Banking Sector Well-Capitalised, Profitable and Resilient

February 9th, 2023

INTERVIEW

Dr Alvin Hilaire
Governor, Central Bank of Trinidad and Tobago

From a Central Bank perspective, could you give a brief overview of the sector in 2021 and to date, highlighting any challenges and key developments as we move forward?

Trinidad and Tobago’s financial sector continued to demonstrate health and resilience in 2021, despite the challenges associated with the pandemic. Credit, market and liquidity risks were heightened in 2020 given the global health crisis, domestic infections, supply chain disruptions and lockdowns aimed at curbing the spread of the virus. Policy actions – including strong fiscal support and monetary actions to boost liquidity – helped to restrain the macroeconomic fallout. At the same time, adjustments by financial institutions as well as forbearance measures by the Central Bank provided some breathing room for individuals and businesses in managing their debt commitments. As a result, overall the banking sector continued to be well-capitalised, profitable and with adequate liquidity in 2020 to date.

How does the banking and financial services industry need to move forward?

Going forward, the banking and financial services industry should continue to embrace the use of financial technology (fintech), while becoming more people-centred in their product and service delivery. The demonstrated benefits of modern technology and communications should be reflected in lower transaction costs of services to consumers and greater efficiency in product delivery. Meanwhile, financial institutions must be sensitive to the needs of customers who are not tech-savvy and must be prepared to significantly shore up their cyber defences to deter fraud and service interruptions.

More generally and consistent with what is happening worldwide, we anticipate that there will be new non-traditional players offering financial services in Trinidad and Tobago, notably fintech companies. The Central Bank is gearing up to deal with regulation in this unfamiliar area by partnering with other regulators, such as the Securities and Exchange Commission and Financial Intelligence Unit, as well as fintech industry representatives.

Relatedly, can Government and/or a private sector partnership contribute to the success of the industry? Is policy or legislation needed to move the industry along?

Yes, there is a need for continued collaboration among all parties – the Government, regulators, private companies, and the public – to ensure durable financial development in Trinidad and Tobago. As noted earlier, the new insurance legislation marks a significant step in buttressing insurance supervision. Likewise, other gaps will need to be identified and addressed as opportunities and issues unfold in the dynamic financial services industry. For example, the concept of legal tender itself is being reviewed to take into account digital means of payments. A proactive, forward-looking approach, seeing the experiences of other countries is essential to assure that Trinidad and Tobago keeps pace with the ever-changing global financial landscape.

What is your projected outlook for the sector between 2022 and 2023?

The domestic financial sector has weathered the pandemic reasonably well. The outlook is positive as the pandemic subsides and economic activity worldwide accelerates. Some of the new challenges include inflation sparked by supply shortages, defensive actions by major central banks that lead to higher interest rates which could dampen growth prospects, and geopolitical turmoil. We expect the domestic financial sector to remain resilient to these challenges. There is likely to be some more consolidation of financial firms, with new mergers and acquisitions within the country and with regional counterparts. An essential component of such success is the capacity of the supervisors to maintain a stable atmosphere and at the Central Bank, we are doing our part to prepare.

The Central Bank of Trinidad and Tobago is widely respected as a monetary policy authority and guardian of financial stability grounded in international best practices. The Bank conducts monetary policy and supervises and regulates licensed financial institutions in Trinidad and Tobago. The institution is committed to public education about core economic and financial concepts, as well as increasing awareness of its roles and functions. For specific queries, you may contact us via email at [email protected].

The Central Bank of Trinidad and Tobago
Eric Williams Financial Complex
Independence Square, Port of Spain
Phone: (868) 621-CBTT (2288)
Fax: 1 868 625 0021
Email: [email protected]
Website: https://www.central-bank.org.tt

By Kay Baldeosingh-Arjune