2018 Financial Stability Report

Figure 5: Credit to GDP Gap (Financial Cycle)

Figure 6 : Credit Growth by Segment (year on year change)

20.0

10.0 20.0 30.0 40.0

High systemic risk

0.0

Low systemic risk

(20.0)

(30.0) (20.0) (10.0) 0.0

(40.0) percentage points

Percentage Change (%)

Jun-03

Dec-05 Mar-07 Private Sector Credit Gap Household Credit Gap Business Sector Credit Gap Jun-08 Sep-09 Dec-10 Mar-12

Jun-13

Jun-18

Sep-04

Sep-14

Dec-00

Dec-15

Mar-02

Mar-17

Source: Eastern Caribbean Central Bank (ECCB)

Dec-07 Total Credit

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Private Sector Credit

Business Credit

Household Credit

Source: Eastern Caribbean Central Bank (ECCB)

This analysis is also substantiated by the year on year growth rate of credit, (Figure 6). Overall, domestic lending is gradually recovering but asymmetric across segments of the financial sector. While credit growth in the banking sector slowly recovered, growth in credit remained buoyant in the credit union sector. Across lending categories, lending to non-financial corporations (NFCs) remained subdued, mortgage lending moderated, while spending on consumer durables accelerated.

The Composite Index of Systemic Stress (CISS) shows a decline in the correlation of risk across different segments of the financial sector (money market, bond market (RGSM), and household credit). The CISS was recorded at 0.14 points as at end December 2018 when compared to a value of 0.20 points at the end of December 2017 (Figure 7). The CISS remains below the levels observed during periods of high stress (average of 0.44 points). The lower risk across these sectors was reflective of cyclical effects, as risk aversion remained high across financial market segments.

Financial Stability Report 2018

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