The Bank of the Republic of Somaliland has brought together senior banking leaders in Hargeisa to launch a major regulatory reform aimed at strengthening oversight of the country’s financial sector through the adoption of a Risk-Based Supervision (RBS) framework and new prudential standards.
The initiative marks a significant shift in the way banks will be supervised, moving beyond traditional compliance-focused inspections towards a forward-looking approach that identifies and addresses potential risks before they threaten financial stability.
Under the new framework, supervisors will place greater emphasis on assessing banks’ capital adequacy, liquidity, credit quality, corporate governance and large exposure risks, enabling earlier intervention where vulnerabilities emerge.
Opening the meeting, Governor Abdinasir Ahmed Hersi described the reforms as a cornerstone of the Bank’s broader agenda to modernize Somaliland’s financial system.
“A resilient banking sector requires strong institutions, credible supervision and clear accountability,” he said. “These reforms are designed to strengthen public confidence and support sustainable economic growth.”
The meeting brought together chairpersons of licensed banks, members of the Central Bank’s Board of Directors, banking executives and senior regulatory officials to discuss the implementation roadmap and the responsibilities of financial institutions under the new supervisory regime.
Officials from the Financial Institutions Supervision and Regulation Department presented the proposed supervisory framework, updated risk management procedures and draft prudential guidelines, outlining how banks will be expected to integrate stronger risk management practices into their operations.
Deputy Governor Hamse Abdirahman Khaire stressed that the transition would be implemented through close collaboration between the regulator and the banking industry.
“The Bank of Somaliland is not asking institutions to make this transition alone,” he said. “Consultation, training and technical support will be central to the process.”
Representing the banking industry, Khalif, Chairman of the Somaliland Banking Association, welcomed the reforms and underscored the importance of continued dialogue.
“Banks support reforms that strengthen stability and protect depositors,” he said. “The key will be practical implementation, realistic timelines and continued engagement between the regulator and the industry.”
Fuad Bashir, Deputy Director of Financial Institutions Supervision and Regulation, said the risk-based approach would allow supervisors to focus their resources on the areas posing the greatest threat to financial soundness.
“Data collection is only the starting point,” he said. “Supervisors must understand the trends, identify the root causes and act before weaknesses become crises.”
The Bank of Somaliland said licensed banks will have the opportunity to review and comment on the draft supervisory guidelines before they are formally adopted. The reform program will also include technical training, capacity building and a phased implementation process to ensure a smooth transition.
The reforms are intended to build a stronger and more resilient banking sector, enhance depositor protection, improve regulatory effectiveness and reinforce confidence in Somaliland’s financial system as it continues to evolve.