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Barbados's Finance Center 'Resilient,' Says Central Bank

by Mike Godfrey, Lowtax.net, Washington
03 February, 2016

Barbados's financial system is sound and capable of withstanding adverse shocks, the territory's central bank has said in its 2015 Financial Stability Report.

The report said "the performance of the local banking sector improved over the twelve months to September 2015. Write-offs of bad loans fell sharply from their peak in 2013 and the non-performing loan (NPL) overhang displayed significant signs of recovery for commercial banks in particular. There was also a substantial recovery in profitability, due not only to improvements in the quality of the credit portfolio, but also to a wider gap between interest paid out to depositors and interest received on loans. However, loan growth remained weak."

The central bank said stress tests on the banking sector, including in the areas of liquidity risks, contagion exposures, the ability to absorb credit shocks, foreign exchange exposure, and interbank exposures, confirmed the resilience of the banking sector.

The bank reported that trust and finance companies, credit unions, and insurance companies' exposure to banks was approximately 23, 44, and 21 percent of their capital, respectively. Conversely, commercial banks' exposure to all other financial institutions combined only represented 12 percent of their capital, with more than half being held with affiliated trust and finance companies.

With respect to the territory's insurance sector, the bank said that while assets in the sector declined during the period, strong growth in premiums for both the life and general insurance subsectors was registered. The report also highlighted increased profitability for trust and finance companies, due mainly to lower provisioning and higher fee income.

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