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This is the first update of the Central Bank of Barbados’ Financial Stability Report, produced in collaboration with the Financial Services Commission (FSC). The Central Bank and the FSC are jointly responsible for the continuous oversight of the financial system, to assess vulnerabilities and to initiate policies to increase the resilience of the system in the face of possible adverse events. The Central Bank’s Financial Stability Unit works with the FSC’s staff to ensure that the assessment of risk exposures covers the activities of banks, international banks, insurance companies, international insurance and reinsurance companies, nonbank deposit taking financial institutions, credit unions, the activities of the Barbados Securities Exchange and issues and redemptions of government securities. This update analyses a range of financial stability indicators for banks and other financial institutions, as well as balance sheet and income and expenditure trends. For the banking system, financial forecasts are used to project a baseline of expectations for capital adequacy and the quality of credit. Stress tests are applied to the baseline, progressively increasing the pressure until capital adequacy falls below the eight percent minimum which the Central Bank stipulates. Progressive stress tests are also used to test for possible contagion among banks, and from banks’ exposures to financial institutions abroad.