2019-2020 Annual Report and Statement of Accounts

FINANCIAL SECTOR STABILITY

Financial Stability Report Enhancing the risk-based supervisory and management framework requires the ECCB to report on risks emanating within the financial sector at the macroeconomic level. The Financial Stability Report is a key reporting tool of central banks globally. The Report is based on analysis of the commercial banking sector, the credit union sector and the insurance sector in the ECCU. To facilitate the analysis of these risks, the Bank works with the Single Regulatory Unit (SRU) in each member country to collect and analyse the data for the credit union and insurance sectors. The Financial Stability Report was produced three times during the financial year 2019/2020. The Bank also produced an infographic to highlight the key messages of the Report in November 2019. Develop a Macro-Prudential Framework The Bank continued towork towards the development of themacro-prudential policy framework for the ECCU region. The goal of this framework is to assess risks across the financial sector and make recommendations on an appropriate course of action to mitigate any risk that threatens the stability of the financial sector. Several initiatives have already been achieved toward this goal, including the development of a suite of indicators to assess stability and the publication of three Financial Stability Reports (2016, 2017 and 2018). Moreover, the Bank continued to offer advice to develop a macro-prudential framework. It also established a Regional Financial Stability Committee and encouraged Member Governments to enact legislation to give the ECCB powers to undertake macro-prudential policy. Issuance of Prudential Standards The ECCB continued to revise existing and draft new prudential standards to strengthen its regulatory framework and increase financial sector resilience. Standards relating to Internal Auditing and Permissible Activities were issued in December 2019, and came into effect on 1 January 2020. Standards on Treatment of Impaired Assets, Corporate Governance, Outsourcing, Fitness and Probity, Operational Risk, Consolidated Supervision, and Holding Companies are being finalised for issuance by September 2020. A suite of Basel-related standards which cover capital, credit risk, market risk and interest rate risk, is being finalised for issuance by the end of December 2020. The commercial banks’ revised and new prudential returns were implemented in January 2020. The balance sheet data submitted by banks were revised to meet international requirements of the monetary and financial statistics. Additional data on the payments system and loans by economic sector based on the International Standard Industrial Classification revised version 4.1 (ISIC Rev 4.1) were also introduced during the period. A new form to capture all real estate lending activity, including funded loans and declined loans on an annual basis, was also introduced during the period.

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