In this study, the economic developments and policy responses of Trinidad and Tobago after the crisis is reviewed. Policy recommendations are used to strengthen the legal and regulatory framework. According to the IMF’s financial system stability assessment (FSSA), there were critical gaps in the overall legal, regulatory, and supervisory structure for the insurance sector. The quality of insurance sector supervision can be assessed against internationally accepted established “core principles.” In this paper, an overview is presented of why the crisis occurred and some suggestions on how to prevent a future crisis.
, throughout the Caribbean through its network of insurance subsidiaries and branches in 22 countries. CLICO affiliates were located in The Bahamas, Barbados, the Cayman Islands, Guyana, Panama, and Suriname. CLICOBarbados and another subsidiary, BAICO Bahamas, operated in all of the members of the OECS/ECCU. CLICO Bahamas operated subsidiaries in Belize and in Turks and Caicos Islands.
Insurance Regulatory Framework
A critical factor in the collapse of CL Financial was the weakness in the regulatory and supervisory framework. Insurance supervision in the OECS
5. Credit Union Indicators
6. Mutual Funds—Total Assets under Management
7. BSE Main Indicators
1. The Financial Sector in Barbados and in the Region
2. Financial Sector Indicators Compared to Peers in the Region
1. The Demise of CLICO-Barbados
2. Status of Implementation of the 2008 FSAP-Update Recommendations
strategy without jeopardizing the still-fragile recovery. To this end, policy discussions focused on fiscal consolidation and external stability in presence of high debt, financial stability (including the resolution of CLICOBarbados), and enhancing medium term growth prospects. The staff made the following recommendations:
Fiscal consolidation and external stability : Push ahead with efforts to put debt on a sustainable path and to sustain the peg. Broaden the coverage of the revised Medium Term Fiscal Strategy to include public enterprises. Focus on expenditure
III. B arbados’ F inancial S ystem in the A ftermath of the G lobal C risis 1
This chapter assesses Barbados’ financial system in the wake of the global crisis . 2 While the financial system appears to have been broadly resilient up to now, preserving its soundness in an environment weakened by the recession requires strengthening the regulatory and supervisory framework. Commercial banks’ credit risk exposure to weak economic activity, particularly in the tourism sector, is the financial sector’s main vulnerability. The collapse of CLICO-Barbados is
to resolve the problems of CLICO-Barbados. Directors also noted that there was a need to develop contingency plans, should the current approach of selling the subsidiaries of CLICO-Barbados to private investors prove unsuccessful. This would be important in order to mitigate any impact on the public finances, and protect the financial system and investor confidence.
Public Information Notices (PINs) form part of the IMF’s efforts to promote transparency of the IMF’s views and analysis of economic developments and policies. With the consent of the country (or
the banking sector; (iii) measures to resolve CLICOBarbados; and (iv) reforms to strengthen supervision and regulation of the nonbank financial sector. The staff made the following recommendations:
Fiscal policy : Go beyond the planned expenditure controls and raise VAT and corporate tax rates while widening their base to first stabilize and then put the public debt on a firm downward path as a ratio to GDP.
Monetary policy : A decisive fiscal adjustment would help to contain pressures on the exchange rate peg, while monetary policy rates should be set to
7. CLF sold these as well as traditional insurance products throughout the Caribbean via CLF’s network of insurance subsidiaries and branches in 22 countries . These included CLICO affiliates in The Bahamas, Barbados, the Cayman Islands, Guyana, Panama, and Suriname. CLICOBarbados and another subsidiary, BAICO Bahamas, operated in the eight members of the Eastern Caribbean Currency Union (ECCU). 3 CLICO Bahamas operated subsidiaries in Belize and Turks and Caicos Islands.
Insurance Regulatory Framework
8. The insurance
central bank financing. There is also a heightened risk that some public sector entities may no longer be able to service government-guaranteed loans, thus forcing the government to assume and service those loans. Finally, the still uncertain fate of CLICO-Barbados (see below) might entail additional budgetary costs not yet reflected in the current fiscal projections.
III. P olicy D iscussions
A. Fiscal Policy
10. The mission encouraged the authorities to aim for a lower fiscal deficit in FY 2009/10 . Given uncertainties about the strength of the global
The short-term recovery of the Barbados economy will critically depend on the rebound of demand for its services in its traditional markets. As a small tourist-dependent economy with a fixed exchange rate and volatile capital inflows, Barbados could shore up its external sector through fiscal consolidation and structural reforms to raise sustainable growth rates. Barbados’s financial system appears to have been broadly resilient up to now; preserving its soundness in an environment weakened by the recession requires strengthening the regulatory and supervisory framework.