Five Reasons You Should Read the Financial Stability Report

Author(s): Central Bank Of Barbados

Created 30 Jul, 2019
Tags CBB Blog
Categories General Press Release
Views: 2876

Since 2010, the Central Bank of Barbados and the Financial Services Commission, Barbados’ two financial regulators, have teamed up to produce the Financial Stability Report (FSR), an analysis of the health of our country’s financial system. The report looks at how well local financial institutions – the places we save and invest our money, insure our homes and valuables, and plan for retirement – are performing. That alone should be enough to tell you why it’s a good idea to read the Financial Stability Report, but here are five specific reasons.

Get a Snapshot of the State of Barbados’ Economy

Financial institutions do not exist in a vacuum. They, and their clients, are impacted by what is happening in the economy. Over the past year, Barbados entered into an International Monetary Fund (IMF) programme, restructured its domestic debt, and took several other steps to get the economy back on track. With so many major changes taking place, it is more important than ever to stay up to date.

The 2018 Financial Stability Report gives a brief overview of what has been done to improve the economy, and how successful it has been.

Learn Who the Major Players are in the Financial System

Did you know that the local financial system’s assets total $24.9 billion, which is the equivalent of 245 percent of Barbados’ Gross Domestic Product (GDP)? Or that one sector within that system controls more than half of those assets?

The Financial Stability Report not only details how much money is in the system, but also how it is distributed across the different sectors, e.g. commercial banks, insurance companies, and credit unions. It also goes further to disclose how evenly the assets within a sector are spread. It reveals, for example, that the top seven (of 33) credit unions control 93% of the movement’s assets.

Discover How Each Sector Performed

Beyond the overview, the report drills down to explore how each of the six major players in the local financial system – commercial banks, insurance companies, credit unions, trust and financial companies, mutual funds, and pension funds – performed. It examines their profitability as well as the factors that affect it, such as non-performing loans (loans that borrowers are not repaying) for commercial banks, credit unions, and trust and finance companies.

Find Out How the Local Debt Restructuring (As Well as Changes to Accounting Rules) Affected the Financial Sector

Last year’s local debt restructuring didn’t only impact individual investors; many financial institutions also invest in government securities. While these financial institutions didn’t lose the money they invested, their investments will now take longer to mature and will earn them less interest, which affects their present value.

The debt restructuring, coupled with the introduction of a new, more stringent accounting standard, International Reporting Standard 9 (IFRS 9), which went into effect in 2018, significantly impacted financial institutions’ profitability. 

Find Out How the Financial System Would Do If the Unexpected Happens

Given Barbados’ economic challenges, and the impact of the local debt restructuring on financial institutions, it’s very important to know what would happen if there was another shock to the financial system, such as if more people stopped paying off their loans or a large number of people withdrew their money in a short space of time.

The Financial Stability Report includes stress tests – extreme hypothetical scenarios designed to test how the system would stand up – for a range of situations.

And a Bonus… See How Barbadians Make Payments

Is cash still king? Or is it dead? The 2018 Financial Stability Report breaks down how Barbadians pay for the goods and services they buy, as well as what Government is doing to modernise payment systems locally.

If you want to know how strong Barbados’ financial system is – and that’s something you definitely should keep track of – read the Financial Stability Report.

Copyright 2021 by Central Bank of Barbados