Change is Needed for the Caribbean Financial Sector to Thrive

Date: 5/5/2017
Author(s): Central Bank Of Barbados

Created 06 May, 2017
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Eastern Caribbean Central Bank (ECCB) Governor, Timothy Antoine, says the region must make urgent changes if its financial sector is to thrive in the modern, global economy.

Antoine was delivering a keynote address, entitled “Imperatives for Financial Sector Development in the Caribbean”, at the 2017 Domestic Financial Institutions Conference, a one-day seminar hosted by the Central Bank of Barbados and the Financial Services Commission.

Raising Leadership Capacity

He identified raising leadership capacity as the first of three “urgent necessities” that would improve the fortunes of the region’s financial sector. After first differentiating between management and leadership – “management is running the business while leadership is changing the business” – Antoine expanded on the notion of leadership, specifically as it relates to those who regulate the financial sector:

“Leadership means anticipating the needs of stakeholders and sensing emerging issues before they become overwhelming or before others with whom we disagree have taken a commanding position.”

He contended that taking the lead in what many have called a “post-truth world” is even more critical. Using the example of a man who in December 2016 travelled from New York to Washington DC and opened fire in a pizzeria because he believed an internet conspiracy theory to show the potentially catastrophic consequences of misinformation, Antoine asked the audience to imagine the implications of inaccuracies being accepted as fact in a sector whose currency is confidence.

Antoine warned that the proliferation of fake news and the ease with which it can be spread demands three things from financial sectors in the region: that they anticipate and be quicker to address distortions and half-truths; that they ensure that their decisions are made based on facts; and that they be proactive with regard to communicating with the public. He identified the frequent changes in regulations and the increasingly complicated demands related to compliance with Know Your Customer (KYC) and Counter-Terrorism Financing (CTF) guidelines as matters where improved and regular communication is necessary.

Help Take the Profit Out of Crime

Working to deter crime by making it less profitable is the second imperative for the regional financial sector. The current financial system in the Caribbean is a channel for counterfeiting, money laundering and corruption, said Antoine, who conceded that addressing the problem would be challenging. He however suggested one possible remedy: reducing the region’s dependence on cash. 

Acknowledging that research is pending on a precise figure, Antoine said that it is estimated that 70% of payments in the Caribbean are made in cash and contrasted that with Belgium, where the figure is a mere 7%. He then challenged the financial sector, despite the resistance that would occur due to cultural practices and concern over the initial costs required for businesses to change their payments systems, to develop a plan to reduce the dependence on cash by 50% in five years. The benefits, he declared, will extend beyond the financial sector to increases in overall economic growth, competitiveness, and higher levels of employment.

More Regional Cooperation

The ECCB Governor’s final call was for increased regional cooperation, which would contribute to the Caribbean’s economic growth and development. He contended that while individual territories are often preoccupied with competing against each other, the rest of the world does not distinguish between one island and another. He noted that this is particularly true as it relates to one of the major challenges facing the region – de-risking:

"It is customary for Caribbean countries to tout their efforts to meet international standards in respect of financial regulation, including areas such as anti-money laundering and combating the financing of terrorism. There can be no doubt that our countries have made significant strides…. Yet new and additional standards keep coming….

"What is more, whether we like it or not, the Caribbean is a brand. What does that mean? It means that notwithstanding our heroic domestic efforts, larger countries, correspondent banks, regulators and even international institutions regard us a homogenous region. Consequently, the weaknesses of one often impact the reputation of all."

These blanket judgements are all the more lamentable, said Antoine, because they can often be based on negative press and fake news. Lauding the 2016 publication of the Regional Financial Stability Report, he suggested even more initiatives, namely shared compliance services, both in terms of personnel and technology. These, he argued, would reduce operating costs, improve risk profiles, and create greater access to the international financial system.

Moreover, the region’s financial interconnectedness, as evidenced by the cross border effects of the CLICO debacle, and the emergence of financial technology (FINTECH), which has created new challenges for regulators, necessitate greater regional cooperation.

Antoine concluded his powerful presentation with a call to action for the conference participants to use the three imperatives he identified to increase the regional financial sector’s role a driver of economic transformation and Caribbean integration and encouraged the conference participants to seize the opportunity.

2017-05-05





Copyright 2017 by Central Bank of Barbados