The financial system in Barbados remains resilient despite weak growth in some sections of the financial services sector.
The Central Bank said in its fourth stability report, released today, that for the 12-month period ending September 2014 most deposit-taking entities and insurance firms faced low demand for major financial products by the private sector.
As a result, growth was weak in some instances with some recording a contraction.
The 48-page report, which is produced in collaboration with the Financial Services Commission (FSC), said that banks continued to be profitable, with each institution recording positive profits over the period under review, although net income was 23 percent below that for the comparable period of 2013.
Credit unions registered significantly higher lending to their membership, even as their client base continued to be impacted by rising unemployment and a sluggish domestic economy.
“However, the portfolio of non-performing loans held by the credit unions continued to climb, especially those categorized in the most severe default category. The FSC has estimated that the insurance sector’s assets fell by two percent in 2014. Insurance entities also reduced their holding of Barbados’ Government-issued domestic debt up to the end of September 2014,” the report stated.
It said that financial stability indicators and stress tests performed for the financial system strongly suggested that the system remains stable and able to withstand a wide variety of severe economic shocks.
“This may be attributed to the simplicity of the business models employed, strong parent companies, the accumulation of robust capital buffers and, in the case of the insurance industry, the presence of substantial reinsurance assets,” the report said.
The Central Bank said that following the publication of the International Monetary Fund’s Financial Sector Assessment Program in February 2014, policymakers continued their efforts to improve the management of the sector, in terms of revisions to guidelines by both the Central Bank and the FSC. Among the areas addressed were internal capital adequacy assessment, the standardized approach to credit risk, and the measurement of operational risk.