The banking supervisory body was set up as of the constitution of Banco Central de Cuba. Bank supervision is responsible for the care of the financial system’s health, effected through on and off site inspections of the banking and non-banking financial institutions authorised to operate in the territory. Among others, bank supervision has also

the function of analysing requests for licenses to operate as financial institutions in the territory. To this purpose, there is a commission, presided by the Superintendent and integrated by the directors of Monetary Policy, Operations and the Legal Department who are in charge of the analysis of requests and submission of an opinion to the Board of Directors of BCC for a final decision on the granting of the said license.

Since BCC was established, different resolutions and agreements have been issued by its Management Board for setting up rules following the 25 Core Principles for an Effective Bank Supervision, recommended by the Basel Committee, which are related to:

• Preconditions for an effective bank supervision.
• Granting of licenses and structure.
• Prudential rules and requirements.
• Methods for a progressive bank supervision.
• Information requirements.
• Formal powers of supervisors.
• Off-shore banking.

Among regulations issued by BCC since its establishment, in terms of supervision, the following are included:

• Bank supervision rules.
• Rules to establish minimum capital to start operations.
• Guidelines for credit granting to natural persons or corporate entities, linked to ownership or management of financial institutions.
• Regulations on risk accumulation.
• Rules for asset rating and provision policy.
• Rules for capital adequacy.
• Agreement on risk accumulation.
• Guidelines for the regulations of bank supervision with external and internal auditors of banks and non-banking financial institutions.
• Modification of the agreement on capital adequacy regulation.
• Minimum plan of accounts and information system for bank supervision.
• Guide for all members of the banking system for detection and prevention of illegal capital movement.
• Rules to determine the minimum liquidity ratio.
• Basic rules for internal control of financial institutions.
• Rules for the granting, control and repayment of financings.
• Other complementary rules to the Guide in order to prevent and detect illegal capitals.

Work is still being carried on the elaboration of documents regulating the banking and financial discipline of the country as well as all methodological procedures to perform the supervision.

On the other side, and to complement control of financial indiscipline, it has been developed the activity of the Central de Información deRiesgos (Risk Information Central) by means of Resolution No. 27, of 1997, whose main objective is the monthly publication of entities which incur in due loans and indiscipline when issuing checks. This publication is sent to the whole financial system and to the Government.

As a result of these inspections, it can be affirmed that financial institutions are solvent, for their solvency coefficient or adequate capital, in all cases, surpass the minimum of 15 percent established in the rules of BCC; just the same, those institutions are within the minimum liquidity ratio for the different tiers according to regulations of BCC; besides, efficiency of the Cuban banking system is evidenced on favourable results of the indicators: spread, ROA (Return On Assets), and ROE (Return On Equities) during all the years covering the 1997-2001 period.

Finally, the health of the Cuban banking system is shown by the fact that no act of corruption nor illegal capital movement has become manifest throughout all these years.