The country’s monetary authority has given the assurance that the local financial system remains well capitalized, with evidence of a slow recovery over the twelve months ending March 2015.
The Central Bank of Barbados (CCB) has said in its latest financial stability update that as at the end of the fiscal year, stress tests suggested that the financial system was “very stable”.
“The capital reserves that are set aside by institutions to protect them against unexpected losses are sufficient to ward off with the increase more substantial among life insurance subsector, “even though overall adverse occurrences of sizeable proportions,” said the bank.
“Additionally . . . in the event of a systemic crisis, the parent entities of the banks remain well positioned to assist their subsidiaries and branches as they remain well capitalized,” the financial institution added, stating that regulatory authorities continued to build on efforts to enhance the domestic supervisory framework.
The Central Bank launched guidelines on measuring capital adequacy for controlling interest rate risks on the banking book.
The premier financial institution said loans portfolios of major deposit-taking institutions (DTIs) expanded by just over one per cent, with the increase more substantial among credit unions, “albeit from a smaller base”.
“Commercial banks recorded 1.4 per cent growth in credit, while the credit unions’ expansion was a more substantial 6.7 per cent,” it said.
“Deposit taking institutions remain well capitalized, with banks in particular possessing capital levels that make them extremely resilient to substantial economic shocks. Credit risk within commercial banks has been contained as net write-offs continued to average less than one per cent per year of total loans,” it added.
In relation to the domestic insurance sector, the Central Bank said it recorded strong growth in premiums, particularly in the life insurance sub-sector, “even though overall assets continued to contract”.
It added that the life insurance industry also increased its holdings of domestic debt in 2014 in contrast to a marginal reduction in holdings by the general insurance industry.
The assets of the domestic fund management industry, it said, grew by 2.3 per cent, with most of the expansion concentrated in the growth and income funds.
The bank also stated that “efforts continued apace to recapitalize CLICO with that company’s contingent liabilities being quantified, while the Government of Barbados proposed the creation of a new company to replace CLICO”.