Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2020 Financial System Stability Assessment with Trinidad and Tobago







October 8, 2020















WASHINGTON, DC:
The Executive Board of the International Monetary Fund (IMF) concluded the
Financial System Stability Assessment (FSAP)

[1]

with Trinidad and Tobago on August 31, 2020 without a meeting.

[2]

This report is based on the work of joint IMF/World Bank Financial Sector
Assessment Program (FSAP) missions to Trinidad and Tobago during November
2019 and January–February 2020. The FSSA report was completed on July 31,
2020.

The FSSA reflects FSAP work conducted mostly prior to the onset of the
COVID-19 crisis. The FSSA focuses on Trinidad and Tobago’s medium-term
financial stability challenges and policy priorities. Given the FSAP’s
focus on tail risks and strengthening policy and institutional frameworks,
including contingency planning and crisis management, the FSAP’s findings
and recommendations remain pertinent.

According to the FSSA the banking system was well capitalized and liquid
but exposed to sovereign risk and potential liquidity risks stemming from
non-bank financial entities in the group on the eve of the COVID-19 crisis.
Illustrative stress tests were run subsequent to the FSAP missions to
quantify the possible impact on bank solvency in adverse COVID-19 economic
scenarios. Given the unprecedented nature of the ongoing pandemic, these
scenarios are associated with significant uncertainty. The results suggest
that under further strong deterioration of macrofinancial conditions some
banks could breach their minimum capital requirements in 2022. Banks could
also face liquidity pressures in the event of a run on investment funds
issued in their groups. Financial vulnerabilities include rising household
debt, sovereign exposures, potential spillovers from natural disasters
(including climate-related) or sovereign shocks in the region, and
contagion risks between investment funds and banks.

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While recognizing the progress made by the authorities, including to
significantly enhance the anti-money laundering/ combating the financing of
terrorism (AML/CFT) framework, the FSSA recommended they accelerate efforts
to strengthen the regulatory framework for this regionally important
financial system. Measures should include strengthening the independence,
governance, and resources of financial supervisors; implementing the new
banking regulations and modern, risk-based insurance supervision; and
introducing system-wide regulation for investment funds while adopting a
carefully sequenced transition to floating value investments.
Macroprudential powers should also be adopted and used to attenuate banks’
sovereign exposures among other risks. In addition, climate risks warrant a
comprehensive environmental risk assessment of the financial sector and the
development of a green finance strategy.




[1]

The Financial Sector Assessment Program (FSAP), established in
1999, is a comprehensive and in-depth assessment of a country’s
financial sector. FSAPs provide input for Article IV consultations
and thus enhance Fund surveillance. FSAPs are mandatory for the 29
jurisdictions with systemically important financial sectors and
otherwise conducted upon request from member countries. The key
findings of an FSAP are summarized in a Financial System Stability
Assessment (FSSA).


[2]

The Executive Board takes decisions under its lapse-of-time
procedure when the Board agrees that a proposal can be considered
without convening formal discussions.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

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