Government is committed to maintaining and strengthening Barbados’ role as a leading financial services centre.
This assurance came from Minister of Finance and Economic Affairs, Christopher Sinckler, who said the sector played a vital role in the country’s economy. He was speaking at the opening of a branch of the Pan-American International Insurance Company at Cheapside, The City.
Sinckler told his audience: “We do know that the financial system has remained resilient, liquid and profitable, even amidst the dampening domestic economic activity. This suggests that our banking system as a whole is able to withstand various economic shocks, particularly external shocks, more so given the fact that many of our commercial banking entities which dominate deposit-taking activity, are all affiliated with well established extra-regional parent banks.”
He pointed out that the latest Financial Stability Report had revealed that deposits in the banking system grew by 4.5 per cent, as of September 2012, to $12 billion, while commercial bank assets grew by 4.8 per cent during the year.
“Commercial banks have also been increasing their investment in Government paper given the general weak demand for loans for individuals and companies in the private sector,” he stated.
The minister noted that Government had undertaken various stress tests to determine the impact of credit risk on the capital adequacy of banks, non-banks and credit unions.
“These analyses suggest that these institutions are able to remain solvent and can withstand even sizeable domestic and external shocks,” he said.
He added that even the local insurance industry had shown resilience despite the initial uncertainty generated by the problems of CLICO. “Corporate profits among life and general insurers grew by almost 30 per cent even as claims paid out were reduced and premium revenues were marginally below the 2010 level,” he explained.
Sinckler stressed that it was necessary to build a strong and proportionate regulatory regime to safeguard the stability of the financial sector as a foundation for sustainable growth, while protecting the competition and innovation that drive its success.
He said the Financial Services Commission was established to strengthen the regulatory environment in an attempt to ensure sustainability within the financial services sector. Describing that sector as an international industry, he stated that national regulations, therefore, must reflect international best practice, at the minimum.
He disclosed too that the commission was extremely busy meeting those standards.
“In fact, in 2012, regulatory activity increased significantly, with many guidance notes being circulated on areas such as internal controls, asset valuation guidelines and statutory reporting guidelines.
“In addition to directly engaging its regulated entities, the FSC has also proposed amendments to the Insurance Act, aimed at strengthening capital buffers and clarifying the operation and obligations of insurance companies to the statutory fund,” he explained.