5 months ago

The Trinidad & Tobago Business Guide (TTBG, 2009-10)


THE FINANCIAL SECTOR Trinidad and Tobago and global finance Scotia Bank, Port of Spain Trinidad and Tobago’s financial sector has minimal exposure to the global economic crisis, and solid contingency measures are in place By Jwala Rambarran Despite the unfolding global financial crisis, Trinidad and Tobago’s financial sector demonstrated remarkable resilience and growth in 2008. The initial impact of the global meltdown on the local financial system was fairly limited, for several reasons. First, domestic banks were not invested heavily in subprime mortgages where the crisis originated. Some institutions had direct exposure to Lehman Bros, Merrill Lynch and AIG, but in all instances the exposure was minimal in relation to total assets. Second, local banks depend almost wholly on deposit mobilisation to engage in credit expansion, and only marginally on foreign loans. Finally, despite dominant foreign ownership, the banking system’s limited integration into global financial markets has, in this instance, turned out to be a blessing in disguise. Six of the eight banks are completely foreign-owned, one is state-owned, and the remaining bank is partly locally owned. By contrast, most of the banking sector was indigenous just five years ago. Global risk Based on analysis carried out by the Central Bank of Trinidad and Tobago, there appears to be no immediate risk to the banking system from the global financial crisis. Banks’ regulatory capital stands at over 18 per cent of risk-weighted assets, well above the minimum 10 per cent regulatory requirement. Regulatory Tier 1 capital is also sufficient at just over 16 per cent of total risk-weighted assets. Although loans to the private sector constitute a significant share of the total assets of the banking system, non-performing loans account for less than 2 per cent of gross loans. All local banks have foreign short-term revolving credit lines. However, given the availability of foreign exchange either from the Central Bank or the market, these credit lines are quickly amortised when used. While the 28 TTBG 09/10

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