CBB Governor speaks to BIBA
Tuesday February 02 2010 | 03:46 PM

The Central Bank of Barbados will be stepping up collaborative efforts with that island’s major foreign exchange earning sectors as it seeks to help them position themselves to better take advantage of the world economic turnaround when it occurs.

This was disclosed by new Central Bank Governor Dr DeLisle Worrell as he identified the foreign exchange earning international business sector as one of the “engines” of the Barbados economy. Dr Worrell said that shoring up the island’s foreign exchange reserves and maintaining the 2:1 currency peg to the United States dollar were the central focus of the monetary authority’s activites and policies, and the international business sector played a prominent role in that regard.

Dr Worrell made these comments before he delivered a presentation on the topic: “Making the Financial System More Secure” at a joint seminar hosted by the Barbados International Business Association and The Barbados Bankers Association on Tuesday at the Savannah Hotel in Christ. The island’s lead economist said he had chosen the topic because the Bank recognised that instability in the financial sector could affect Barbados’ foreign currency holdings and any threat to those reserves could undermine the island’s economic stability.

While assuring that the system was stable, he said fears of financial instability by institutional and individual investors could prompt a slow-down in foreign direct investment or a flight of cash, making it important to address this issue. He added that investors could remain assured of the current stability of Barbados’ economy as the Central Bank had adequate foreign exchange to defend the local currency and foreign borrowing was well within international guidelines.

Dr Worrell recently revealed in his first economic review as Central Bank governor that at the end of last year the bank had $1.5 billion in net international reserves (the equivalent of 21 weeks of import cover) and the external debt service ratio was projected to be 13 per cent in 2010, but to fall below 10 per cent from next year.

During his presentation to the roomful of domestic bankers and their international counterparts, Dr Worrell said that the bank would be monitoring not only the state of the local financial system, but it would also be keeping an eye on what was happening in other countries in the region given the high level of integration among regional financial systems.

 “As is evident from even casual observation, the degree of financial integration is considerable. Financial stability analysis must reflect this regionalisation of financial institutions, and going forward, financial stability monitoring must be a joint effort of all financial regulators, conducting regular scrutiny of the region as a whole, as well as the individual national components of the overall picture,” he said.

 In the interest of this effort, Dr Worrell said that The Caribbean Technical Assistance Centre, the Caribbean Centre for Money and Finance (which he headed up prior to becoming Governor), the Caribbean Group of Banking Supervisors, the Caribbean Association of Insurance Regulators, the Credit Union league and the Caribbean Group of Securities Commissioners, would be holding a workshop in Trinidad on March 3 – 5, to develop an action plan for setting up an appropriate framework.

 Dr Worrell also revealed two new initiatives that the Central Bank would undertake in this area: the publishing on-line of financial soundness indicators, starting with indicators for banks; and the release of an inaugural financial stability report for Barbados.