An­dre Alexan­der

De­spite the sharp de­cline in the T&T econ­o­my in the last 18 months, the coun­try's fi­nan­cial sec­tor is in a strong and re­silient po­si­tion, Cen­tral Bank Gov­er­nor Alvin Hi­laire said yes­ter­day.Speak­ing at the pre­sen­ta­tion of the Cen­tral Bank's Fi­nan­cial Sta­bil­i­ty Re­port 2015, he said:

"By most met­rics, fi­nan­cial in­sti­tu­tions re­main well-cap­i­talised, liq­uid and prof­itable with rel­a­tive­ly low in­ci­dence of non-per­form­ing loans."

The re­port states that the pre­cip­i­tous de­cline in en­er­gy com­mod­i­ty prices, cou­pled with low­er pro­duc­tion lev­els, has had an ad­verse im­pact on the cen­tral gov­ern­ment's fis­cal op­er­a­tions, while the trade bal­ance and the terms of trade have al­so wors­ened.

Ac­cord­ing to the re­port: "Labour mar­ket con­di­tions have de­te­ri­o­rat­ed but job loss­es to date have most­ly been con­cen­trat­ed in en­er­gy and en­er­gy-re­lat­ed in­dus­tries."

How­ev­er, the re­port added: "Thus far, chal­lenges with­in the do­mes­tic macro­eco­nom­ic en­vi­ron­ment stem­ming from the fall in en­er­gy prices have not trans­lat­ed in­to a ma­te­r­i­al de­cline in any of the key Fi­nan­cial Sound­ness In­di­ca­tors (FSIs) of the bank­ing and in­sur­ance sec­tors."

Based on the bank­ing sec­tor's FSIs, cred­it, mar­ket and liq­uid­i­ty risks ap­pear con­tained with banks con­tin­u­ing to be well cap­i­talised with reg­u­la­to­ry cap­i­tal-to-risk weight­ed as­sets ra­tio of 20 per cent, sig­nif­i­cant­ly above the eight per cent min­i­mum.

The re­port al­so found that the bank­ing sec­tor's prof­itabil­i­ty was healthy in 2015, with re­turn on as­sets of 2.9 per cent and re­turn on eq­ui­ty of 18.1 per cent, up from 2.1 and 13.5 per cent in 2014.

"As­set qual­i­ty as mea­sured by non-per­form­ing loans to gross loans steadi­ly im­proved, hav­ing fall­en from 6.2 per cent at the end of 2011 to 3.7 per cent at the end of 2015," ac­cord­ing to the re­port.

The Cen­tral Bank found that even though the coun­try's banks were stress test­ed for ad­verse in­ter­est rates, for­eign ex­change, cred­it, prop­er­ty prices and liq­uid­i­ty shocks, cap­i­tal ad­e­qua­cy ra­tios con­tin­ued to be above the eight per cent statu­to­ry bench­mark.

In his pre­sen­ta­tion to an au­di­ence that con­sist­ed most­ly of ma­jor fi­nan­cial sec­tor ex­ec­u­tives, Hi­laire fo­cused on in­sur­ance leg­is­la­tion re­form and up­grad­ing of the na­tion­al pay­ments sys­tem.

On the is­sue of in­sur­ance leg­is­la­tion re­form, he said the cur­rent In­sur­ance Act (IA) of 1980 re­mained es­sen­tial­ly un­changed and had not kept pace with changes in the mod­ern fi­nan­cial are­na.

"The IA 1980 is fun­da­men­tal­ly un­changed from the 1966 Act and does not re­quire in­sur­ance com­pa­nies to hold cap­i­tal com­men­su­rate with their risk pro­file, re­flect min­i­mum, in­ter­na­tion­al cor­po­rate gov­er­nance re­quire­ments, treat with con­sol­i­dat­ed su­per­vi­sion and ad­dress the over­sight of fi­nan­cial groups," he said, adding that since in­sur­ance re­forms be­gan in 2001, three in­sur­ance bills were laid in Par­lia­ment be­tween 2011 and 2015.

Com­ment­ing on the In­sur­ance Bill 2015, the gov­er­nor said it was on the short-term leg­isla­tive agen­da of the Gov­ern­ment and he hoped the process could be fast tracked.

Turn­ing his at­ten­tion to over­hauls of the na­tion­al pay­ments sys­tem, Hi­laire said that the rapid pace of in­no­va­tion in tech­nol­o­gy glob­al­ly made keep­ing pace as a coun­try manda­to­ry.

"Con­cert­ed and co-or­di­nat­ed ef­forts should be made to bol­ster the se­cu­ri­ty and ef­fi­cien­cy of the pay­ments sys­tem, in­clud­ing com­plet­ing steps for gov­ern­ment elec­tron­ic trans­ac­tions."