ECCB 2016/2017 Annual Report

17

ECCB ANNUAL REPORT 2016/2017

The Bank sought to strengthen financial integration by providing support towards the development of strong and well capitalised financial institutions and modern, liquid and dynamic markets as well as the necessary enabling infrastructure to improve the efficiency of the financial system.

T he financial system continued to be challenged by a relatively low level of economic activity in some member territories; market structure constraints, including: small size, growing competition; and de- risking initiatives by correspondent banks. The impact of BREXIT and policies of the current US government remain uncertain and have the potential to affect the ECCU economies via major industries such as tourism, construction and Foreign Direct Investment (FDI) inflows. In addition, the Citizenship by Investment Programme (CIP), for some territories, has come under scrutiny. Credit risk was considered one of the major threats to financial stability, given the high level of non- performing assets at some commercial banks. The potential for contagion risk remained high within the ECCU financial system, given the small population size of the sub-region. The major financial stability activities undertaken during the year were: Policy Development Towards Systemic Stability and Enhanced Regulatory and Supervisory Framework The Bank procured the services of an in-house consultant to provide training in risk-based supervision, consolidated supervision, the Basel Core Principles Assessment and the implementation of Basel II.

Monitoring Threats to Financial System Stability and Implementation of Measures to Mitigate Risk Seven on-site examinations and several prudential visits to commercial banks were conducted. Greater focus was placed on enhanced monitoring of relevant licenced financial institutions, to ensure compliance with the requirements of the new Banking Act, prudential standards and best practices. Where applicable, the necessary action was taken. Execution of the Comprehensive Resolution Strategy and Technical Assistance Programme The ECCB received technical assistance from the IMF through the CARTAC with drafting a procedures manual for consolidated supervision, licencing procedures for holding companies, and updates to prudential standards. Implementation of an Effective ResolutionMechanism The Eastern Caribbean Asset Management Corporation (ECAMC) legislation was passed in the eight member territories and efforts continued towards full operationalisation of the entity. The ECCB continued to formulate a concept note on the establishment of a Depositor Protection Trust (DPT) for the ECCU and participated in aWorking Group established by CARICOM, for the implementation of a model deposit insurance system for the region.