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CENTRAL BANK OF BARBADOS REDUCES THE FOREIGN EXCHANGE RESERVE REQUIREMENT
The Central Bank of Barbados today announced a modification to its monetary policy.
With effect from July 9, 2009, the foreign exchange reserve requirement will be reduced from 6% to 4%.
The foreign exchange reserve requirement was introduced in December 2005 in order to give the Bank access to a higher proportion of the foreign exchange held by the commercial banks. At present the commercial banks are holding foreign exchange well in excess of what is required by statute.
The reduction in the requirement is intended to encourage those banks that need foreign reserves to use their own resources rather than purchase from the Bank while accumulating their own reserves. This should result in some strengthening of the net international reserves if the additional foreign exchange is sold to the Central Bank or if the commercial banks use their own foreign exchange rather than approach the Central Bank. It is estimated that the change in the reserve requirement will make an additional $27 million available for use by the commercial banks or for sale to the Central Bank.
June 22, 2009