Barbados and its Caribbean neighbours are seeking to avoid a repeat of the 2009 CLICO collapse that sent shockwaves across the region’s insurance and financial sectors.
In this regard, serious consideration is to be given here tomorrow to a proposal made by Central Bank governors for strengthening the sector’s regulation.
Deputy Governor of the Central Bank of Barbados (CCB) Cleviston Haynes made the disclosure this morning following the opening of a three-day high-level conference of local, regional and international regulators.
Haynes told reporters that no regional governance system was in place at the time of the CLICO failure.
However, he said a first-ever Regional Stability Report had since been released, which included a proposal by governors to tackle financial stability issues.
“So if we have a problem with an entity which operates across borders, then the governors will convene and meet and discuss with their technicians, the nature and scale of the problem and make recommendations to the respective ministers of finance, who ultimately bear the responsibility for treating with such problems, particularly from a financial perspective,” said Haynes.
Shelton Nicholls, resident advisor with responsibility for financial stability at the Caribbean Regional Technical Assistance Centre (CARTAC) also reported that a financial sector crisis management and monitoring plan had been drafted for the region.
The plan covers development of financial stability and health indicators, particularly for the non-banking sector; improvement of information gathering on financial sector inter-connectedness; development of crisis management and contingency plans; stress testing of the financial system, and establishment of market prudential indicators.
Nicholls said the ultimate goal was to help reform, modernize and enhance the region’s financial stability architecture.
“I certainly think we would be in a better position than we have been before. In previous episodes many of these infrastructures were not in place. We didn’t have a lot of the data, we certainly didn’t have a crisis resolution plan and a framework that could focus our minds,” he told reporters.
“It is not to say this is going to help us prevent a crisis, but certainly I think it would help us to be much better prepared should any other disruption take place in the financial sector. And of course it is going to be a continuous work in progress. It is not going to be a solution for all crises. It is a continuous work in progress, but I think we would be in much better position than we were previously,” the CARTAC official assured.
Both men spoke to reporters following the opening of the three-day conference, jointly organized by the Central Bank of Barbados and CARTAC.
The high-level meeting, being held under the theme, Building Resilience to Financial Crisis in the Caribbean: The Role of Crisis Management Policies, Metrics and Plans, also involves representatives of the World Bank, the International Monetary Fund, as well as regional and international policymakers.
In his address to the opening, CARTAC’s Programme Coordinator David Kloeden said while financial linkages in the region had increased over the years, operators needed to innovate in order to remain secure and be able to withstand a financial crisis.
He added that CARTAC continued to work with the region’s financial regulators to improve institutional and operational processes. The aim was to avoid the effects experienced with the collapse of both CLICO and its sister company BAICO and the “subsequent turmoil that ensued,” said Kloeden.
He noted that Barbados, Jamaica, Trinidad & Tobago, The Bahamas, Belize, and member states of the Eastern Caribbean Currency Union had started to strengthen their crisis management frameworks through the development of national crisis management plans.
However, he warned, there was still some “gaps to be plugged” in the region.