Supervisory approach

The FRENCH POLYNESIA FINANCIAL SERVICE AUTHORITY (FPFSA) mandate is to supervise and regulate the operations of specified non-bank financial entities and to promote stability, public awareness, and public confidence in the operations of these licensed operators. FPFSA adopts a risk-based supervisory approach to ensure that institutions falling under its oversight are well-supervised, and that threats and risks are identified and addressed in a timely manner.

FPFSA also utilizes internationally acceptable prudential standards to assess the condition and financial soundness of institutions that it supervises, including IFRS, CAMELS, PEARLS, BASEL I, and some components of BASEL II, IACS-ICPs.

FPFSA is concerned with building financial stability to ensure that institutions are well-supervised, and that emerging threats and risks are identified and acted upon in a timely and effective manner. A stable financial system is key to achieving other statutory objectives of maintaining market confidence, protecting consumers, and reducing financial crime.

FPFSA regularly engages in the ongoing monitoring of an institution’s financial and operational condition with the objective of ensuring that these institutions comply with the minimum prudential requirements stipulated by the respective legislations. These functions are carried out mainly through off-site surveillance and on-site examinations. The off-site supervision process is done through submitted regulatory reports and financial statements as well as periodic trend analysis of selected ratios.

The on-site inspection involves assessing the qualitative risks that cannot be assessed offsite. On-site assessment aims at verifying compliance with the requisite laws and regulations. It is the cornerstone of the supervisory process and involves evaluating an institution’s corporate governance through interviews with management, inspecting the written policies and procedures of the institution, and assessing the degree to which those written policies and procedures are followed. It also involves evaluating whether the institution’s financial statements accurately show profitability and capital, checking the accuracy of accounting records, evaluating the adequacy of internal controls and the audit function, as well as examining investments and the risk appetite of the company.

On-site and offsite supervision are mutually reinforcing and are designed to rapidly identify and diagnose emerging problems in individual institutions with a view to prescribing the most efficient resolution directed towards ensuring continued public confidence in the financial system.