Regulatory Framework

Frequently Asked Questions

Who does the Central Bank of Barbados regulate and supervise?

The Central Bank of Barbados (Bank) is charged with safeguarding the safety and soundness of the financial system. The Bank Supervision Department is responsible for regulating and supervising commercial banks, merchant banks, trust and finance companies and international (offshore) banks licensed in Barbados.

What is the Financial Institutions Act, 1996-16?

The Financial Institutions Act, 1996-16 is the legislation under which commercial banks, trust and finance companies, and merchant banks are licensed and administered in Barbados. This Act establishes the statutory requirements on such areas as licensing, capitalisation, reporting, and restrictions on banking activities.

What is the International Financial Services Act, 2002-5?

The International Financial Services Act, 2002-5 is the legislation under which international banks (offshore banks) are licensed in Barbados. Like the Financial Institutions Act, it sets out the legal obligations that must be observed by licensees.

Where can I find a copy of the Acts?

Electronic copies of the International Financial Services Act, 2002-5 can be downloaded from www.barbadosbusiness.gov.bb under the link “Legislation/Investment Acts”. Both Acts can be downloaded from www.caricomlaw.com.

How does the Bank supervise these entities?

The Bank Supervision Department uses a dual approach of ongoing off-site monitoring and site visits (onsite examinations) to assess various elements of a licensee’s operations.  The off-site process incorporates analyses of monthly and quarterly prudential returns submitted by all entities and the processing of applications as required by law.  Onsite assessments are undertaken on such areas as corporate governance, operational risk management, information technology, anti-money laundering and terrorist financing, and regulatory reporting.

Where can I find a list of these approved entities?

A full listing of all licensed financial institutions regulated and supervised by the Bank Supervision Department can be found on the Central Bank’s website under the link entitled “Financial System”.

How can I license a bank in Barbados?

The Minister’s approval must be sought prior to the establishment of a bank in Barbados. An application for a licence must be completed and reviewed by the Bank. On satisfaction of all requirements, a recommendation is forwarded to the Minister of Finance for approval.

How can I obtain an application for licensing and registration requirements?

Application packages, which provide the application forms and requirements, can be obtained from the Director of the Bank Supervision Department.

Does the Bank administer a Deposit Insurance Scheme?

The Barbados Deposit Insurance Corporation (BDIC), established under the Deposit Insurance Act-29 of 2006, came into operation on June 8, 2007. The BDIC is administered by a Board, independent of the Central Bank of Barbados. The Bank is represented on the Board by the Governor and the Director of Bank Supervision.

The deposit insurance initial contribution and premium was set at 0.05% of the insurable deposits held by the member during the calendar year preceding the calendar year for which the premium is payable.

The Corporation manages the Deposit Insurance Fund, which was financed by an initial contribution and annual premiums from all member institutions. At present they are fourteen members of the Fund, six (6) commercial banks and eight (8) deposit taking financial institutions governed by the Financial Institutions Act. The Central Bank of Barbados matched the
initial contribution payable by all member institutions.

The BDIC guarantees insurance coverage of up to $25,000 for depositors of commercial banks and other deposit taking financial institutions licensed under the Financial Institutions Act.

The financial climate in Barbados is very sound however the establishment of this Fund is designed to extend the financial sector safety net and contribute to the maintenance of public confidence in deposit taking institutions in the financial sector. 

What is Basel II?

The new International Convergence of Capital Measurement and Capital Standards commonly referred to as Basel II, is the name given to the new framework, which measures the adequacy of capital in banks and other similar financial institutions. Unlike the current framework, referred to as the 1988 Accord, which offers a simple methodology for calculating the level of capital held by a bank relative to its exposure to credit and market risks, Basel II proposes a three pillar approach to capital measurement and assessment. 

Under the first pillar, Basel II offers a menu of approaches to measure the level of capital held by a financial institution relative to its exposure to credit, operational and market risks.  The measurement approach in pillar I is more risk sensitive than under the 1988 Accord and the menu of measurement options range in sophistication from a simple rules-based approach to an internal rating based approach, which requires the institution to model its risk.  Additionally, Basel II represents the first attempt by regulators to assign a quantitative measure to operational risk and requires institutions to hold, at a minimum, this calculated level of capital against this risk.

Pillar II focuses on the management and supervision of risks not captured in the quantitative exercise and embodies the principle of early intervention. Under pillar II, the role of supervisors will be broader than at present.  One key aspect of pillar II is the principle that mandates the supervisor to require institutions to hold capital over the minimum levels in direct response to its (the institution’s) management of risks.

Pillar III recognizes that market discipline is an effective tool in the supervision of the financial system and focuses on enhanced public disclosures by financial institution. It seeks to increase market discipline by requiring banks to publish quantitative as well as qualitative information, including details about its risk appetite, risk management and level of capital.

What is the relationship between the Bank and other regulatory institutions in Barbados?

There is a formal grouping of all domestic sector regulators that includes the Bank, Supervisor of Insurance, Securities Commission, Registrar of Cooperatives, Financial Intelligence Unit and Ministry of Industry and International Business.  Representatives from these agencies meet to discuss matters of mutual interest relative to the regulation and supervision of the local financial system. 

What is the relationship between the Bank and other regional and international regulatory agencies? 

Barbados is a member of the Caribbean Group of Banking Supervisors, the Offshore Group of Banking Supervisors, the Association of Supervisors of Banks of the Americas, and the Caribbean Financial Action Task Force.

The Bank has established memoranda of understanding to allow for information sharing, which is key to effective solo and consolidated supervision of banks that are part of a regional or international financial group.

The Bank is a member of the Anti-Money Laundering Authority.

How can I contact the Bank Supervision Department?

Members of the public can contact us at (246) 436-6870 or email supervision@centralbank.org.bb.

 
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