi

on

Value Traded ($ Million)

Volume Traded (Million Shares)

20

18

16

14

12

10

8

6

4

2

0

Mil

lio

n S

ha

res


In 2009, the SPSE introduced the SPSE Total ReturnIndex (STRI), an aggregate market capitalisation indexwhich reflects the aggregate market value of all itscomponents relative to their aggregate value on thebase day.

The STRI is constructed on a base of 1,000, set at 4January 2000. It is an accumulation index refl-ectingthe total return from the stock market, including theprice and dividend returns.

During 2009, the STRI generally declined due to fallingcapital levels and lower dividend yields. The marketrecorded a negative average capital growth of 6.9percent in 2009, compared to a growth of 6.0 percentin 2008. The average total market return also declined,by 3.0 percent, compared to a growth of 9.5 percentin 2008.

In 2009, a locally registered unlisted public companythat undertakes exploration and development ofgeothermal resources was authorised to publicly raise$3.5 million through the issue of 700,000 B-classordinary shares in the company.

Another locally registered unlisted company was alsoapproved to raise between $5 million to $30 millionthrough the issuance of convertible notes in 2010.Local commercial companies have raised $158.6million in capital over the last ten years.

Activity in the secondary bond market fell in 2009,both in volume and value. The number of transactionsfell significantly to 10 trades, amounting to $2.6million, in contrast to 31 trades valued at $8.9 millionin 2008.

The lower activity was a result of ample liquidity inthe banking system and limited reinvestmentopportunities for investors.

During the year, there were no additions to the ReserveBank domestic bond portfolio but $2.7 million bondswere redeemed. Consequently, the nominal value ofthe Reserve Bank’s domestic bond portfolio fell to$122.8 million from $125.5 million. The net incomeearned from the portfolio fell by 5.6 percent to $7.9million in 2009.

The unit trust market in Fiji includes two unit trustsand one property trust. In 2009, the unit trust marketcontracted, as funds under management declined from$136.6 million to $107.0 million. This was mainlydue to the large redemptions and revaluations ofunlisted securities by the unit trusts.

Competitive interest rates on term deposits offeredby commercial banks and financial difficulties facedby many unit holders also contributed to the cont-raction of managed funds.

However, despite the reduction, the number of unitholders rose in the latter part of 2009.

Complaints Management

In April 2009, the Reserve Bank announced theestablishment of the FSDC Group. One of its maintasks was to ensure that the regulated financial instit-utions established an effective complaints managementpolicy, as well as governance and operational proceduresto effectively address customer complaints. The publicwas also advised that complaints could be lodged withthe Reserve Bank in instances where complainantswere dissatisfied with the outcome provided by thefinancial institution to which they must first raisetheir complaints.

Since the formation of the FSDC Group, the ReserveBank received 32 written complaints, majority of whi-ch concerned commercial banks and insurancecompanies. Complaints against commercial banks we-re largely related to lending contracts and bank fees/charges, while complaints against insurance companieswere related to disagreements on insurance claimsmainly regarding motor insurance.

In processing these complaints, the Reserve Bank cons-ulted the relevant financial institutions and otherappropriate organisations. Of the total complaints, 13were resolved without further action, while 17 rem-ained under investigation. One complaint was with-drawn and another is before the Courts.

Meetings

In 2009, Reserve Bank continued its industry cons-ultations with commercial banks, credit institutions,insurers, brokers and foreign exchange dealers. Industrymeetings were held on a quarterly basis with theAssociation of Banks in Fiji (ABIF), Finance CompaniesAssociation, Insurance Task Force, and the Associationof Foreign Exchange Dealers. The Reserve Bank alsoconducted several individual meetings with comm-ercial banks, insurance companies and the FNPF.

The Reserve Bank hosted the annual meeting andworkshop of the Association of Financial Supervisorsof Pacific Countries in October 2009. The regionalworkshop covered liquidity risk in banking organ-isations. Participants included representatives fromthe Cook Islands, Federated States of Micronesia, Palau,Papua New Guinea, Republic of Marshall Islands,Samoa, Solomon Islands, Tonga, Vanuatu and Fiji.

Funds Under Management and Number of Unit Holders


18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

02005 2006 2007 2008 2009

$ M

illi

on

Funds Under Management ($Million)

No. of Unit Holders180

160

140

120

100

80

60

40

20

0

Nu

mb

er


The significant increase was led by better reporting ofSTRs by other financial sectors (other than commercialbanks) due to a greater level of understanding andawareness of reporting obligations.

Following the analysis of the STRs, 196 case reportswere referred to relevant law enforcement agencies in2009 for further investigation of possible moneylaundering and other serious offences.

Pursuant to the FTR Act, financial institutions are alsorequired to report to the FIU all cash transactions of$10,000 and above; and all international electronicfund transfers.

In 2009, the FIU received 127,566 cash transactionreports (CTRs) compared to 38,780 received in 2008.Similarly, 297,312 international electronic fundstransfer reports (EFTRs) were received during the year,

Financial Institutions’ Compliance with the FTR Act

n 2009, the FIU continued its liaison with financialinstitutions to assist them in the effectiveimplementation of their obligations under the FTR

Act. Regular meetings were held with financialinstitutions and industry groups to explain and adviseon policy issues and discuss implementation progress.The FIU also conducted numerous training andseminar presentations for the financial institutions toraise awareness on the requirements of the FTR Act.

In addition, the FIU issued a Guideline on CustomerIdentification and Verification to assist financial instit-utions in understanding the customer identificationrequirements of the FTR Act. This guideline is alsoexpected to eventually facilitate the financial instit-utions’ compliance with the legislative requirements.Furthermore, the new guideline is designed to supportcustomers with a low risk of money laundering (ruraldwellers, students, farmers and microfinance indust-ries) to access financial services with only certain mini-mum identification requirements.

The FIU conducted six on-site compliance visits oflicensed foreign exchange dealers. During the year, theFIU also worked closely with several financialinstitutions on non-compliance issues. Formal exem-ptions were provided to these institutions to allowthem time to comply with the FTR Act.

Receipt and Analysis of Financial Transaction Inform-ation

Financial institutions are required under the FTR Actto report to the FIU any transaction (or attemptedtransaction) suspected to be related to money laund-ering activity, terrorist financing activity or otherserious offences.

In 2009, the FIU received 750 suspicious transactionreports (STRs) from various financial institutions, anincrease of 56.0 percent from the previous year.


COMBATING MONEY LAUNDERING

Fiji’s primary legislation for combating money laundering is the Financial Transactions Reporting (FTR) Act(2004). The FTR Act sets out certain measures that local financial institutions must implement to combat moneylaundering in Fiji.

The Financial Intelligence Unit is a national agency established under the FTR Act (2004) that is responsible foradministering and enforcing the FTR Act. The FIU is administered and funded by the Reserve Bank pursuantto the delegation of powers by the Minister for Justice to the Governor of the Reserve Bank of Fiji.

The FIU is responsible to the Governor of the Reserve Bank in the discharge of its powers and functions.

Reporting Financial Institutions 2009

Source: Financial Intelligence Unit

Reporting Financial Entities or Persons Number of STRsReceived

Commercial Banks 639

Finance Companies and Superannuation 8

Public 10

Insurance Companies 2

Money Remittance Service Providers1 86

Regulatory Authorities 2

Law Firms 2

Others 1

TOTAL 7501 Includes foreign exchange dealers.

MISSION: DEVELOP AN INTERNATIONALLY REPUTABLE FINANCIAL SYSTEM

I

Suspicious Transactions Reported to the FIU

Year 2005 2006 2007 2008 2009

280 215 268 479 750STRs

Case Reports Disseminated to Law Enforcement Agencies

Source: Financial Intelligence Unit

InlandRevenueServices 30 14 60 131 143

Police 17 12 12 25 37

Immigration 14 15 20 7 3

Customs 0 0 0 4 2

Others 13 20 21 35 11

TOTAL 74 61 113 202 196

Number of STRs

2005 2006 2007 2008 2009


compared to 94,911 in the previous year. These out-comes were a result of heightened awareness amongreporting institutions of their reporting requirementsand the introduction of electronic reporting systems.

Border Currency Reporting

Persons travelling into or out of the Fiji Islands are requiredunder the FTR Act to declare to Customs officials if theyare carrying currency or negotiable bearer instrumentsof F$10,000 and above. In 2009, the FIU received 244currency reports, compared to 198 in 2008. These reportsare analysed for possible currency smuggling, moneylaundering and related criminal offences.

Assistance to Partner Agencies

The FIU is empowered under the FTR Act to provideassistance to various partner agencies. In 2009, the FIUreceived and attended to 53 requests from Governmentagencies for due diligence checks on persons or entitiesof interest. These requests related to background checkson 117 business entities and 120 individuals.

The FIU also attended to 76 requests from local andforeign law enforcement agencies for assistance inmoney laundering and other related investigations.

FIU Financial Information Management System

The FIU’s Financial Information Management SystemOnline (FFIMSO) was formally launched in early 2009.FFIMSO is a secure online reporting system, whichenables financial institutions to electronically submitSTRs, CTRs and EFTRs to the FIU.

At the end of 2009, 63 financial institutions wereregistered to use FFIMSO, compared to 26 in 2008. Theincrease in number of registered users was an outcomeof FIU’s awareness campaigns.

FFIMSO also consists of a back-end data managementand analysis system which enables the FIU to effectivelymanage and analyse the large number of financialtransaction reports received.

Domestic Coordination and Information Sharing

The FIU organised an inaugural national anti-moneylaundering (AML) conference in early 2009. Theconference brought together more than120 delegatesfrom the private and public sector to discuss emergingAML issues. The conference was also aimed at creatingawareness of Fiji’s AML framework.

The National AML Council, which is Fiji’s nationalAML coordinating committee, met four times during2009 to discuss national AML policy initiatives andissues. The Council is chaired by the PermanentSecretary for Justice. The Governor and the Directorof the FIU are members of the Council. The FIUprovides the secretarial support for the Council. TheCouncil also held a strategic planning workshop in2009 that was hosted by the Reserve Bank.

In 2009, the FIU signed Memorandums of Agreement(MOA) with the Land Transport Authority, FijiIndependent Commission against Corruption andData Bureau Limited. The MOA allows for theexchange of information between the FIU and theseagencies.

International Coordination and Initiatives

In 2009, Fiji’s FIU was admitted as the 999th memberof the Egmont Group, which is a global association ofFIUs. As a member of the Egmont Group, the Fiji FIUcan electronically request and share information andintelligence with other FIUs via the Egmont Group’ssecure website.

The FIU maintained close networking and coord-ination with other foreign FIUs during the year. TheFIU signed an MOA with Indonesia’s FIU in 2009.

The FIU participated in the Australia AML and Coun-ter-Terrorism Financing Conference in early 2009,which was co-hosted by AUSTRAC, the AustralianFIU. The FIU also liaised with various internationalorganisations on AML issues and programmes. In early2009, the FIU facilitated a visit by the IMF to conductan assessment of the risk of money laundering in Fiji.

In late 2009, the FIU also worked with the UnitedNations Office on Drugs and Crime (UNODC) inholding consultations with stakeholders on the reviewof the FIU’s administration. The results of this reviewwill be discussed with the National AML Council in2010.

During the year, the FIU liaised closely with the AsiaPacific Group on Money Laundering (APG) on variousAML programmes and initiatives held in the region.One such key initiative was the FIU’s participation ina World Bank and APG mutual evaluation of theSolomon Islands on their AML framework. The FIUplans to work closely with international stakeholderson AML issues in 2010.

MISSION: DEVELOP AN INTERNATIONALLY REPUTABLE FINANCIAL SYSTEM COMBATING MONEY LAUNDERING

Currency Strategic Review

uring the year, the Reserve Bank continued work onPart II of the Fiji Currency Strategic Review, involvingthe review and issue of new coins.

On 16 February 2009, new smaller and lighter coinswere introduced into circulation in denominations of 5,10, 20 and 50 cents. The new coins are made from RoyalCanadian Mint’s multiply® nickel plated steel mintingtechnology and offers greater durability, shininess, as wellas increased security and reliability in coin-operatedvending machines.

As a first for Fiji, the new coins are designed with vary-ing edge treatments to assist the visually impaireddifferentiate between denominations. Other themes anddesigns from the old coins remained the same to enhancethe transition and acceptance of the new coins.

The Reserve Bank rolled out a comprehensive publicawareness exercise and worked closely with variousstakeholders to ensure a smooth transition, as well as toensure the public was receptive to the new coins.

The old series coins continued to cocirculate with thenew series until 30 April 2009, at which time all the oldcoins, with the exception of the $1 coin, weredemonetised and ceased to be legal tender. Thereafter,the public can only redeem their old coins in exchangefor new coins with the Reserve Bank of Fiji.

A total of 354.6 tonnes of old coins, worth $5.8 million,was collected during the nation-wide old coin collectionexercise through commercial banks, which culminatedin May 2009.

Following a competitive tender process, the London RoyalMint was awarded the contract for the purchase andsecure disposal of the old coins. In August 2009,approximately 420 tonnes of old coins, including 65.9tonnes of coins that were not issued, were shipped to theRoyal Mint’s associates in Moerdijk in the Netherlandsfor sorting and smelting. The Reserve Bank expects to

recover a percentage of the value of the metallic contentof copper and nickel contained in the old coins.

As part of the Reserve Bank’s audit and assurancerequirements in ensuring that the coins were destroyedas per contracted, a visit was made to the sorting facilityin Moerdijk, as well as to the smelting facility in Beersein Belgium. The old coin disposal exercise is expected toconclude in June 2010.

Note Processing

In 2009, the volume of notes processed increased by 48.1percent to 30.8 million pieces, underpinned by bettermachine efficiency and increased machine hours,compared to 2008 when the new note processing machinewas commissioned. The value of notes processed alsorose, by 22.8 percent, to $514.2 million, reflective of thehigher note processing turnover.

Of the total value of notes processed, 38.9 percent weresuitable for reissue, while 61.1 percent deemed unsuitablefor further circulation were destroyed. The old designnotes being phased out of circulation contributed to thehigh percentage of notes destroyed.

During the year, there were two on-site visits byAustralian-based De La Rue technicians for the CPS1500Currency Processing System as part of the preventativemaintenance agreement to ensure optimal machineoperations.


CURRENCY

Pursuant to Section 4(a) of the Reserve Bank Act (1983), the Bank is charged with regulating the issue of currency inFiji. The Bank is responsible for maintaining an adequate supply of quality banknotes and coins in circulation.The Reserve Bank issues banknotes and coins that are commensurate with demand payment purposes and redeemsany banknotes or coins that are mutilated and/or no longer needed and destroys them accordingly. The Bank alsodetermines the denomination and design of Fiji’s banknotes and coin subject to the approval of the Minister for Finance.


Coins Collection by Geographical Location (Total Coins Collected: $5.8 Million)


Northern

Western

Eastern 41%

12%

47%

Tonnes of Coins Disposed (Total Tonnage: 420 Tonnes)


1c

2c

5c

14%13%

25%

12% 9%

27%10c

20c

50c

Notes Processed


NotesRecirculated 219.1 9.2 200.1 8.2

NotesDestroyed 199.7 11.6 314.1 22.6

TotalProcessed 418.8 20.8 514.2 30.8

2008 2009

Value Pieces Value Pieces($ Million) (Million) ($ Million) (Million)

D

The $2 note recorded the highest increase of 12.5percent to $14.1 million, while the $5 note registeredan increase of 8.3 percent to $16.6 million. Theincrease reflects the high usage of lower denominationsfor change.

The demand for $20 and $50 notes also rose. Thedemand for $20 rose by 4.3 percent to $139.3 million,while the demand for $50 increased by 1.3 percent to$228.2 million. These increases are attributed to theirpredominant usage in ATMs.

The demand for the $100 note also increased by 9.3percent to $54.1 million, reflective of the public usageof the $100 denomination in high value transactions.

However, the demand for the $10 note fell by 13.9percent to $66.8 million, mainly attributed to itsmarginal usage in ATMs and lower demand for change.

On the demand for coins, there was an increase in theissue of all denominations except for the $1 coin,underpinned by the release of new coins during theyear. The 5 cents coin experienced the highest increaseof 501 percent to $0.7 million, mainly due to itsreplacement as the lowest denominated coin in thecoin structure after the demonetisation of the 1 and2 cent coins in 2008. The high demand for the newcoin series suppressed the demand for the $1 denom-ination, which fell by 52.3 percent to $1.8 million.

Mutilated Currency

During the year, $0.38 million was reimbursed tocommercial banks, businesses and individuals formutilated currency, compared with $0.21 million in2008. The banknotes were damaged during floods,house fires and prolonged storage.

Currency in Circulation

In 2009, the total currency in circulation increased by10.4 percent to $431.5 million. Banknotes accountedfor $403.3 million, while coins in circulation amoun-ted to $28.2 million.

The value of all banknote denominations increased incirculation over the year. The $100 denominationrecorded a marked increase of 25.4 percent to $124.2million, while the $5 note posted the lowest increaseof 2.1 percent to $13.3 million. The $2 note, on theother hand, registered the highest number of notes incirculation.

The value of all coin denominations in circulation alsoincreased, boosted by the introduction of the new coinseries and the withdrawal of old coins from circulation.The value of the 50 cents coin recorded the highestincrease of 17.0 percent to $5.8 million, while the 5cents coin registered the lowest increase of 3.2 percentto $2.8 million.

Cost of Currency

In 2009, the cost of currency issued by the Bank increa-sed significantly by 155.0 percent to $5.1 million.

The cost of notes issued increased by 12.5 percent to$1.8 million, mainly due to the issue of new notes tomeet demand. The cost of coins issued also increasedsignificantly, by 725.0 percent, to $3.3 million due tothe issue of the new coins to replace the old coinswithdrawn from circulation.

Banking Transactions

During the year, the currency issued to commercialbanks rose by 1.8 percent to $527.5 million, of which$518.9 million was issued in notes and $8.3 millionin coins.

In 2009, with the exception of the $10 note, thedemand for all banknote denominations increased.


Notes & Coins in Circulation ($ Million)


Notes 354.6 364.9 403.3

Coins 26.3 26.0 28.2

Currency in Circulation 380.9 390.9 431.5

2007 2008 2009

Cost of Currency Issued ($ Million)


Notes 3.0 1.6 1.8

Coins 0.5 0.4 3.3

Total 3.5 2.0 5.1

2007 2008 2009

Notes Issued in 2009 (Total Value: $518.9 Million)


40%

27%

17%

2%

2%

12%$2$5

$10

$100

$50

$20

Coins Issued in 2009 (Total Value: $8.7 Million)


25%

21%

14%

8%

32%

50c

$1

20c

10c

5c

MISSION: DEVELOP AN INTERNATIONALLY REPUTABLE FINANCIAL SYSTEM CURRENCY

Counterfeit Banknotes

In 2009, the volume of counterfeit notes discoveredincreased by 22.0 percent to 150 pieces. The value ofcounterfeits, however, fell by 25.3 percent to $3,949.As a percentage of currency in circulation, the valueof counterfeits remained negligible, at 0.0009 percent.

The $20 and $50 notes were the highest counterfeitedcurrency, as these denominations are more commonlyused and have a higher value return compared to the$2 and $5 denomination. The sophisticated securityfeatures and higher value of the $100 note, which issusceptible to closer security checking by recipients,makes it less likely to be counterfeited.

In efforts to eradicate counterfeiting, the Reserve Bankcontinued to assist the Fiji Police Force with invest-igations. The Reserve Bank also conducted a numberof training sessions for commercial bank tellers anddistributed public awareness material to various organ-isations, schools and the general public.

Numismatics

In 2009, numismatic income fell by 39.3 percent to$212,571, led by lower domestic and internationalsales/royalties, as a result of the impact of the globaleconomic downturn.

The Reserve Bank signed the following new progr-ammes with its partner Mints in 2009:


Coin Programme


New Zealand The Siberian & Bengal Tigers (2 coins) 20,000

Mint Hans Christian Andersen (4 coins) 36,000

Taku (6 coins) 114,099

Royal Australian Nine Dragons (9 coins) 9,999

Mint

Commonwealth Great Animals of the World (4 coins) 16,550

Mint Tropical Fish Coin (6 coins) 70,660

Great Explorers of the Pacific (6 coins) 80,550

Mint Programme Mintage

Counterfeit Summary


$2 10 5 14 7$5 30 6 55 11

$10 90 9 190 19$20 660 33 1,340 67$50 2,500 50 2,250 45

$100 2,000 20 100 1Total 5,290 123 3,949 150

2008 2009

Value Number Value Number($) of Notes ($) of Notes

MISSION: DEVELOP AN INTERNATIONALLY REPUTABLE FINANCIAL SYSTEM CURRENCY

IJICLEAR processes all large value transactions,interbank payments, money market settlements,time-critical customer payments and commercial

banks’ foreign currency deals, as well as their currencylodgements and withdrawals with the Reserve Bank.In addition, it offers the commercial banks up-to-dateinformation on account balances with the ReserveBank, improves liquidity management and providessecure interbank funds transfer. It also facilitatescommercial banks to provide cost-effective and betterservices to customers.


Fiji’s Real Time Gross Settlement System, FIJICLEAR, entered its second year of operation in 2009. FIJICLEARis a state of the art payment system where settlement of interbank payment obligations occurs on a real time grosssettlement (RTGS) basis. It is a means by which Exchange Settlement Accounts (ESAs) are accessed by all thecommercial banks to monitor the inflow and outflow of funds from their accounts with the Reserve Bank. Thesettlement of transactions takes place irrevocably, in real-time, out of credit funds in commercial banks' ESAs.

During the year, there was a general upward trend noted in the usage by commercial banks, as well as theircustomers. The system was upgraded in November 2009, keeping it abreast with the latest developments insoftware.

FIJICLEAR


FIJICLEAR Quarterly Transactions


25,000

20,000

15,000

10,000

5,000

0

$ M

illi

on

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Nu

mb

er

of

Tra

nsa

ctio

ns

Mar 08

Gross Payments

Number of transactions

Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09

In 2009, the average monthly number of transactionsincreased notably, by 126.0 percent, to 3,927. Thevalue of transactions rose by 19.2 percent. A recordnumber of 4,991 transactions were made via FIJI-CLEAR in September 2009.

The Reserve Bank worked very closely with the ABIFto increase customer usage through its awarenessprogrammes, which included presentations to stake-holders and the display of FIJICLEAR posters at allcommercial bank branches throughout Fiji. All banksalso produced customised FIJICLEAR brochures,which contributed to the growth in the number oftransactions made through the system. In addition,given the benefits of electronic payments, there was anotable increase in small value customer paymentsmade through FIJICLEAR.

FFIJICLEAR Payments and Transactions


Monthly Average GrossPayments ($ Million) 3,706 5,218 6,218

Monthly AverageTransactions (Number) 1,299 1,741 3,927

2007 2008 2009


Assistance to the Export Sector

s part of continued efforts to support the exportsector, the Reserve Bank made changes to the EFFto allow more exporters to benefit from the

Facility. In May 2009, the Facility was extended toLicensed Credit Institutions (LCIs), in addition tocommercial banks and the FDB. The eligibility ruleswere extended to include traditional exports, such assugar, molasses and gold, in addition to non-traditionalexports.

To promote greater awareness, the Reserve Bank posteddetails of the EFF on its website and will conduct semi-nars to relevant stakeholders in early 2010.

IMF Visits and the Article IV Mission

Fiji is a member of the IMF. Under Article IV of theIMF’s Articles of Agreement, the IMF holds bilateraldiscussions with officials from the Reserve Bank,Government, statutory bodies and private sector fromtime to time. There was a Staff Visit from 11 to 17March 2009, and an Article IV Consultation Missionfrom 10 to 24 November 2009. The Reserve Bank co-ordinated these meetings.

The close work with the IMF paved the way fordiscussions with other multilateral organisations onplanning the way forward for Fiji’s economic recoveryprocess.

Flood Assistance

To assist businesses affected by the January 2009 flashfloods, the Reserve Bank established a Flood Rehab-ilitation Facility (FRF) in April 2009. The Facilityoffers funding, at concessional interest rates, for eitherproduction or asset losses related to the floods. Similarto the EFF, the FRF is available through commercialbanks, the FDB and LCIs. The Reserve Bank allocated$20 million for the Facility on a first-in basis, while

individual loans were capped at $0.5 million perbusiness. The FRF was available until the end of 2009and a total of $3.1 million was utilised.

In July 2009, the Reserve Bank announced changes tothe conditions of the FRF. These included theextension of the maximum loan term from three tofive years, automatic loan rollovers every six monthswith only accrued interest payable until maturity, andthe application deadline for the Facility was extendedto 31 December 2009, from 30 September 2009.

Local Value Added

In efforts to safeguard Fiji’s balance of payments, inApril 2009, the Reserve Bank announced that it wasexamining a local value added policy for the tourismindustry. This policy is expected to link borrowingfrom lending institutions by hotel operators to theiruse of local goods (including produce and furnishing)and their efforts towards environment protection. TheReserve Bank has approached the Asian DevelopmentBank (ADB) for technical assistance to develop theassessment criteria that lending institutions will useto determine the local value added content. This policyis expected to be issued in 2010.

In addition, the Reserve Bank established a scholarshipprogramme for a local chef to be trained at a Malaysianhotel on innovative ways to utilise local produce. Thisscholarship will be awarded in 2010. Local cateringstudents, instructors from tertiary institutions andchefs employed in the tourism industry are all eligiblefor the scholarship.

Furthermore, the Reserve Bank will sponsor an annualPrime Minister’s award for local value added from2010. The award will recognise hotels/resorts for exten-sive use of local products and environment-consciousefforts.

ENHANCE OUR ROLE INTHE DEVELOPMENT OF THE ECONOMY

MISSION:

In addition to its core functions of monetary policy, financial stability and the issue of currency, the Reserve Bankis involved in various projects, with the objective of developing the economy.

A


Advisory Board by foreign bank operations, with effectfrom 1 January 2010. The policy ensures that foreignbank operations better understand and align theirstrategies to Fiji’s regulatory and supervisory environ-ment, as well as to national development objectives.The Local Advisory Board will provide advice andguidance to the senior management of foreign bankoperations.

Members of the Board are required to have a goodknowledge and understanding of Fiji’s banking andsocio-economic environment, as well as an awarenessof the long-term growth strategies of the Government.The policy also requires members to meet the ReserveBank’s fit and proper requirements.

Remittances

Personal remittances recovered in 2009, growing by56.5 percent to $294.0 million, likely led by the gainsfrom the April devaluation. Remittances remainedthe second largest foreign exchange earner after tour-ism.

During the year, the Reserve Bank continued to workclosely with key stakeholders to explore ways ofreducing remittance costs. The Reserve Bank approvedWestpac’s Dual Visa Remittance Card, which will beavailable in 2010 for remittance of funds fromAustralia and New Zealand. This card provides lowertransaction costs for those who send money homeregularly to their family members in Fiji from thesetwo countries.

The Reserve Bank also assessed and approved pilotprojects to be undertaken by two local companies tointroduce funds transfer and payments through mobilephones. This is expected to have a positive impact oncosts, as well as promoting financial inclusion amongstthe unbanked in Fiji.

Small and Micro Enterprises and Microfinance

Given the importance that SMEs can play in developingFiji’s economy and reducing poverty, the Reserve Bankundertook the development of an Alternate Invest-ment Market (AIM) Board for the SMEs on the SPSE.This was carried out together with the SPSE. The AIMBoard is expected to be fully operational by early 2011.The intention of the AIM Board is to provide an alter-native avenue for SMEs to access finance.

The Reserve Bank issued a banking supervision policyon the Minimum Requirements for Commercial Bankson Internal Microfinance Units, with effect from 1January 2010. The policy requires commercial banksto extend banking services to Fiji’s marginalised comm-unities, as well as SMEs, and encourages a greater rolefor commercial banks in promoting financial inclusion.

Furthermore, the Reserve Bank hosted a national mic-rofinance workshop in November 2009, which wassupported by the Pacific Financial Inclusion Prog-ramme. The workshop was aimed at mapping out thevision, strategic goals and measures for the orderlydevelopment of microfinance in Fiji and the integrationof commercial banks in the provision of microfinanceservices. The Reserve Bank issued a communiqué afterthe workshop to all stakeholders that attended. Thecommuniqué and all the presentations were postedon the RBF Website.

During the year, the Reserve Bank also continued tosupport SMEs through its annual sponsorship for theFDB’s Small Business of the Year Awards.

Local Advisory Board

In December 2009, the Reserve Bank issued a bankingsupervision policy on the establishment of a Local

FRESH VEGETABLES

or the past 3 years, Kiran Lata has been selling fruit,vegetables and sweets at the Navua market. She

buys the produce from people in Suva as well as thosewho travel by boat from Beqa Island. A carrier is usedto transport the produce from the Suva market. Withthe small loan she obtained, she has invested in herbusiness. Her savings are banked at a commercial bank,which provides rural banking services to the Navuaarea.

F

PROPRIETOR:

Kiran Lata


MISSION: ENHANCE OUR ROLE IN THE DEVELOPMENT OF THE ECONOMY

RBF in the Community

The Reserve Bank’s presence in the communityfacilitates better relations with the public, Govern-ment, businesses and academia.

As part of the Bank’s efforts to keep the publicinformed of its assessment of the economy, theGovernor and senior staff of the Bank regularlygive presentations on the latest economic devel-opments to Government, businesses, communitygroups and education institutions. The Bank alsomakes available information on its website so thatusers can easily access information.

Moreover, the Bank funds the chair of the AssociateProfessor/Senior Lecturer in Monetary Economicsat the University of the South Pacific (USP). Thisagreement has been in place since February 1998.A “Reserve Bank of Fiji” prize is also awarded annu-ally to the outstanding Economics graduate at theUSP.

In support of SMEs, the Reserve Bank sponsors theFDB’s Small Business Award. The Bank alsosponsors the Fiji Trade and Investment Bureau’s(Agriculture) Exporter of the Year Award.

The Reserve Bank participated in the Earth Hourinitiative, an annual international event created bythe World Wide Fund for Nature/World WildlifeFund, held on the last Saturday of March, whereparticipants turn off non-essential lights andelectrical appliances for one hour to raise awarenesson climate change. The Reserve Bank also joined

major business houses in Central Suva and aroundthe world to support World AIDS Day on 1December. To mark the occasion, a giant red ribbonwas placed over Fiji’s tallest building to supportthe initiative. His Excellency the President, RatuEpeli Nailatikau was present to congratulate theBank for supporting this event. In addition, theBank also took part in the Fiji Police Crime Preven-tion initiative.

The Bank makes donations to national charitableorganisations as part of its corporate responsibilityto the community. In 2009, the Bank donatedcomputers to schools across Fiji. Apart from theformal donations, Team RBF also voluntarilycontributes and uses their own time to participatein community projects. Some of the charitableprojects undertaken by staff in 2009 includeddonation of books and other school materials toWaiqanake Primary and Kindergarten School.Contributions were also made to the LeadershipFiji Class of 2008 and Save the Children Fiji jointfundraising effort for the Early Childhood Edu-cation programme.

The Bank’s Sports and Social Club organises socialevents and cultural activities for staff. In 2009, theBank’s Sports and Social club organised the collect-ion of funds for victims of the January floods, aswell as for the Samoa Tsunami relief effort. TheClub also organised the cleaning up of the HiltonSpecial School and organised an internal blooddrive.

particular importance was the Reserve Bank’sinvolvement with the Economic Reform Programme. The Reserve Bank continued to participate in theDebt and Cashflow Policy Committee, which evaluatesGovernment’s financing needs.

Registry and Banking Services

The Reserve Bank provides registry services for debtsecurities issued by Government and statutorycorporations. The Bank also acts as a fiscal agent forGovernment, and provides banking services to theGovernment and overnight facilities to the commercialbanks.

During the year, the Reserve Bank administered bondsworth $3.0 billion, compared to $2.8 billion in 2008.The level of outstanding Government bonds rose by6.8 percent to $2.5 billion, while outstanding statutorycorporations’ bonds rose by 3.5 percent to $497.5million. These increases were due to higher net issuesduring the year. In addition, Fiji Sugar Corporation re-entered the securities markets, after a lapse of threeyears, and issued $32.5 million in bonds.

In 2009, total registry payments made by the ReserveBank fell by 24.5 percent to $761.5 million. The lowerpayments were primarily driven by a fall in theredemption of Treasury bills, as well as a decline inmaturing statutory corporations’ bonds. In contrast,

Policy Coordination

uring the year, the Reserve Bank continued toassist Government through various PolicyCommittees.

The Macroeconomic Policy Committee (MPC) andits Technical Committees prepare projections on Fiji’sGDP, trade and balance of payments. These projectionsare critical inputs to monetary policy formulation andother national policy decision making. The MPC ischaired by the Governor of the Reserve Bank. Membersof these Committees comprises officials from theMinistry of Finance and National Planning, theMinistry of Industry and Trade, Fiji Islands Bureau ofStatistics, the Prime Minister’s Office, the Ministry ofForeign Affairs, International Cooperation and CivilAviation, the FIRCA and the Reserve Bank. Duringthe year, there were three forecasting rounds, threeMPC meetings and nine Macroeconomic TechnicalCommittee meetings.

In addition to providing forecasts, the Committee alsoprovides policy advice to Government through asubmission to the National Budget.

As part of the macroeconomic forecasting process, theReserve Bank conducted several meetings with keyindustry groups in 2009. At these meetings, the Bankprovided updates on the economy and received feed-back from representatives on the performance andprospects for their industry and the economy. Bankstaff also met with representatives of employers andprivate businesses and conducted on-site industryvisits to various companies in the Western Division.Information gathered from these meetings are used asa basis for forecasting national indicators, as well asproviding advice to Government through the MPCreports and input to the National Budget submission.

In 2009, the Reserve Bank continued to be activelyinvolved in many Committees of national interest. Of

The provision of policy advice to Government occurs in many forms. In 2009, the Governor met with the Minsterfor Finance on a number of occasions for discussions on various issues. The Governor also accompanied theMinister on some visits and consultations abroad. Presentations on the economy are also made to Cabinet,Ministries and other Government agencies, as and when requested.

Outstanding Bonds in 2009 ($ Million)


Government 404.2 245.4 2,505.1

Fiji Development Bank 75.3 88.9 243.1

Fiji Electricity Authority - 0.4 138.8

Housing Authority 10.0 11.5 83.1

Fiji Sugar Corporation 32.5 - 32.5

Total 522.0 346.2 3,002.6

Issued Redeemed Outstanding

D

PROVIDE PROACTIVE ANDSOUND ADVICE TO GOVERNMENT

MISSION:


interest and redemption payments on Governmentbonds rose slightly in 2009.

As a result of the tight liquidity conditions experiencedin the first quarter of 2009, the yields on Governmentbonds rose across the maturity spectrum. Bond yieldscontinued to rise thereafter despite significantimprovements in the liquidity level. The Governmentassessed that the prevailing yields were out of line withthe market and consequently fixed the coupon rateson its bonds from September 2009. Hence, the yieldson Government bonds at the end of 2009 were lowercompared to 2008.

VEGETABLE & POULTRY FARMER

anjay Vinod Chand, a vegetable and poultry farmer in Saru,Lautoka is enjoying his lifestyle, reaping the benefits of

business skills he attained via specialised training in 2008. Hedrew up his business plan with financial projections andsuccessfully secured a loan. He worked with the Ministry ofAgriculture to develop plans based on the analysis of soilcontent and possible returns on investment per acre. In 2008,Sanjay received the FDB Small Business Award sponsored bythe RBF, which included $2,000 cash and prize packs fromTelecom Fiji and Fijilive.

S

PROPRIETOR:Sanjay Vinod Chand


In 2009, there was a notable decline in the amount ofTreasury bills issues. The outturn was mainly due tolow demand for short-term papers resulting in theGovernment raising all its funding requirementsthrough bonds. During the year, gross issues andredemptions of Treasury bills declined by 34.2 and52.5 percent, respectively. The total outstanding valueof Treasury bills was $100.0 million at the end of theyear.

Interest rates on Treasury bills rose substantially despitethe build up in bank liquidity. Similar to bond yields,the rates on Treasury bills were assessed to be out ofline and hence were fixed in the final quarter.

Weighted Average Yields on Long-Term Government Bonds


12

10

8

6

4

2

01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Pe

rce

nt

Maturity(Years)

2009

2008

Treasury Bills ($ Million)


Floatations 606.0 430.0 335.0

Allotments 692.5 392.0 257.9

Redemptions 696.6 468.9 222.6

Outstanding 141.6 64.7 100.0

2007 2008 2009


FINANCIAL PERFORMANCE

Income

he Reserve Bank’s total income largely consists ofinterest income from foreign currency investmentsand domestic securities. For the 2009 financial

year, total income fell by 19.4 percent to $41.6 million.This was underpinned by the fall in interest incomefrom foreign investments, as a result of low globalinterest rates.

Expenditure

In 2009, total expenditure rose by 18.1 percent to$25.0 million, mainly due to costs incurred in themanagement of currency.

Administrative expenditure increased by 5.4 percent,driven by costs for staffing, training and capacitybuilding. The higher outlays were also due to costsincurred during the Review of the RBF Act andpayment of IT related licences, both of which werehigher as a result of the devaluation of the Fiji dollar.

Other expenses rose by 113.6 percent, mainly attrib-uted to the issue of new coins into circulation. In

addition, the Reserve Bank wrote off the older designseries of banknotes, as these would no longer be issuedinto circulation.

Operating Profit and Payment to Government

The operating profit for 2009 was $16.6 million,compared to $30.4 million in 2008. There was notransfer to the General Reserve Account in 2009.Consequently, as required under the RBF Act (1983),the total operating profit will be transferred toGovernment in 2010.

The RBF Act (1983) also requires the Reserve Bank totransfer one-fifth of the RRA balance to Government.This amounted to $22.6 million in 2009, comparedto $2.6 million the year before. The significant increasewas underpinned by the impact of the devaluation onforeign reserves.

Therefore, the Bank will pay a total of $39.2 millionto Government, compared with the payment of $33.0million for its 2008 operations. This payment will bemade in 2010.

DISSEMINATE TIMELYAND QUALITY INFORMATION

In line with the mission to disseminate timely and quality information to the public and relevant stakeholders,the Reserve Bank releases economic and financial information through major publications (monthly EconomicReviews, Quarterly Reviews and Annual Reports), Press Releases and its website.

MISSION:

T

Total Income and Total Expenses


60

50

40

30

20

10

0

2003

2004

2005

2006

2008

2009

Income

Expenditure

2007

$ M

illi

on

Operating Expenses by Type


14

12

10

8

6

4

2

0

2003

2004

2006

2008

Staff Costs

Total Administrative Costs

$ M

illi

on

2007

2005

2009

PLANTER / RE-SELLER

iliva Nasaga has come a long way from days where herfamily had to survive on $10 a week. She always had

an interest in flowers and the interest grew while she wasworking in various hotels around Fiji. Her husband, whojoined the microfinance programme in 2005, started smallscale farming. Currently, she operates a stall at Garden Cityto sell or offer pot plants for hire. Her dedication andpassion did not go unnoticed as she received the FDB SmallBusiness Award in 2008.

S

PROPRIETOR:

Siliva Nasaga


online system users to enhance efficiency andproductivity. Work also continued on paperless officeinitiatives by implementing software to monitorprinting and staff online meetings.

During the year, the Reserve Bank continued tostrengthen systems and network security controls. Theinfrastructure was also upgraded with new Bladeservers and storage area networks. The Reserve Bankcontinued to ensure that critical systems, proceduremanuals and streamlined processes were replicated aspart of the business resumption strategy and inpreparation for the inauguration of the Bank’s BRS in2010.

Records Management and Library

The Reserve Bank continued with the principles ofRecordkeeping for Good Governance and commencedwork on the upgrade of the TRIM (Total RecordsInformation Management) system. Preparations werealso made for the transfer of archival storage to theBRS.

During the year, the Reserve Bank also renewed itssubscriptions with ProQuest. The Reserve Bankextends its appreciation to the University of the SouthPacific library for continuing to enable access to theirresources.

Domestic Relations

In 2009, a key part of the Reserve Bank’s outreach tothe public involved a Road Show, conducted at a seniorlevel, where 30 presentations were made to differentstakeholders across Fiji. These presentations werefocussed on explaining the economic situation andrationale for monetary policy decisions.

During the year, various schools continued to visit theReserve Bank to learn about the role and respon-sibilities of the Bank, as well as view the numismaticsdisplay.

The Reserve Bank convened two Economics Assoc-iation of Fiji presentations in 2009, which discussedthe global financial crisis and the US economic andfiscal policies.

Publications/Press Releases

The Reserve Bank continued to release economic andfinancial information during the year through its majorpublications: the monthly Economic Review, QuarterlyReviews and the Annual Report. The Reserve Bankalso issued 49 press releases and a Monetary PolicyStatement to inform the general public of the stanceand rationale of its policies. The 2008 Insurance andFIU Annual Reports were also published in 2009.

Tender results of Treasury bills and Government bondswere posted on the Reserve Bank website, Reuters andBloomberg. Commercial banks’ key disclosurestatements are also available on the Reserve Bankwebsite.

During the year, the Reserve Bank continued todisseminate information through media interviews,presentations and brochures. The Reserve Bank’swebsite was continuously updated to include the latestinformation disseminated by the Bank.

Information Technology

FIJICLEAR, Fiji’s electronic payment system, wasupgraded to provide more features, flexibility andresilience to users, as well as making it more reliableand scalable to meet future needs. The Reserve Bank’sSWIFT (Society for Worldwide Interbank FinancialTelecommunication) system was also upgraded andbetter integrated with the FIJICLEAR system.

In 2009, the Reserve Bank’s email messaging systemand other end-user applications were upgraded toprovide more secure and enhanced systems. TheReserve Bank also developed in-house applications for

Reserve Bank’s Profit Payable to Government ($ Million)


Operating Profit 10.7 20.4 30.4 16.6

Less

Transfer to General Reserves 0.0 1.0 0.0 0.0

Balance Paid to Government 10.7 19.4 30.4 16.6

One-fifth Portion of RRA 4.2 2.8 2.6 22.6

Total Paid to Government 14.9 22.2 33.0 39.2

2006 2007 2008 2009


International Relations

The Reserve Bank continued to maintain and fosterinternational relations with supranational organ-isations and other central banks. The Governor wasalso visited by several foreign dignitaries. Reserve Bankofficials also participated in a number of internationalconferences and workshops.

The Reserve Bank liaised with the IMF, World Bank,ADB and central banks in the Pacific and South EastAsia region. During the year, the Bank received tech-nical assistance from international institutions suchas the IMF, the World Bank and the AustralianPrudential Regulatory Authority (APRA), in the areasof insurance, super-annuation and banking super-vision.

Senior Reserve Bank officials attended annual meetingsof the joint IMF/World Bank, South East Asian Central

MISSION: ENHANCE OUR ROLE IN THE DEVELOPMENT OF THE ECONOMY

Banks (SEACEN) Board of Governors, SEACENExecutive Committee, ADB Annual Meeting,SEACEN Directors of Research and Training Meeting,South Pacific Central Banks’ Conference and the SouthPacific Governors’ Meeting.

The Reserve Bank also hosted the Central BankGovernor’s Conference, Regional Workshop on StressTesting, as well as the annual meeting of the Ass-ociation of Financial Supervisors of Pacific Countries.During the year, the Reserve Bank received disting-uished visitors from the IMF, World Bank and ADB.

The Bank continued its association with the PacificFinancial Technical Assistance Centre (PFTAC), whichcontinues to provide guidance in the areas of financialsupervision, statistics and economic processes. TheBank also hosted attachments from the Bank of PapuaNew Guinea and FIU officials from the Central Bankof Solomon Islands and the Ministry of Justice of theFederated States of Micronesia.

Staffing

t the end of 2009, the Reserve Bank staff com-plement increased to 198, following the estab-lishment of the FSDC Group. The FSDC Group

was established with 20 staff, including 12 staff fromthe former CMDA.

During the year, the Reserve Bank recruited 24 staff,mostly for the positions of economists, analysts andexaminers, while 8 staff resigned, mainly to take upalternative employment.

Management Remuneration in 2009

The salaries of the Executive Management are approvedby the Higher Salaries Commission (HSC). Other

management staff are employed on individual contractbasis and remunerated in line with the market.

Staff Development

The Reserve Bank continued to invest in staffdevelopment and the up-skilling of staff through itsStaff Development Policy and Staff Training NeedsAnalysis programme. Accordingly, the Bank organisedinduction and mentoring programmes, and on-the-job training. During 2009, the Bank continued tosponsor courses for staff for further academic qual-ifications through full-time, part-time, corresp-ondence, short courses and seminars at local andoverseas institutions.

Three staff successfully completed Masters degrees,one from the University of Wollongong (Australia) inForensic Accounting and two from USP in BusinessAdministration and Commerce. Two staff continuedwith overseas study leave to pursue Masters degrees inEconomics at the University of Putra in Malaysia andat the Australian National University in Canberra,Australia.

Furthermore, three staff successfully completedcorrespondence certification programmes from theAustralian and New Zealand Institute of Insurance(ANZIIF) and the Securities and Investment InstituteAsia-Pacific, while two staff completed ANZIIF Dip-lomas in Financial Services on Risk Management. Twostaff received professional memberships, one as a Fell-ow with the Financial Services Institute of Australasiaand the other as an ANZIIF Senior Associate memberand certified insurance professional.

In addition, 15 staff continued with correspondencecourses for ANZIIF Certificate IV in General Insuranceand Diploma in Financial Services (Risk Management),while 22 staff pursued part-time studies at the USP,


RECRUIT, DEVELOP ANDRETAIN A PROFESSIONAL TEAM

MISSION:

People capital is the Reserve Bank’s greatest asset in the delivery of corporate goals. The Reserve Bank ensures thatit has capable people, systems, structure and culture through appropriate staff development and corporate policies.

A Management Total Remuneration in 20091


i. $192,100 1

ii. $150,487 1

iii. $99,956 - $105,931 8

iv. $66,536 - $89,124 26

Total Remuneration2

Staff Numbers

1 Total Remuneration is exclusive of any performance bonus.2 (i)-(iii) Executive Management as approved by the HSC; (iv) Other Management Staff.

RBF Staff Statistics (31 December)


2005 2006 2007 2008 2009

Recrui-tment

TotalStaff

TurnoverRecrui-tment

TotalStaff


TotalStaff


TotalStaff


TotalStaff

Turnover

Professional 0 0 0 0 0 0 0 2 0 0

Manager 0 3 2 2 0 3 0 1 2 1

Graduate/Techical 5 10 19 10 18 7 10 11 26 5

Clerical 0 1 5 3 0 0 2 2 1 1

Administrative 5 5 4 3 4 4 1 1 7 2

Total 10 19 30 18 22 14 13 17 36 9

RBF Staff Statistics (31 December)


Total Staff 156 168 176 1711 2001

Average Years of Service 8.7 8.0 7.8 9.1 7.6

Annual Staff Turnover (%) 12.2 10.7 8.0 9.9 4.5

Resignation 12 14 10 15 8

Emigration 3 11 7 6 3

Further Studies 0 1 0 0 0

• Overseas 0 1 0 0 0

• Local 0 0 0 0 0

New Employment 9 2 3 9 5

• Overseas 1 0 2 1 1

• Local 8 2 1 8 4

Retirement 5 3 1 1 1

• Age 55 years 3 2 1 0 0

• Age 45 years 2 1 0 1 1

Contract Expiry 2 1 0 0 0

Terminated 0 0 3 0 0

Deceased 0 0 0 1 0

Recruitment 10 30 22 13 36*

Total Staff Turnover 19 18 14 17 9

2005 2006 2007 2008 2009

* Includes CMDA staff.1 Includes staff on study leave.

During the year, in accordance with the Health &Safety at Work (Control of Hazardous Substances)Regulations (2006), the Reserve Bank submitted a listof industrial chemicals and material data safety sheetswith the Ministry of Labour.

Training in the areas of OHS continued, with 19 staffsuccessfully completing the Fire at Work Safety Train-ing by the National Fire Authority, while three staffattended the OHS Module Training at TPAF.

Service Recognition

The Governor’s Service Recognition and Long ServiceLoyalty Award recognises dedicated long and merit-orious service to the Bank. In 2009, two staff reached15 years, four staff reached 20 years and six staffreached 25 years of service. The Senior Advisor to theGovernors, Mr. Inia Naiyaga, achieved 35 years ofservice.


Central Queensland University and Fiji Institute ofTechnology towards Masters, Post Graduate andDiploma programmes.

During the year, 44 staff attended various locallyprovided short courses, such as those organised byUSP, TPAF, Fiji Institute of Accountants (FIA) and theRotaract Club. Moreover, 21 staff attended variouscourses abroad that were organised by the IMF-Singapore Technical Institute, SEACEN TrainingCentre, Bank Negara, ADB, Australia Asia-PacificEconomic Cooperation, APRA, Bank of Korea, Bankof England, World Bank and Pacific Regional BranchInternational Council on Archives. One staff alsoattended a conference hosted by the UNESCAP andBangladesh Bank in Dhaka, Bangladesh. He also visitedthe Central bank of Bangladesh and the GrameenBank during his stay in Bangladesh.

The Reserve Bank also sponsored staff professionalmemberships to the FIA, Fiji Institute of Bankers, FijiInstitute of Internal Auditors and Fiji HumanResources Institute.

During the year, two staff completed overseassecondments, one as the Deputy Governor of theNational Reserve Bank of Tonga and the other asAdvisor to the Executive Director at the IMF inWashington D.C. The staff resumed work as the SeniorAdvisor to the Governors and Chief Manager (FSDC),respectively.

Employment Relations Promulgation

In accordance with Regulation 7 of the EmploymentRelations Promulgation (2008), the Reserve Bankregistered its Labour Management ConsultationCooperation Committee with the Ministry of Labour.

The Reserve Bank also continued negotiations withthe Fiji Bank and Finance Sector Employees Union ona Salary Review Successor Agreement and Log ofClaims.

Health and Safety in the Workplace

In 2009, the Reserve Bank’s Occupational Health &Safety (OHS) Committee met four times. Issuesdiscussed included office space, noise disturbances,OHS signage, as well as safety attire and equipmentfor security and currency personnel.

VILLAGE STORE & FARMER

ikeli and Litiana Naivucu run the Etuba Store from Nadroumaivillage outside Sigatoka, proudly serving the village people.

Sikeli runs the shop in addition to working on their kumalaplantation. He is also the village headman. Through themicrofinance programme, the couple has saved consistently andnow has taken a loan to meet their children’s educational expenses.Sikeli has opened an account for Etuba Store. He also borrowedto increase the store’s stock. Sikeli has attended a business skillstraining workshop in Sigatoka, from which he learnt about bulkbuying and record keeping for the business. He hopes to use theseskills in the future.

S

PROPRIETOR:

Sikeli & Litiana Naivucu

Mr. Kaliova TogaloaManager Security

(25 years)

Mr. Mikaele MatawaluCurrency Officer

(25 years)

Mr. Samuela KetedromoSecurity Officer

(25 years)

Mrs. Laitipa LaliqavotaFiling & Records Officer

(25 years)

Mr. Alipate BolabasagaHuman Resources Officer

(25 years)

2009 Governor’s Service Recognitionand Long Service Loyalty Award Recipients

Mr. Saliceni Leleca,Senior Security Officer

(25 years)

Mr. Inia NaiyagaSenior Advisor

to the Governors(35 years)


In November 2009, the Reserve Bank’s 30 Years ServiceRecognition Plaque was unveiled by RBF Board Direc-tor Mr. Iowane Naiveli. The names on the Plaque inc-lude Mr. Inia Naiyaga, Mr. Sada Reddy, Ms. Lily Wongand Mr. Barry Whiteside each of who completed their30 years of service to the Bank between 2004 and2007. During the year, the Governor and Chief Mana-gers also rewarded staff for exceptional performance.

Quality Performance Management

The Reserve Bank’s quality performance managementprogramme continued in 2009, with the objective ofachieving higher quality performance through buildingeffective teamwork. This was under the direction ofChief Managers, who are the major drivers of thisprogramme.

There are 16 quality teams in the Bank and membersmet regularly during the year. These self-driven teams focused on work process improvements and buildingeffective work relationships.

General Administration Services

The Reserve Bank tendered and renewed its insurancerisks during its annual insurance renewal programme.Other general administration services of providingtransport, reception, stationery and supplies, logisticsfor official Reserve Bank functions and meetings weremanaged throughout the year. In the last quarter of2009, the new design of the staff corporate uniformswas finalised for issue in 2010.

Plant and Building

Work on the BRS continued and is expected to becompleted in 2010. During the year, repairs, main-tenance, refurbishments, office fit and cleaning of theexterior surface of the Reserve Bank were also com-pleted. The Tower 11 meeting room sound system wasupgraded with the installation of an Audio DigitalRecorder for the recording of presentations. The Rese-rve Bank also introduced energy management equip-ment as a cost saving efficiency measure.

Acknowledgement

The Reserve Bank Board wishes to thank the formerGovernor, Mr. Savenaca Narube, for his 29 years ofdevoted service, dedication and contribution to theReserve Bank of Fiji. The Board also sincerelyacknowledges the efforts and contribution of staff in2009.

The Board’s gratitude is also extended to theGovernment of Fiji, the IMF, the World Bank, theADB, SEACEN, PFTAC and regional central banksfor their continued support and assistance.

Furthermore, the Reserve Bank also wishes to expressits sincere appreciation to the Fiji Bank and FinanceSector Employees Union for its support and assistancein industrial matters.

MISSION: RECRUIT, DEVELOP AND RETAIN A PROFESSIONAL TEAM

Mr. Barry WhitesideDeputy Governor(1 March 2007)

Mr. Inia NaiyagaSenior Advisor

to the Governors(2 December 2004)

Mr. Sada ReddyGovernor andChairman of

the Board(8 December 2005)

Ms. Lily WongActing Deputy

Chief ManagerCurrency and

Corporate Services(16 March 2006)

30 Years Service Recognition Plaque


New innovation in the telecommunications andpayments system sectors have been brought to theforefront of supervision and emphasis will be placedon finding the right balance between providing anenabling regulatory framework and ensuring thesoundness and safety of depositors and the public.

Mobile Money

Conditional approvals were granted to two localcompanies in 2009 to undertake pilot projects formobile money. The Reserve Bank will develop anappropriate regulatory framework, including legislationand policy guidelines in 2010. This is consistent withthe Reserve Bank’s objective to deliver financial servicesto the poor and increasing the outreach of basic fin-ancial services to remote and rural areas in Fiji.

Capital Market Developments

The Reserve Bank will draft a 10-year Capital MarketsMaster Plan in 2010. The Master Plan will establishthe direction and strategies for the long-termdevelopment of capital markets. It will ensure that thecapital markets are well positioned to support nationaleconomic growth and are able to face challenges fromregional competition and globalisation.

The formulation and initial implementation of theMaster Plan will be carried out by the Capital MarketsAdvisory and Development Taskforce. This Taskforcewill be set up in 2010 and will be chaired by theGovernor. It will comprise eight other members fromthe private and public sectors.

Finally, a risk based supervision model for the capitalmarkets will be formulated and implemented in 2010.The model will be based on the Reserve Bank assigninga risk score to each intermediary, which will in turndetermine the supervisory approach to be taken.

Monetary Policy

The Reserve Bank will continue to implementappropriate monetary policy to safeguard its twinobjectives of maintaining low inflation and ensuringan adequate level of foreign reserves. In this respect,the Bank will work on a new monetary policy frame-work.

Reserve Bank of Fiji Act

The review of the Reserve Bank Act (1983) is expectedto be completed and presented to Cabinet in 2010.

Asset Management Bank

The Reserve Bank’s controllership of the AMB willcontinue in 2010 with preparations for the final windup of the AMB.

Currency Review

In 2010, the Reserve Bank will introduce the newsmaller and lighter $1 coins, which will cocirculatewith the old $1 coins. The Bank will also reorderbanknotes and coins for circulation for the 2012 to2017 period.

Enhanced Supervision

The Reserve Bank continues to strengthen its capacityin its supervisory role. In 2010, focus will be on thereforms and formulation of supervisory policies ofFNPF.

Policies aimed at strengthening financial sectorresilience will also be rolled out for the banking andinsurance industries. Stress testing and lessons learntfrom other supervisors in the aftermath of the recentglobal financial crisis will also be given supervisoryfocus in 2010.

THE YEAR AHEAD

The Reserve Bank will continue to focus on fulfilling its core responsibilities in 2010. Listed below are areas wherespecial effort will be focussed.

46 Annual Report 2009

FINANCIAL STATEMENTS

CONTENTS

Directors’ report 47-48

Statement by directors 49

Independent auditors’ report to the Board of Directors of the Reserve Bank of Fiji 50

Statement of Comprehensive Income 51

Statement of changes in equity 52-53

Balance sheet 54

Statement of cash flows 55

Notes to and forming part of the financial statements 56-76

47

DIRECTORS’ REPORTRESERVE BANK OF FIJI


The Directors present their report together with the financial statements of the Reserve Bank of Fiji (“the Bank”)for the year ended 31 December 2009 and the auditors’ report thereon.

Directors

The Directors in office at the date of this report were:

Sada Reddy (Chairman and Governor – from 15 April 2009)John Prasad (Ex-officio member from 31 March 2009)Iowane NaiveliRobin YarrowAdish NarayanChandra DulareDeo Saran (from 11 February 2009)

State of affairs

In the opinion of the Directors:

• there were no significant changes in the state of affairs of the Bank during the financial year under review nototherwise disclosed in this report or the financial statements;

• the accompanying balance sheet and statement of changes in equity gives a true and fair view of the state of affairs of the Bank as at 31 December 2009 and the statement of comprehensive income, statement of changein equity and statement of cash flows give a true and fair view of the results of the Bank, its change in equityand its cash flows for the year then ended.

Principal activities

The Reserve Bank’s role as a central bank, as defined in the Reserve Bank of Fiji Act, is:

(a) to regulate the issue of currency and the supply, availability and international exchange of money;(b) to promote monetary stability;(c) to promote a sound financial structure;(d) to foster credit and exchange conditions conducive to the orderly and balanced economic development

of the country.

Trading results

The net profit of the Bank for the year ended 31 December 2009 was $16.60m (2008: $30.46m).

Reserves

There was no transfer to the General Reserves from net profit at year end as agreed between the Minister and theBoard, in accordance with Section 8(1)(c) of the Reserve Bank of Fiji Act.

Payable to Government

In accordance with the Reserve Bank of Fiji Act, the following amounts totalling $39.25m (2008: $33.03m) arepayable to the Government of Fiji:

Section 8(3): Net profit after transfer to General Reserves - $16.60m (2008: $30.46m)Section 34: One-fifth balance of Revaluation Reserve - $22.65m (2008: $2.57m)

Significant events

Devaluation of the Fiji dollar

On 15 April 2009, the Bank devalued the Fiji dollar by 20 percent. This had the impact of increasing the valueof all foreign currency balances held by the Bank.


DIRECTORS’ REPORT (continued)Significant events (continued)


Transfer of Capital Markets Development Authority (“CMDA”) to Reserve Bank of Fiji

The CMDA was established under the CMDA Act, 1996 and was responsible for the development and regulationof capital markets in the Fiji Islands.

On 13 August 2009, the Government of Fiji issued a decree (Capital Markets Decree 2009) dissolving the CMDA.The decree required the transfer of all capital market and administration functions to the Reserve Bank of Fiji.CMDA is now a business unit of the Reserve Bank of Fiji.

All moveable property vested in and all assets, interest, rights, privileges, liabilities and obligations of the CMDAwere transferred to and vested in the Reserve Bank of Fiji.

Bad and doubtful debts

The Directors took reasonable steps before the financial statements of the Bank were made out to ascertain thatall known bad debts were written off and adequate allowance was made for doubtful debts.

At the date of this report, the Directors are not aware of any circumstances which would render the amountwritten off for bad debts, or the amount of the allowance for doubtful debts, inadequate to any substantial extent.

Provisions

There were no material movements in provisions during the year apart from the normal amounts set aside forsuch items as doubtful debts, depreciation and employee entitlements.

Assets

The Directors took reasonable steps before the Bank’s financial statements were made out to ascertain that theassets of the Bank were shown in the accounting records at a value equal to or below the value that would beexpected to be realised in the ordinary course of business.

At the date of this report, the Directors were not aware of any circumstances which would render the valuesattributable to the assets in the financial statements misleading.

Directors’ benefits

No Director of the Bank has, since the end of the previous financial year, received or become entitled to receivea benefit by reason of contract made by the Bank with the Director or with a firm of which the Director is amember, or with a company in which the Director has substantial financial interest.

Events subsequent to balance date

There has not arisen in the interval between the end of the financial year and the date of this report any item,transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Bank, to affectsignificantly the operations of the Bank, the results of those operations, or the state of affairs of the Bank, in futurefinancial years.

Other circumstances

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this reportor financial statements which render amounts stated in the financial statements misleading.

Dated at Suva this of March 2010.

Signed in accordance with a resolution of the Directors:

Iowane NaiveliDirector

Sada ReddyGovernor

49

STATEMENT BY DIRECTORSRESERVE BANK OF FIJI


In the opinion of the Directors:

(a) the accompanying statement of comprehensive income is drawn up so as to give a true and fair view of theresults of the Bank for the year ended 31 December 2009;

(b) the accompanying balance sheet is drawn up so as to give a true and fair view of the state of affairs of theBank as at 31 December 2009;

(c) the accompanying statement of changes in equity is drawn up so as to give a true and fair view of the move-ment in equity for the year ended 31 December 2009;

(d) the accompanying statement of cash flows statement is drawn up so as to give a true and fair view of thecash flows of the Bank for the year ended 31 December 2009;

(e) the financial statements have been properly prepared in accordance with International Financial ReportingStandards except as noted in note 1(c) to the financial statements. In accordance with the provisions ofSection 34 of the Reserve Bank of Fiji Act, 1983, exchange gains and losses are credited or charged directlyto the ‘Revaluation reserve account – foreign currency’ and are not included in the computation of annualprofits or losses of the Bank. This is at variance with International Financial Reporting Standard IAS 21“Effects of Changes in Foreign Exchange Rates” which requires that exchange gains and losses be creditedor charged to the profit and loss.

In the opinion of the Directors, the accounting treatment adopted is appropriate in view of the requirementof Section 34 of the Reserve Bank of Fiji Act, 1983.

For and on behalf of the Board of Directors by authority of a resolution of the Directors this of March2010.


Sada ReddyGovernor


INDEPENDENT AUDITORS’ REPORT TO THE BOARD OF DIRECTORSOF THE RESERVE BANK OF FIJI

Suva CentralRenwick RoadSuva

PO Box 32SuvaFiji Islands

Telephone (679) 330 1155Fax (679) 330 1312Email [email protected]

Scope

We have audited the financial statements of Reserve Bank of Fiji for the year ended 31 December 2009, consistingof the statement of comprehensive income, statement of changes in equity, balance sheet, statement of cash flowsand accompanying notes, set out on pages 56 to 76. The Bank’s Directors are responsible for the preparation andpresentation of the financial statements and the information they contain. We have conducted an independentaudit of these financial statements in order to express an opinion on them to the Directors of the Bank.

Our audit has been conducted in accordance with Fiji Standards on Auditing to provide reasonable assurance asto whether the financial statements are free of material misstatement. Our procedures included examination,on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and theevaluation of accounting policies and significant accounting estimates. These procedures have been undertakento form an opinion as to whether, in all material respects, the financial statements are presented fairly in accordancewith International Financial Reporting Standards and statutory requirements so as to present a view which isconsistent with our understanding of the Bank's financial position and the result of its operations, its changes inequity and its cash flows.

Qualification

As noted in Note 1 (c) to the financial statements, exchange gains and losses in the amount of $102.95m arecredited directly to the ‘Revaluation reserve account – foreign currency’ as required under Section 34 of theReserve Bank of Fiji Act, 1983. This accounting treatment is not in accordance with International FinancialReporting Standard IAS 21 “Effects of Changes in Foreign Exchange Rates” which requires exchange gains andlosses to be credited or charged to the profit and loss.

Accordingly, had the Bank adopted IAS 21, the ‘Revaluation reserve account – foreign currency’ would have beenreduced by $82.36m, being the net exchange gains transferred to the Revaluation reserve account of $102.95moffset by an increase of $20.59m in amount payable to the Government of Fiji resulting in a balance of $8.23mas at 31 December 2009. The net profit for the year would have been increased by $102.95m to $119.55m,being the exchange gains for the year.

Qualified audit opinion

In our opinion, except for the effects of non-compliance with IAS 21 as noted above, the financial statements givea true and fair view of the financial position of the Reserve Bank of Fiji as at 31 December 2009, and of its financialperformance and its cash flows for the year then ended in accordance with International Financial ReportingStandards (“IFRS”) and the Reserve Bank of Fiji Act, 1983.

Suva, Fiji Islands 2010

KPMGChartered Accountants

KPMG, a Fiji Islands partnership, is part of the KPMG International network.KPMG International is a Swiss cooperative.

51

STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2009



The statement of comprehensive income is to be read in conjunction with the notes to and forming part of the financial statementsset out on pages 56 to 76.

Note 2009 2008$000 $000

IncomeInterest income 3(a) 39,974 49,001Net gains on realisation of securities 513 1,310Net gains on currency trading 4 -Other revenue 3(b) 1,067 1,282

Total income 41,558 51,593

ExpensesInterest expense 3(c) 1,515 3,088Net losses on currency trading - 84Amortisation of securities 1,402 1,656Administration expenses 3(d) 12,443 11,811Other expenses 3(e) 9,598 4,494

Total expenses 24,958 21,133

Net profit 10 16,600 30,460

Fair value gains 19,709 6,411Net gains arising from translation of foreigncurrency balances to Fiji currency 102,952 1,726Movement in property revaluation reserve taken to equity - 7,990

Other comprehensive income for the period 122,661 16,127

Total comprehensive income 139,261 46,587


STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2009


Paid Upcapital

Revaluationreserve

account-foreign

currency

Available-for -sale reserve

AssetRevaluation

reserve

RetainedEarnings

Total

$000 $000 $000 $000 $000 $000 $000

Generalreserves

Balance at 1 January 2008 2,000 39,050 11,129 8,290 - - 60,469

Total comprehensive income for the period

Profit or loss - - - - - 30,460 30,460

Other comprehensive income

Fair value gains - - - 6,411 - - 6,411Net gains arising from translation offoreign currency balances to Fiji currency - - 1,726 - - - 1,726Movement in property revaluationreserve taken to equity - - - - 7,990 - 7,990Total other comprehensive income - - 1,726 6,411 7,990 - 16,127

Total comprehensive incomefor the period - - 1,726 6,411 7,990 30,460 46,587

Transactions with owners, recordeddirectly in equity.Payable to the Government of the Fiji Islands - - (2,571) - - (30,460) (33,031)

Balance at 31 December 2008 2,000 39,050 10,284 14,701 7,990 - 74,025

The statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 56 to 76.

53Reserve Bank of Fiji

Paid Upcapital

Revaluationreserve

account-foreign

currency

Available-for -sale reserve

AssetRevaluation

reserve

RetainedEarnings

Total

$000 $000 $000 $000 $000 $000 $000

Generalreserves

Balance at 1 January 2009 2,000 39,050 10,284 14,701 7,990 - 74,025

Total comprehensive income for the period

Profit or loss - - - - - 16,600 16,600

Other comprehensive income

Fair value gains - - - 19,709 - - 19,709Net gains arising from translation offoreign currency balances to Fiji currency - - 102,952 - - - 102,952

Total other comprehensive income - - 102,952 19,709 - - 122,661

Total comprehensive income for the period - - 102,952 19,709 - 16,600 139,261

Transactions with owners, recordeddirectly in equity.Payable to the Government of the Fiji Islands - - (22,647) - - (16,600) (39,247)

Balance at 31 December 2009 2,000 39,050 90,589 34,410 7,990 - 174,039

STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2009


The statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 56 to 76.


BALANCE SHEETAs at 31 December 2009


The balance sheet is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 56 to 76.

Note 2009 2008$000 $000

Foreign currency assetsShort-term commercial paper and current accounts 4 397,998 250,129Marketable securities 4 439,712 245,685Gold 4 1,748 1,279Accrued interest 4 6,635 9,997International Monetary Fund- Reserve tranche position 4/16 48,399 42,963- Special drawing rights holdings 4/16 202,765 18,638- PRGF - HIPC Trust 4 587 -- Currency subscription 16 164,154 148,043

Total foreign currency assets 1,261,998 716,734

Local currency assetsCash on hand 13 1,620 603Domestic securities 5 228,506 160,421Other assets 6 24,232 19,691Intangible assets 7 1,034 1,331Property, plant and equipment 8 23,741 22,417

Total local currency assets 279,133 204,463

Total assets 1,541,131 921,197

Foreign currency liabilitiesAccrued interest and charges - 3Demand deposits 9 91 8IMF - Special drawing rights allocation 16 202,861 18,905

Total foreign currency liabilities 202,952 18,916

Local currency liabilitiesDemand deposits 9 300,218 66,068Payable to government 10 39,247 33,031Currency in circulation 11 431,480 390,913Statutory reserve deposits 227,432 188,895IMF - notes currency subscription 162,733 146,236Other liabilities 12 3,030 3,113

Total local currency liabilities 1,164,140 828,256

Total liabilities 1,367,092 847,172

Net assets 174,039 74,025

Capital and reservesPaid-up capital 14 2,000 2,000General reserve 15 39,050 39,050Revaluation reserve account - foreign currency 15 90,589 10,284Available-for-sale reserve 15 34,410 14,701Asset revaluation reserve 15 7,990 7,990

174,039 74,025

Signed in accordance with the resolution of the Directors:


Sada ReddyGovernor

55

STATEMENT OF CASH FLOWSFor the year ended 31 December 2009



Note 2009 2008$000 $000

Operating activities

Rental lease income 279 348Numismatic sales 144 350Currency trading 4 (84)Interest received and securities trading income 41,342 54,954Other income 938 725Interest paid (1,448) (3,149)New currency payments (6,449) -Administration and other expenses (13,031) (10,665)

Cash flows from operating activities 21,779 42,479

Investing activities

Net movement of domestic securities (46,414) 14,739Purchase of property, plant & equipment and intangibles (3,709) (2,571)Net movement of bonds (57,014) 35,229Net movement in gold (469) (201)Net movement in short-term commercial papers (18,415) 124,492Net movement in fixed deposit accounts (140,369) 9,117Net movement in International Monetary Fund accounts (4,950) (5,532)Net movement in other receivables (3,136) (137)

Cash flows (used in)/from investing activities (274,476) 175,136

Financing activities

Net movement in currency in circulation 40,568 8,646Net movement in demand deposits 234,142 (293,459)Net movement in statutory reserve deposits 38,537 (5,304)Payment to the Fiji Government (33,031) (22,152)

Cash flows from/(used in) financing activities 280,216 (312,269)

Net effect of exchange rate 102,952 1,726

Net increase/(decrease) in cash 130,471 (92,928)

Cash at the beginning of the financial year 165,876 258,804

Cash at the end of the financial year 13 296,347 165,876

The statement of cash flows is to be read in conjunction with the notes to and forming part of the financial statements set outon pages 56 to 76.


1. Statement of significant accounting policies

The significant policies, which have been adopted in the preparation of these financial statements, arenoted below:

(a) Statement of compliance

The financial statements have been drawn up in accordance with the provisions of the ReserveBank of Fiji Act, 1983, International Financial Reporting Standards (“IFRS”) and other disclosurerequirements of the Fiji Institute of Accountants except as detailed in note (c) below.

(b) Basis of preparation

Reserve Bank of Fiji (“the Bank”) operates under the Reserve Bank of Fiji Act, 1983. The financialstatements are prepared on the historical cost basis except for the following:

• available-for-sale financial assets are measured at fair value• held to maturity financial assets are measured at amortised cost• property is measured at fair value.

The accounting policies as set out below have been applied consistently and, except where thereis a change in accounting policy are consistent with those of the previous year.

(c) Foreign currency

Foreign currencies have been translated to Fiji currency at rates of exchange ruling at year end.

In accordance with the provisions of Section 34 of the Reserve Bank of Fiji Act, 1983 exchangegains and losses are credited or charged directly to the ‘Revaluation reserve account - foreigncurrency’ and are not included in the computation of annual profits or losses of the Bank.

This is at variance with International Financial Reporting Standard IAS 21 “Effects of Changes inForeign Exchange Rates” which requires that exchange gains and losses be credited or charged toprofit and loss.

In accordance with Section 34, losses arising from such fluctuations are set off against any creditbalance in the ‘Revaluation reserve account - foreign currency’; if such balance is insufficient tocover such losses, Government is required to transfer to the ownership of the Bank non-negotiablenon-interest bearing securities to the extent of the deficiency. Any credit balance in the Revaluationreserve account at the end of each year is applied first, on behalf of Government, to the redemptionof any non-negotiable non-interest bearing notes previously transferred to the Bank by Governmentto cover losses and thereafter one-fifth of any remaining balance is paid to Government.

In the opinion of the Directors, the accounting treatment adopted is appropriate in view of therequirement of Section 34 of the Reserve Bank of Fiji Act, 1983. Had the Bank adopted IAS 21 anet profit of $119.55m would have been reported, an increase of $102.95m, being the exchangegains for the year.

(d) Financial assets and liabilities

Investment securities

The Bank defines its investment securities into the following three categories: held-to-maturity,held-for-trading and available-for-sale assets.

Investment securities with fixed maturities where the Bank has both the intent and the ability tohold to maturity are classified as held-to-maturity. Investment securities to be held for an indefiniteperiod of time, which may be sold in response to needs for liquidity or changes in interest rate,exchange rates or equity prices, are classified as held-for-trading. Investment securities that are notclassified in any of the other categories are classified as available-for-sale. The Bank determines theappropriate classification of its investments at the time of the purchase.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFor the year ended 31 December 2009





1. Statement of significant accounting policies (continued)

(d) Financial assets and liabilities (continued)

Investment securities (continued)

Investment securities are initially recognised at cost (which includes transactions costs). Held-for-trading financial assets are valued at market value. Unrealised gains and losses arising from thevaluation adjustments of these securities at year end are included in the computation of annualprofits or losses of the Bank.

Held-to-maturity investments are carried at amortised cost. Any premium or discount on purchaseis capitalised and amortised over the term of the maturity on a constant yield to maturity basis.

Available-for-sale financial assets are carried at fair value. Unrealised gains and losses arising fromchanges in the fair value are recognised in other comprehensive income. When available-for-salefinancial assets are sold or impaired, the accumulated fair value adjustments are included in thestatement of comprehensive income as gains and/or losses.

All purchases and sales of investment securities are recognised at settlement date, which is the datethat the asset is transferred to/from the Bank.

Other financial assets and liabilities

Local and foreign cash, deposits and short-term advances are valued at transaction date value. Reserve Bank of Fiji notes are valued at amortised cost.

(e) Gold

Gold is valued at the market price ruling at year end.

(f) Numismatic items

The Bank sells or receives royalties on notes and coins which are specifically minted or packagedas numismatic items. These numismatic items have not been accounted for as currency in circulationas they are not issued for monetary purposes. In terms of Section 55(2) of the Reserve Bank of FijiAct, 1983 the Minister has specified by notice made under the provisions of paragraph (b) of theprovision to Section 31 of the Act that the Bank shall not be required to include the face value ofthese numismatic items in circulation in its financial statements. It is considered that no materialliability will arise in respect of these numismatic items.

(g) Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents includes cash held atbank, short-term commercial paper and current accounts.

(h) Currency inventory

Currency inventory relates to notes and coins purchased for circulation. The amount expensed inthe statement of comprehensive income is based on the cost of notes and coins that are issued forcirculation. It is estimated that this supply will meet requirements up to the period 2014.

(i) Loans and advances

Loans are carried at recoverable amount represented by the gross value of the outstanding balanceadjusted for an allowance for bad and doubtful debts.

A specific allowance for bad and doubtful debts is made based on the appraisal carried out at yearend. Movement in the allowance is charged to the statement of comprehensive income.




All known bad debts are written off against the allowances in the year in which they are recognised.Bad debts, in respect of which no specific allowances have been established, are charged directlyto the statement of comprehensive income.

(j) Demand deposits

Demand deposits representing funds placed with the Bank by financial institutions and centralbanks are brought to account on a cost basis. These deposits are at call.

(k) Currency in circulation

The exclusive rights of national currency issue are vested with the Bank. Currency in circulationcomprises bank notes and coins issued by the Bank and represent a claim on the Bank in favour ofthe holder. The liability for currency in circulation is recorded at face value.

(l) Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation andimpairment losses. The cost of property, plant and equipment at 1 January 2006, the date oftransition to IFRSs, was determined by its fair value at that date. Costs include expenditures thatare directly attributable to the acquisition of the asset.

Depreciation

Items of capital expenditure, with the exception of freehold land, are depreciated on a straight linebasis over the following estimated useful lives (in years):Improvements 5-15Freehold buildings 50Motor vehicles 6Computers and equipment 4-5Plant & machinery, equipment & furniture & fittings 5-10

Assets are depreciated from the date of acquisition. Expenditure on repairs and maintenance ofproperty, plant and equipment incurred which does not add to future economic benefits expectedfrom the assets is recognised as an expense when incurred.

(m) Intangible assets

Acquired intangible assets comprises of computer software and are initially recorded at their costat the date of acquisition being the fair value of the consideration provided plus incidental costsdirectly attributable to the acquisition. Intangible assets with finite useful lives are amortised ona straight line basis over the estimated useful lives of the asset being the period in which the relatedbenefits are expected to be realised (shorter of legal duration and expected economic life). Amortisation rates and residual values are reviewed annually and any changes are accounted forprospectively. The per annum amortisation rates used for each class of assets is as follows:

Intangible assets 25%

(n) Statutory reserve deposit (“SRD”)

Under Section 40 of the Reserve Bank of Fiji Act, 1983, the Reserve Bank may specify the reservesrequired by each financial institution, to be maintained against deposits and other similar liabilities.However, under Section 31 of the National Bank of Fiji Restructuring Act, 1996, this section doesnot apply to the Asset Management Bank (“AMB”).


(i) Loans and advances (continued)





(n) Statutory reserve deposit (“SRD”) (continued)

SRD holdings requirements were 5% of commercial banks’ deposits and similar liabilities from 7April 2009 to 7 December 2009. Prior to 7 April 2009, SRD holdings requirements were 6%.Effective from 7 December 2009, the SRD requirements is 7%.

Interest was payable on this deposit at a rate of 0.9% per annum from 2 February 2009 to 7December 2009. Prior to 2 February 2009, this deposit was pegged to the preceding month’sweighted average 91-day Treasury bill rate plus a margin of 50 basis points. Effective from 7December 2009, the interest rate is fixed at 0.5% per annum.

(o) Impairment

The carrying amounts of the Bank’s assets are reviewed at balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the assets recoverable amountis estimated. An impairment loss is recognised whenever the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. Impairment losses are recognised in thestatement of comprehensive income.

(p) Employee entitlements

Short-term benefits

Short-term employee benefits comprising of annual leave are measured on an undiscounted basisand are expensed as the related service is provided.

Other long-term employee benefits

The Bank’s net obligation in respect of long-term benefits is the amount of future benefit that em-ployees have earned in return for their service in the current and prior period; that benefit is dis-counted to determine its present value. The discount rate is based on the domestic bond portfolio.

(q) Income tax

The Bank is exempt from income tax in accordance with Section 57 of the Reserve Bank of FijiAct, 1983.

(r) Revenue recognition

Interest income

Interest income is brought to account in profit or loss on an accruals basis.

Income from available-for-sale securities

Gains and losses realised from the sale of available-for-sale securities are reflected in profit or loss.

(s) Operating leases

Where the Bank is the lessee, the lease rentals payable on operating leases are recognised in com-prehensive income over the term of the lease.

Where the Bank is the lessor, the assets leased out are retained in property, plant & equipment.

(t) Comparative figures

Where necessary, comparative figures have been changed to conform to changes in presentationin the current year.

(u) Rounding

Amounts in the financial statements are rounded to the nearest thousand dollars unless otherwisestated.




2. Transfer of Capital Markets Development Authority (“CMDA”) to Reserve Bank of Fiji

The CMDA was established under the CMDA Act, 1996 and was responsible for the development andregulation of capital markets in the Fiji Islands.

On 13 August 2009, the Government of Fiji issued a decree (Capital Markets Decree 2009) dissolvingthe CMDA. The decree required the transfer of all capital market and administration functions to theReserve Bank of Fiji. CMDA is now a business unit of the Reserve Bank of Fiji.

The assets and liabilities were transferred to the Bank on 13 August 2009.

Fairvalues on

transferdate

$000AssetsCash 643Plant and equipment 84Intangible assets 5Other assets 15

Total assets 747

LiabilitiesOther liabilities 283Deferred income 464

Total liabilities 747

As at 31 December 2009, the Capital Markets Unit had cash at bank balance of $134,000 and deemedincome of $193,000.

2009 2008$000 $000

3. (a) Interest income

Overseas investments 23,621 35,245International Monetary Fund 250 1,779Domestic securities 16,035 11,909Loans and advances 68 68

39,974 49,001 (b) Other revenue

Rent received 286 348Numismatic sales 213 350License and application fees 298 193Other miscellaneous income 270 391

1,067 1,282(c) Interest expense

Statutory reserve deposits 1,433 2,444International Monetary Fund 67 556Other 15 88

1,515 3,088(d) Administration expenses

Staff costs 8,622 8,411Other costs 3,821 3,400

12,443 11,811

Total number of employees at year end 200 171

2009 2008$000 $000




2009 2008$000 $000

3. (e) Other expenses

Depreciation 1,339 1,119Amortisation of intangible assets 541 448Auditors remuneration 20 20Board remuneration 44 41Write off of old notes and coins 2,541 490Currency issue 5,081 2,363Numismatic 32 13

9,598 4,494

4. External Reserves

Under the provisions of Section 31 of the Reserve Bank of Fiji Act, 1983, the value of the ExternalReserves provided for in Section 30 shall not be less than 50% of the total demand liabilities of theBank. At 31 December 2009, the value of the external reserves was 105% (2008: 91%) of totaldemand liabilities.

External Reserves comprise the following:

Short-term commercial paper 297,663 140,981Current accounts 100,335 109,148

397,998 250,129Marketable securities - Fixed term deposits 199,663 59,294 - Bonds 240,049 186,391

439,712 245,685

Gold 1,748 1,279

Accrued interest 6,635 9,997

International Monetary Fund- Reserve tranche position 48,399 42,963- Special drawing rights holdings 202,765 18,638- PRGF - HIPC Trust 587 -

251,751 61,601

Total external reserves 1,097,844 568,691

5. Domestic securities

Held to maturity (a) 130,571 135,248

Available-for-sale (b)

Government of Fiji bonds 72,287 25,173

Fiji Sugar Corporation bonds 25,648 -

97,935 25,173

228,506 160,421

(a) These securities have varying maturity dates up to 20 years. These securities are purchased in thesecondary market and it is the Bank’s intention to hold these investments to maturity. During theyear $1.402m (2008: $1.656m) was amortised in respect of securities held in this category.

(b) Domestic securities underwritten by the Bank are classified as available-for-sale. These securitieshave maturities dates up to 2029.




2009 2008$000 $000

5. Domestic securities (continued)

Reconciliation of available-for-sale financial assets

Opening balance 25,173 26,193Investments 74,083 -Redeemed at maturity (25,000) -Fair value gains/(losses) 23,679 (1,020)

Total investments 97,935 25,173

6. Other assetsAccrued interest 3,973 1,716Currency inventory 15,455 16,628Other assets and prepayments 3,468 55

22,896 18,399

Staff loans and advances 1,338 1,294Allowance for doubtful debts on staff loans and advances (2) (2)

1,336 1,292

24,232 19,691

7. Intangible assets

CostBalance at 1 January 2009 3,251 3,132Net transfers from CMDA 5 -Acquisitions 243 119Disposals (11) -

Balance at 31 December 2009 3,488 3,251

Accumulated amortisationBalance at 1 January 2009 1,920 1,472Amortisation charge for the year 541 448Disposals (7) -

Balance at 31 December 2009 2,454 1,920

Carrying amountAt 1 January 2009 1,331 1,660

At 31 December 2009 1,034 1,331




8. Property, plant and equipment

Freeholdland andbuildings

Motorvehicles

Computersand

equipment

Plant &machinery,

equipment &furniture &

fittings

Work inprogress

Total

$000 $000 $000 $000 $000 $000 $000

Improvements

Cost/ValuationBalance at 1 January 2009 18,220 2,657 264 1,812 4,665 799 28,417Net transfers from CMDA - - 32 - 52 - 84Additions - 223 64 301 3 2,875 3,466Disposals/transfers - - (88) (30) (20) (833) (971)

Balance at 31 December 2009 18,220 2,880 272 2,083 4,700 2,841 30,996

Accumulated depreciationBalance at 1 January 2009 - 2,289 108 1,264 2,339 - 6,000Depreciation for the year 643 76 45 243 332 - 1,339Depreciation on disposals - - (45) (27) (12) - (84)

Balance at 31 December 2009 643 2,365 108 1,480 2,659 - 7,255

Carrying amountBalance at 1 January 2009 18,220 368 156 548 2,326 799 22,417

Balance at 31 December 2009 17,577 515 164 603 2,041 2,841 23,741

2009 2008$000 $000

9. Demand deposits

ForeignInternational Monetary Fund 91 8

LocalBanks’ exchange settlement balances 296,637 55,166Fiji Government 482 5,842State NBF Trust account 1,310 1,030International Monetary Fund 1,422 1,807Other depositors 367 2,223

300,218 66,068

In accordance with an agreement dated 12 September 1996 between the Sovereign Democratic Republicof Fiji and the Reserve Bank of Fiji and NBF Asset Management Bank (AMB), the State established a trustaccount, known as the State NBF Trust Account, with the Reserve Bank of Fiji, on the basis, among otherthings, that all money in the trust account is the property of the State at all times. The purpose of the StateNBF Trust Account is to meet the obligations of the AMB.

The National Bank of Fiji Restructuring Act, 1996, provides that the State, the Reserve Bank of Fiji andAMB may at any time enter into one or more deeds, agreements, arrangements and understandings relatingto the performance by the State of its obligations under the guarantees of deposits with AMB.

From 1 April 2007, under Section 30(2)(c)(i) of the Banking Act 1995, Cabinet agreed that the Bank assumecontrollership and the ultimate winding down process of the AMB. It also permits the Bank to use moneyfrom the State NBF Trust Account to meet any controllership expenses.




2009 2008$000 $000

10. Payable to Government

Net profit 16,600 30,460One-fifth balance of ‘Revaluation reserve account – foreign currency’ 22,647 2,571

39,247 33,031

The amount payable to the Government of Fiji is made in accordance with Section 8(3) of the ReserveBank of Fiji Act.

11. Currency in circulation

Notes 403,314 364,864Coins 28,166 26,049

431,480 390,913

The exclusive rights of national currency issue are vested with the Reserve Bank. Currency in circulationcomprises bank notes and coins issued by the Reserve Bank.

12. Other liabilities

CurrentEmployee entitlements 1,042 916Other liabilities 1,988 2,197

3,030 3,113

13. Cash and cash equivalents

Cash and cash equivalents included in the statement of cash flows comprise of the following:

Cash on hand – local currency 1,620 603Cash and cash equivalents – foreign currency 294,727 165,273

296,347 165,876

Cash and cash equivalents – foreign currency forms part of short-term commercial paper and currentaccounts in Note 4.

14. Share capital

Authorised capital stock 5,000 5,000

Issued and paid-up capital stock 2,000 2,000

15. Reserves

Reserves are maintained to cover the broad range of risks to which the Bank is exposed.

General reserve

The General reserve provides for events which are contingent and which are non-foreseeable. Transfersto this account from retained earnings can only take place following an agreement between the Ministerfor Finance and the Board of Directors, in accordance with Section 8(1)(c) of the Reserve Bank of FijiAct.




15. Reserves (continued)

Available-for-sale reserve

This reserve records fair value gains and losses on available-for-sale investments of the Bank.

Revaluation reserve account – foreign currency

Exchange gains and losses arising from revaluation of foreign currencies are transferred to the Revaluationreserve account – foreign currency (refer note 1(c))

16. International Monetary Fund

The Bank was designated to serve with effect from 17 December 1976 as the Government of theRepublic of Fiji Island’s fiscal agent for the purposes of the International Monetary Fund (“IMF”),and assumed the Republic of Fiji Island's obligation of membership from that date.

As at 31 December 2009, the Republic of Fiji Island’s membership subscription to the InternationalMonetary Fund remained at $212.55m (2008: $191.00m). Of this amount $48.40m (2008: $42.96m) is shown as Reserve tranche position and is included as part of the External Reserves of theReserve Bank (refer note 4) and the balance representing the local currency subscription portion of$164.15m (2008: $148.04m) is held mainly in the form of a non-interest bearing notes payable ondemand.

Special drawing rights holdings (“SDR”) is an interest bearing international reserve asset createdby the IMF and is allocated to members on the basis of their quotas in the IMF. During the year, theIMF allocated $190m to Fiji as part of the global financial assistance due to the global and economicfinancial crisis. As at balance date this is shown as Special drawing rights holdings (asset) which hasa balance of $202.76m (2008: $18.64m) and is included as part of External Reserves of the Bank(refer to note 4) and IMF – Special drawing rights allocation (liability) with a balance of $202.86m(2008: $18.91m).

17. Principal activities

The Reserve Bank’s role as a central bank, as defined in the Reserve Bank of Fiji Act, is:(a) to regulate the issue of currency and the supply, availability and international exchange of

money;(b) to promote monetary stability;(c) to promote a sound financial structure;(d) to foster credit and exchange conditions conducive to the orderly and balanced economic

development of the country.

18. Risk management policies

a) Introduction and overview

The Reserve Bank is involved in policy oriented activities. The Bank identifies risks and implementscontrols in its operation and management of foreign reserves holdings. The main financial risks thatthe Bank faces include:

• liquidity risk• credit risk• market risk• operational risk

This note presents information about the Bank’s exposure to each of the above risks, the Bank’sobjectives, policies and procedures for measuring and managing risk.


18. Risk management policies (continued)

Risk management framework

Like most central banks, the nature of the Bank’s operations creates exposures to a range of operationaland reputational risks. The Board of Directors has overall responsibility of the establishment andoversight of the Bank’s risk management framework.

Bank management seeks to ensure that strong and effective risk management and controls systemsare in place for assessing, monitoring and managing risk exposures. Internal audit forms part of theBank’s risk management framework. This function reports to the Governor and the Board AuditCommittee on internal audit and related issues. All Bank groups are subject to periodic internal auditreview.

The majority of the Bank’s financial risks arise from the management of foreign and domestic invest-ments. The Middle Office is responsible for monitoring and reporting compliance with the riskpolicies.

The Bank is subject to an annual external audit. Both external and internal audit arrangements areoverseen by the Board Audit Committee comprising three of the Board’s Directors. The Committeemeets regularly and reports to the Board of Directors on its activities.

b) Liquidity risk

Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated withits financial liabilities that are settled by delivering cash or another financial asset.

Management of liquidity risk

To limit the liquidity risk, the Bank maintains an adequate level of reserves and taking into considerationthe transaction demand on foreign exchange, ensures that an acceptable amount is maintained in cur-rent accounts at all times. The Bank invests in high quality instruments, including commercial paperand debt issued by Governments and Supranationals, all of which are easily converted to cash (referto maturity analysis on liquidity).

Exposure to liquidity risk

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to totaldemand liabilities. The Bank’s investment guidelines requires that minimum value of foreign currencyassets to be held at any point shall not be less than 50% of the total demand liabilities of the Bank.(Demand liabilities include currency in circulation but exclude non interest bearing notes issued tointernational financial institutions).





b) Liquidity risk (continued)

Maturity analysis as at 31 December 2009

0 - 3Months

3 - 12Months

1 - 5Years

Over 5Years

No SpecificMaturity

Total

$000 $000 $000 $000 $000 $000

Foreign currency assets

Short-term commercial paperand current accounts 294,727 103,271 - - - 397,998Marketable securities 131,715 247,273 60,724 - - 439,712Gold 1,748 - - - - 1,748Accrued interest 6,635 - - - - 6,635IMF: - Reserve tranche position 48,399 - - - - 48,399

- Special drawing rights holdings 202,765 - - - - 202,765 - PRGF - HIPC Trust - - - 587 - 587

- Currency subscription 164,154 - - - - 164,154

850,143 350,544 60,724 587 - 1,261,998

Local currency assets

Cash on hand 1,620 - - - - 1,620Domestic securities 2,012 28,156 86,694 111,644 - 228,506Other assets 4,894 1,602 11,621 6,115 - 24,232Intangibles - - - - 1,034 1,034Property, plant & equipment - - - - 23,741 23,741

8,526 29,758 98,315 117,759 24,775 279,133

858,669 380,302 159,039 118,346 24,775 1,541,131Total assets

Foreign currency liabilitiesDemand deposits 91 - - - - 91IMF - Special drawing rights allocation - - - - 202,861 202,861

91 - - - 202,861 202,952Local currency liabilities

Demand deposits 300,218 - - - - 300,218Payable to Government 39,247 - - - - 39,247Currency in circulation - - - - 431,480 431,480Statutory reserve deposit - - - - 227,432 227,432IMF - Notes currency subscription - - - - 162,733 162,733Other liabilities 572 829 1,042 587 - 3,030

340,037 829 1,042 587 821,645 1,164,140

Total liabilities 340,128 829 1,042 587 1,024,506 1,367,092

Net assets 174,039





b) Liquidity risk (continued)

Maturity analysis as at 31 December 2008

0 - 3Months

3 - 12Months

1 - 5Years

Over 5Years

No SpecificMaturity

Total

$000 $000 $000 $000 $000 $000


Short-term commercial paperand current accounts 165,273 84,856 - - - 250,129Marketable securities 43,429 36,476 165,780 - - 245,685Gold 1,279 - - - - 1,279Accrued interest 9,997 - - - - 9,997IMF: - Reserve tranche position 42,963 - - - - 42,963 - Special drawing rights holdings 18,638 - - - - 18,638 - Currency subscription 148,043 - - - - 148,043

429,622 121,332 165,780 - - 716,734

Local currency assets

Cash on hand 603 - - - - 603Domestic securities 18,069 9,831 92,588 39,933 - 160,421Other assets 2,237 1,328 10,147 5,979 - 19,691Intangible assets - - - - 1,331 1,331Property, plant & equipment - - - - 22,417 22,417

20,909 11,159 102,735 45,912 23,748 204,463

Total assets 450,531 132,491 268,515 45,912 23,748 921,197

Foreign currency liabilities

Accrued interest & charges 3 - - - - 3Demand deposits 8 - - - - 8IMF - Special drawing rights allocation - - - - 18,905 18,905

11 - - - 18,905 18,916

Local currency liabilities

Demand deposits 66,068 - - - - 66,068Reserve Bank of Fiji notes - - - - - -Payable to Government 33,031 - - - - 33,031Currency in circulation - - - - 390,913 390,913Statutory reserve deposit - - - - 188,895 188,895IMF - Notes currency subscription - - - - 146,236 146,236Other liabilities 2,191 6 916 - - 3,113

101,290 6 916 - 726,044 828,256

Total liabilities 101,301 6 916 - 744,949 847,172

Net assets 74,025




2009 2008$000 $000


c) Credit risk

Credit risk relates to the risk of loss to the Bank from the failure of a counter-party to a transactionto meet its contractual obligations and arises principally from the Bank’s investments and loans andadvances to customers and other banks.

For risk management purposes, the Bank prescribes minimum credit ratings acceptable for investmentand specifies the maximum permissible credit exposure to individual banks and countries. In addition,the number of commercial banks, with whom the Reserve Bank may deal with in foreign exchange,is limited by credit ratings and these banks must have minimum credit ratings of P1 and A for short-term debt and Aaa for long-term debt.

The Bank uses Standard and Poor’s, Moody’s and Fitch credit ratings for assessing the credit risk offoreign counterparties. The credit ratings of counterparties are on “watch” all the time and areupdated as new market information is available. Foreign exchange limits per bank are imposed for allcurrency dealings.

The total exposure of credit risk in the Bank’s portfolio is as follows:

Foreign currency assetsShort-term commercial paper and current accounts 397,998 250,129Marketable securities 439,712 245,685International Monetary Fund 415,905 209,644

1,253,615 705,458Local currency assets

Domestic securities 228,506 160,421Staff loans and advances 1,338 1,294

229,844 161,715

1,483,459 867,173

2008 2008$000 %

2009 2009$000 %

The Bank monitors credit risk by country and sector. An analysis of concentrations of credit risk is shown below:

Concentration by countryUnited States 279,235 19 157,796 18Japan 32,379 2 31,260 4European countries 46,489 3 40,716 5Australia 285,744 20 159,042 18New Zealand 193,863 13 107,000 12International Monetary Fund 415,905 28 209,644 24Fiji 229,844 15 161,715 19

Total financial assets 1,483,459 100% 867,173 100%




2008 2008$000 %

2009 2009$000 %


c) Credit risk (continued)

2008 2008$ %

2009 2009$ %

Concentration by sector

Foreign currency assetsCentral banks 54,592 4 106,821 15Commercial banks 302,938 24 202,603 29Government 105,459 8 22,755 3Municipal 16,805 1 15,666 2Semi Government 71,225 6 51,486 7Supranational 227,790 18 75,589 11International Monetary Fund 415,905 33 209,644 30Others 58,901 6 20,894 3

1,253,615 100 705,458 100

Local currency assetsGovernment and statutory bodies 228,506 99 160,421 99Staff loans and advances 1,338 1 1,294 1

229,844 100 161,715 100

Total financial assets 1,483,459 867,173

Credit exposure by credit rating

The Bank averages the credit ratings provided by the above agencies, rounded down to the lower ratingin case the composite is between two ratings. The rating agencies are evenly weighted when calculatingthe composite. For ease of reference, an analysis of the credit quality based on Moody’s credit ratingsis as follows:

Summary by major credit category

Foreign currency financial assetby major credit category:

Aaa 279,866 19 243,296 28Aa1 76,073 5 95,524 11Aa2 185,781 13 17,667 2Aa3 34,270 2 - 0A1 15,244 1 - 0A2 19,233 2 - 0International Monetary Fund 415,905 28 209,644 24Others and Not rated 227,243 15 139,327 16

1,253,615 85 705,458 81

Local currency financial assetby major credit category:Others and Not rated 229,844 15 161,715 19

Total financial asset 1,483,459 100 867,173 100

‘Others’ include financial instruments held with the Government of Fiji Islands. ‘Not rated’ includesfinancial instruments held with the Fiji Sugar Corporation, central banks and staff loans and advances.These financial institutions are not rated by Moody’s investor services.




Market risk is the risk that the changes in market prices such as interest rates and foreign exchange rates. The objectiveof market risk management is to manage and control market risk exposures within acceptable parameters while optimisingthe return on risk.

Interest rate risk management

The principal risk to which trading portfolios is exposed is the risk of loss from fluctuations in future cash flows or fairvalue of financial instruments because of a change in market interest rates.

The Bank limits interest rate risk by modified duration targets. The benchmark modified duration for the total portfoliois twelve months. The duration of the portfolio is re-balanced regularly to maintain the targeted duration.

Foreign exchange risk management

Exchange rate risk relates to the risk of loss of foreign reserves arising from changes in the exchange rates against the Fijidollar. The Bank has adopted a currency risk management policy, which maintains the Fiji dollar value of the foreignreserves and manages the fluctuations in the revaluation reserve account.

The Bank’s exposure to foreign exchange risk was as follows based on notional amounts:

Notional carrying amounts as at 31 December 2009


d) Market risks

USD STG EURO AUD NZD SDR$000 $000 $000 $000 $000 $000 $000

YEN

Foreign currency assetsShort-term commercial paper,current account and marketable securities 144,783 1,551,265 50 16,750 165,618 139,271 -Gold 906 - - - - - -Accrued interest 783 - - 32 1,474 1,791International Monetary Fund- Reserve tranche position - - - - - - 16,007- Special drawing rights holdings - - - - - - 67,063- PRGF - HIPC Trust - - - - - - 194- Currency subscription - - - - - - 54,293

Total foreign currency assets 146,472 1,551,265 50 16,782 167,092 141,062 137,557

Foreign currency liabilitiesDemand deposits - - - - - - (30)IMF - Special drawing rights

allocation - - - - - - (67,094)

Total foreign currency liabilities - - - - - - (67,124)

Carrying amount 146,472 1,551,265 50 16,782 167,092 141,062 70,433




d) Market risks (continued)

Notional carrying amounts as at 31 December 2008

USD STG EURO AUD NZD SDR$000 $000 $000 $000 $000 $000 $000

YEN


Short-term commercial paper,current account and marketablesecurities 89,454 1,600,177 49 16,354 130,414 105,054 -Gold 725 - - - - -Accrued interest 579 4,839 - 400 3,673 3,312 13International Monetary Fund- Reserve tranche position - - - - - - 15,813- Special drawing rights

holdings - - - - - - 6,860- Currency subscription - - - - - - 54,487

Total foreign currency assets 90,758 1,605,016 49 16,754 134,087 108,366 77,173

Foreign currency liabilitiesAccrued interest and charges - - - - - - (1)Demand deposits - - - - - (3)IMF - Special drawing rights

allocation - - - - - (6,958)

Total foreign currency liabilities - - - - - - (6,962)

Carrying amount 90,758 1,605,016 49 16,754 134,087 108,366 70,211

2009 2008

2009 2008$000 $000

Sensitivity analysis

For example, a 10 percent strengthening of the Fiji dollar against the above currencies at 31 December would havedecreased equity by the amounts shown below.

Effect on equity31 December 2009

USD 28,249 16,010YEN 3,238 3,135STG 15 12EURO 4,642 4,158AUD 28,829 16,352NZD 19,636 11,037SDR 21,296 19,076

105,905 69,780

A weakening of the Fiji dollar against the above currencies at 31 December would have had the equal but opposite effect.

The following significant exchange rates were used at year end:

Reporting date spot rate

USD 0.5185 0.5669YEN 47.91 51.19STG 0.3226 0.3932EURO 0.3615 0.4029AUD 0.5796 0.8200NZD 0.7184 0.9818SDR 0.330741 0.368052





Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associatedwith the Bank’s processes, personnel, technology and infrastructure and from external factors otherthan liquidity, credit and market risks such as those arising from legal and regulatory requirementsand generally accepted standards of corporate behaviour. Operational risk arises from all of the Bank’soperations.

Managing operational risk in the Bank is an integral part of day-to-day operations and oversight. Thisincludes adherence to Bank wide corporate policies. There is also an active internal audit functioncarried out on a quarterly basis.

To reduce operational risks in foreign reserves operations there is a clear separation of duties betweenthe front office (dealing) and the back office (settlements function). The front office comprisesauthorised team of officers (dealers) who are duly authorised to transact on behalf of the Bank. Theback office comprises officers who independently process and settle all the deals undertaken by thefront office.

The primary responsibility for the development and implementation of controls to address operationalrisk is assigned to senior management within each business group. This responsibility is supportedby the development of overall and business group specific policies and procedures. Internal andexternal audit functions also ensure that operational risk is effectively minimised and managed.


e) Operational risk

The fair value of an instrument is the amount for which an asset could be exchanged, or a liabilitysettled, between knowledgeable, willing parties in an arms length transaction. Quoted market valuesrepresent fair value when a financial instrument is traded in an organised and liquid market that isable to absorb a significant transaction without moving the price against the trader.

The valuation of the Bank’s financial assets and liabilities are discussed below:

External reserves

The reported value of external reserves is considered to be its fair value due to the short-term natureof the financial assets. Bonds are valued at mark to market.

Domestic securities

The fair value of the Bank’s domestic securities is $242.26m (2008: $166.80m), based on quotedmarket prices.

Statutory reserve deposits

The carrying value of statutory reserve deposits are considered to approximate their fair value as theyare denominated in cash.

Demand deposits

The carrying value of deposits are considered to approximate their fair value as they are payable ondemand.

Currency in circulation

The carrying value of currency in circulation is considered to be its fair value as reported in theaccounts.

19. Fair values of financial assets and liabilities




19. Fair values of financial assets and liabilities (continued)

Other Financial Assets and Liabilities

The reported values of other financial assets and liabilities are considered to be its fair value.

Valuation of financial instruments

The Bank measures fair values using the following fair value hierarchy that reflects the significanceof the inputs used in making the measurements:

• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

• Level 2: Valuation techniques based on observable inputs either directly (i.e as prices) or indirectly(i.e derived from prices). This category includes instruments valued using: quoted marketprices in active market for similar instruments; quoted market prices for identical orsimilar instruments in markets that are considered less than active; or other valuationtechniques where all significant inputs are directly or indirectly observable from marketdata.

• Level 3: Valuation techniques using significant unobservable inputs. This category includes allinstruments where the valuation techniques include inputs not based on observable dataand the unobservable inputs have a significant impact on the instrument’s valuation.This category includes instruments that are valued based on quoted prices for similarinstruments where significant unobservable adjustments or assumptions are required toreflect differences between the instruments.

The table below analyses financial instruments measured at fair value at the end of the reportingperiod.

Level 3 TotalLevel 1 Level 2

31 December 2009

Foreign currency assetsAvailable for sale financial assets at quotedmarket price 207,833 - - 207,833Fiji Government bonds - 32,216 - 32,216

207,833 32,216 - 240,049

Local currency assetsDomestic securities - Underwritten Fiji Government bonds - 72,287 - 72,287

- Fiji Sugar Corporation bonds - 25,648 - 25,648

- 97,935 - 97,935

207,833 130,151 - 337,984

31 December 2008

Foreign currency assetsAvailable for sale financial assets at quotedmarket price 186,391 - - 186,391

Local currency assetsDomestic securities - Underwritten Fiji Government bonds - 25,173 - 25,173

186,391 25,173 - 211,564

During the financial period ended 31 December 2009, there were no transfers in and out of the fairvalue hierarchy levels mentioned above.




Identity of related parties

The Bank has related party relationships with the Board of Directors, the executive management andthe Government of the Republic of Fiji Islands.

The Board of Directors in office during the year were:Sada Reddy (Chairman and Governor from 15 April 2009)Savenaca Narube (Chairman and Governor until 14 April 2009)John Prasad (Ex-officio member from 31 March 2009)Peceli Vocea (Ex-officio member until 30 March 2009)Iowane NaiveliRobin YarrowAdish NarayanChandra DulareDeo Saran (from 11 February 2009)

During the year, the following persons were the executives identified as key management personnel,with the greatest authority and responsibility for planning and controlling the activities of the Bank:

Sada Reddy Governor from April 2009Savenaca Narube Governor until April 2009Barry Whiteside Deputy GovernorInia Naiyaga Senior Advisor to the GovernorsLorraine Seeto 2009: Chief Manager Corporate Planning & Assurance; Current: Advisor to

the GovernorsJitendra Singh Chief Manager EconomicsAriff Ali Chief Manager Financial MarketsEsala Masitabua 2009: Chief Manager Currency & Corporate Services; Current: Chief Manager

Financial InstitutionsFilimone Waqabaca Chief Manager Financial Systems Development & ComplianceRazim Buksh Director Financial Intelligence UnitUday Singh Advisor Corporate Affairs and Secretary to BankAbigail Chang Acting Chief Manager Financial Institutions until August 2009Vilimaina Dakai Acting Chief Manager Financial Institutions from August 2009

Transactions with related parties

In the normal course of its operations, the Bank enters into transactions with related parties identifiedabove. The transactions with the Board of Directors and executive management include the paymentof board remuneration and salaries, respectively.

The transactions with the Government of the Republic of Fiji Islands include banking services, foreignexchange transactions, registry transactions and purchase of Government securities. During the yearthe Bank received $10.99m (2008: $10.49m) of interest income relating to their investments inGovernment securities. The Bank also paid $39.25m (2008: $33.03m) to the Government inaccordance with Section 8(3) of the Reserve Bank of Fiji Act, 1983. The balance of the Bank’sinvestment in Government securities at year end amounted to $245.69m (2008: $168.76m).

The Bank also provides an overnight standby facility to the Government of the Republic of Fiji Islands.The approved facility of $20m (2008: $20m) was utilised during the year and as required repaid atyear end.

20. Related parties




20. Related parties (continued)

2009 2008$000 $000

21. Commitments

Commitments not otherwise provided for in the financial statements and which existed at 31 December2009 comprise:

Commitments - foreign exchange transactions- Sales 10,401 5,702- Purchases - 6,715Capital commitments 779 27

22. Lease receivable

The Bank leases out several floors of the Reserve Bank building. The operating lease rentals receivableare as follows:

Receivable not later than one year 237 278Receivable later than one year but not later than five years 12 12

249 290

23. Significant events

Devaluation of the Fiji dollar

On 15 April 2009, the Bank devalued the Fiji dollar by 20 percent. This had the impact of increasingthe value of all foreign currency balances held by the Bank.

Transfer of Capital Markets Development Authority (“CMDA”) to Reserve Bank of Fiji

The CMDA was established under the CMDA Act, 1996 and was responsible for the developmentand regulation of capital markets in the Fiji Islands.

On 13 August 2009, the Government of Fiji issued a decree (Capital Markets Decree 2009) dissolvingthe CMDA. The decree required the transfer of all capital market and administration functions to theReserve Bank of Fiji. CMDA is now a business unit of the Reserve Bank of Fiji. All moveable propertyvested in and all assets, interest, rights, privileges, liabilities and obligations of the CMDA weretransferred to and vested in the Reserve Bank of Fiji.

24. Events subsequent to balance date

Since the end of the financial year, the Directors are not aware of any matter or circumstance nototherwise dealt with in the report or financial statements that will significantly or may significantlyaffect the operations of the Bank, the results of those operations or state of affairs of the Bank insubsequent financial years.

The transactions with the respective related parties are carried out on normal trading terms. Duringthe year the following transactions were incurred with the related parties:

Board remuneration expenses 44 41Short-term employee benefits 1,022 1,177Long-term employee benefits 217 45

1,283 1,263



9 Jan. Press Release - RBF Announces Revised New Coin Issue Date22 Jan. Press Release - Reserve Bank Reduces its Lending Rates to

Commercial Banks2 Feb. Press Release - National Anti-Money Laundering Conference4 Feb. FDB Small Business Awards, JJ’s on the Park, Suva10 Feb. December 2008 Quarterly Review published10 Feb. Press Release - RBF Clarifies Issues on Foreign Reserves16 Feb. New 5, 10, 20 and 50 cents coins issued18 Feb. Governor Narube delivered closing address at the National

Anti-Money Laundering Conference, Holiday Inn, Suva23 Feb. Governor Narube addressed the RBF/USP Book Launch of “A

Voice of Reason: The Writings of Savenaca Siwatibau”, USP,Suva

24 Feb. Press Release - Reserve Bank of Fiji Clarifies Issues on Liquidity25 Feb. Board Staff Committee Meeting26 Feb. Ordinary Board Meeting27 Feb. Press Release - Reserve Bank of Fiji Maintains Tight Monetary

Policy Stance28 Feb. Governor Narube addressed the Rotaract Club of Suva’s

Business Seminar on “Productivity and Ethics”, JJ’s on thePark, Suva

5 Feb. Governor Narube addressed the Suva Chamber of Commerceand Industry on “Current Economic Situation in Fiji – WhatCan We Do?”, Suva

5-13 Mar. IMF Technical Assistance on Stress Testing provided by Mr.Alexander Tieman and Mr. Rodney Venn

6 Mar. Press Release on Absence of Deputy Governor, Mr. Sada Reddy11-17 Mar. IMF Staff Visit24 Mar. Economics Association of Fiji presentation by Dr. Jerry Jordan

on “Global Financial Crisis”25 Mar. Board Audit Committee Meeting27 Mar. Ordinary Board Meeting

Press Release - Reserve Bank of Fiji Maintains Monetary PolicyStance

31 Mar. The Operations Report and Financial Statements for 31December 2008 were submitted to the Minister for Finance

1 Apr. Press Release - Reserve Bank Introduces Flood RehabilitationFacilityMr. Ariff Ali appointed Chief Manager Financial Markets

3 Apr. Press Release - Reserve Bank Transfers $33 million to GovernmentPress Release - Reserve Bank Reduces Statutory Reserve DepositRequirement for Commercial Banks

9 Apr. Press Release - Revised Economic Projections14 Apr. Press Release - Reserve Bank of Fiji Announces Policy Changes

to Exchange Controls15 Apr. Press Release - Office of the Governor of the Reserve Bank of

Fiji Press Release - Reserve Bank Announces Monetary Policy

ChangesSpecial Board MeetingMr. Sada Reddy appointed GovernorMr. Jitendra Singh appointed Chief Manager Economics

16-17 Apr. Pacific Central Bank Governors’ Conference hosted by RBF,Nadi

23 Apr. Press Release - Reserve Bank Consults with the Banks24 Apr. Press Release - Reserve Bank Announces the Set Up of a

Financial Systems Development and Compliance Group25 Apr. Press Release - Reserve Bank Announces Foreign Exchange

Preservation Policies28 Apr. Press Release - Devaluation has brought about immediate

improvement in Foreign Reserves and LiquidityBoard Governance Committee Meeting

4-15 May APRA assisted on-site supervision with some Pacific Islandcountries

13 May Commencement of RBF Road Show16 May Press Release - Reserve Bank of Fiji Welcomes Interest Rate

Reduction by ANZ Bank20 May Mr. Filimone Waqabaca resumes work after secondment to

IMF, as Chief Manager Financial Systems Development andCompliance

26 May Economics Association of Fiji presentation by Mr. TerryMichaels on “Economic and Financial Stimulus Policies andthe first 120 days of the Obama Administration”

27 May Press Release - Financial Intelligence Unit Joins Egmont Group28 May Board Governance Committee Meeting

Ordinary Board Meeting3 Jun. Press Release - Reserve Bank of Fiji Provides Clarification on

the Economy12 Jun. Press Release - Commercial Bank Interest Rate Reductions Are

Encouraging Says Reserve Bank of Fiji19 Jun. Press Release - May 2009 Monetary Policy Statement23 Jun. Press Release - Revised Offshore Placement of Insurance

Business24 Jun. Board Audit Committee Meeting25 Jun. Ordinary Board Meeting30 Jun. Submission of 2008 Insurance Annual Report to the Minister

for Finance

2 Jul. March Quarterly Review 2009 published3 Jul. Press Release - Residence of the Governor of the Reserve Bank

of Fiji13 Jul. Governor Reddy delivered keynote address at the 2009 Pacific

Microfinance Week on “An Anatomy of Microfinance in Fiji”,Radisson Resort, Nadi

23 Jul. Press Release - Flood Rehabilitation Facility Guideline Changes24 Jul. Press Release - Strong Growth in Fiji’s Foreign Reserves30 Jul. Ordinary Board Meeting

Press Release - Monetary Policy Stance Remains Unchanged31 Jul. 25th Anniversary of the Reserve Bank of Fiji building11 Aug. 2008 Insurance Annual Report was tabled in Cabinet13 Aug. Transfer of the administration of the CMDA to Reserve

Bank of Fiji14 Aug. Governor Reddy addressed the 2009 Fiji Tourism Forum on

“National Economic Update and a Path to Sustainable TourismGrowth”, Intercontinental Resort, Natadola

17 Aug. June 2009 Quarterly Review published21 Aug. Press Release - New Guidelines to Facilitate Customers’ Access

to Financial Services26 Aug. Press Release - Financial Intelligence Unit Annual Report 200827 Aug. Ordinary Board Meeting28 Aug. Press Release - Fiji’s Foreign Reserves Hits F$900 million Plus31 Aug. Press Release - RBF Board Announces Removal of Credit Ceiling1 Sep. Mr. Inia Naiyaga resumes work after secondment to the

National Reserve Bank of Tonga as Senior Advisor to theGovernors

4 Sep. 2008 RBF Annual Report published14 Sep. Governor Reddy delivered opening address at the 2nd Pacific

Credit Union Technical Congress, Tanoa International, Nadi17 Sep. Press Release - Reserve Bank Responds to Queries on a New

Bank Operating in Fiji as Native Bank of FijiGovernor Reddy presented at the Public and Private SectorConsultative Forum on the 2010 Budget on “State of theEconomy and Monetary Policy”, Novotel, Lami

23 Sep. Press Release - Fiji’s Foreign Reserves Hit a Record F$1 billionPlusBoard Audit Committee Meeting

24 Sep. Ordinary Board MeetingBoard Governance Committee Meeting

1 Oct. Mr. Barry Whiteside appointed Deputy GovernorMr. Graham Pinner, United Nations Office on Drugs andCrime Consultant, provided technical assistance on the FIUReview Project

5 Oct. Press Release - Financial Intelligence Unit Signs Memorandumof Agreement with the Land Transport Authority

23 Oct. Governor Reddy addressed 3rd Fiji Human Resources InstituteAnnual Convention on “Leadership in a Competitive andTurbulent Environment”, Warwick Resort, Sigatoka

26 Oct. Governor delivered the opening address at the RBF-hostedAFSPC Annual Workshop and Meeting on “Liquidity Risk inBanking Organisations”, Radisson Resort Fiji, Nadi

28 Oct. Governor delivered the opening address at the 30th Anniversaryof the SPSE and launched the SPSE Total Return Index andnew SPSE corporate logo, JJ’s on the Park, Suva

29 Oct. Ordinary Board Meeting2-13 Nov. APRA assisted on-site supervision with some Pacific Island

countries3 Nov. Capital Markets Decree 2009 approved by Cabinet4 Nov. Governor delivered opening address at the RBF-hosted

Microfinance Workshop on “Medium Term Strategy forFinancial Inclusion in Fiji”, Novotel, Lami

6 Nov. Press Release - Reserve Bank Increases Statutory Reserve DepositRequirement for Commercial Banks in Fiji

7 Nov. Deputy Governor presented the RBF-sponsored prize to‘Agriculture Exporter of the Year’ at the Telecom Fiji LimitedPrime Minister’s Exporter of the Year Awards

10-24 Nov. IMF Article IV Mission20 Nov. Governor addressed the Joint New Zealand-Fiji Business

Council Meeting, Auckland, New Zealand23 Nov. Press Release - Reserve Bank Revokes Foreign Exchange Dealer

License25 Nov. Board Audit Committee Meeting26 Nov. September Quarterly Review 2009 published

Ordinary Board Meeting 30 years honorary staff service recognition plaque unveiled. Staff honoured were Mr. Naiyaga, Mr. Reddy, Ms. Wong and

Mr. Whiteside27 Nov. Press Release - Reserve Bank to Remove Controls from January30 Nov. Governor addressed the Joint Fiji-Australia Business Council

Forum, Intercontinental Resort, Natadola8-17 Dec. PFTAC Technical Assistance by Mr. Meir Sokoler16 Dec. Press Release - Reserve Bank of Fiji’s Statement on Cyclone

Mick17 Dec. Ordinary Board Meeting

Board Governance Committee Meeting18 Dec. Press Release - Reserve Bank of Fiji Statement on Standard and

Poor’s Rating of Fiji30 Dec. Press Release - New Policy Guidelines for Commercial Banks

SELECTED EVENTS IN 2009



FIJI: KEY ECONOMIC AND FINANCIAL INDICATORS

Sources: Fiji Islands Bureau of Statistics, Reserve Bank of Fiji, Ministry of Finance and Commercial Banks

Notes:1 Credit to the private sector is adjusted for AMB’s non-performing loans and advances.2 In 2006, the rate is for October. In 2007, the rate is for June. There were no issues of 91-day RBF Notes in December for both years.

Key:(e): estimaten.i.: no issue(p): provisional(r): revisedp.a.: per annum

I. GROSS DOMESTIC PRODUCTGDP at Market Price ($ Million) 5,084.4 5,371.5(r) 5,483.0(p) 5,693.5(e) 5,965.1(e)Per Capita GDP at Current Factor Cost ($) 5,136.3 5,478.9(r) 5,593.2(p) 5,803.4(e) 6,097.1(e)Constant Price GDP Growth Rate (%) 0.6 1.9(r) -0.5(p) -0.1(e) -2.5(e)

II. LABOUR MARKETLabour Force 321,336(r) 324,607(r) 326,988(r) 329,755(e) 332,582(e)Wage and Salary Earners (mid-year) 123,900(r) 126,000(r) 128,700(r) 130,800(e) 128,000(e)

III. INFLATION (year-on-year % change)All Items 2.7 3.1 4.3 6.6 6.8

IV. GOVERNMENT FINANCE ($ Million)Total Revenue and Grants 1,221.9 1,401.3 1,391.3 1,454.9 1,382.9(r)Total Expenditure (excluding loan repayments) 1,390.4 1,558.5 1,504.1 1,426.8 1,715.2(r)

V. EXTERNAL TRADECurrent Account Balance ($ Million) -495.4(r) -1,022.3(r) -763.3(r) -1,007.8(r) -517.1(e)Capital & Financial Account Balance ($ Million) 411.6(r) 1,138.6(r) 498.2(r) 661.1(r) 246.8(e)Current Account Balance (% of GDP) -9.7(r) -19.0(r) -13.9(r) -17.7(r) -8.7(e)

VI. FOREIGN EXCHANGE RESERVES ($ Million)Foreign Reserves 549.1 515.4 804.6 558.7 1,095.8

VII. MONEY AND CREDIT (year-on-year % change)Narrow Money 17.59 -4.57 43.47 -19.67 -8.17Currency in Circulation 11.01 5.04 -1.32 8.40 10.25Quasi-Money 12.76 42.01 -9.79 5.58 12.82Domestic Credit1 26.59 23.59 3.16 4.85 2.6

VIII. INTEREST RATES (% p.a.)Lending Rate 6.63 7.90 8.46 7.72 7.57Savings Deposit Rate 0.40 0.84 0.64 0.64 0.89Time Deposit Rate 2.03 9.05 4.45 3.00 5.7391-day RBF Note Rate2 2.25 4.25 4.25 n.i. n.i.Minimum Lending Rate 2.75 5.25 9.25 6.32 3.00

IX. EXCHANGE RATES (mid rates, F$1 equals: end of period)

United States dollar 0.5731 0.6009 0.6447 0.5669 0.5185Real Effective Exchange Rate (January 1999 = 100) 100.31 102.29 104.34 107.45 92.11

2005 2006 2007 2008 2009

ABBREVIATIONS

ABIF Association of Banks in FijiACCION Americans for Community Co-operation in Other NationsADB Asian Development BankAIM Alternate Investment MarketAMB Asset Management BankAML Anti-Money LaunderingANZIIF Australian and New Zealand Institute of InsuranceAPG Asia Pacific Group on Money LaunderingAPRA Australian Prudential Regulatory AuthorityATM Automated Teller MachineBRS Business Resumption SiteCMDA Capital Markets Development AuthorityCTR Cash Transaction ReportEFF Export Finance FacilityEFTPOS Electronic Funds Transfer at Point of SaleEFTR Electronic Funds Transfer ReportEPMU Export Proceeds Monitoring UnitESA Exchange Settlement AccountFAI Fire and All Risks InsuranceFDB Fiji Development BankFFIMSO Financial Information Management System OnlineFIA Fiji Institute of AccountantsFIRCA Fiji Islands Revenue & Customs AuthorityFIU Fiji Intelligence UnitFJD Fiji DollarFNPF Fiji National Provident FundFRF Flood Rehabilitation FacilityFSDC Financial Systems Development and ComplianceFTR Financial Transactions ReportingGDP Gross Domestic ProductHSC Higher Salaries CommissionIMF International Monetary FundIT Information TechnologyKPI Key Performance IndicatorLCI Licensed Credit InstitutionLFI Licensed Financial InstitutionMOA Memorandum of AgreementMPC Macroeconomic Policy CommitteeNBFI Non-Bank Financial InstitutionNEER Nominal Effective Exchange RateNMU National Microfinance UnitOHS Occupational Health & SafetyOMO Open Market OperationsPFTAC Pacific Financial Technical Assistance CentreRBF Reserve Bank of FijiREER Real Effective Exchange RateRRA Revaluation Reserve AccountRTGS Real Time Gross SettlementSDR Special Drawing RightsSEACEN South East Asian Central BanksSME Small and Medium EnterpriseSPSE South Pacific Stock ExchangeSRD Statutory Reserve DepositSTR Suspicious Transaction ReportSTRI SPSE Total Return IndexSWIFT Society for Worldwide Interbank Financial TelecommunicationTPAF Training Productivity Authority of FijiTRIM Total Records Information ManagementUNESCAP United Nations Economic and Social Commission for Asia and the PacificUNODC United Nations Office on Drugs and CrimeUS United StatesUSP University of the South Pacific



The great double-hulled, ocean-going canoes (drua) ofthe ancient Fijians were remarkable crafts, capable oflong voyages. The tagaga (pronounced “tanganga”) ormasthead, was crucial for holding in place the sails,woven from the leaves of the pandanus tree. It was thetagaga which enabled the navigators to keep their druasailing towards their destinations.

For the Reserve Bank of Fiji, a logo based on the tagagamasthead, symbolises the Bank’s role in contributingtowards a sure and steady course for Fiji’s economy.


Postal:Private Mail Bag, Suva, Fiji Islands

Telephone:(679) 331 3611

Facsimile:(679) 330 2094

Email:[email protected]

Website:www.rbf.gov.fj

2009 - Reserve Bank of Fiji

Documents

Transcript of 2009 - Reserve Bank of Fiji