ECCB 2020-2021 Annual Report and Statement of Accounts

MONETARY STABILITY

Reserve Management Given the low interest rate environment following the onset of the COVID-19 pandemic, the Bank explored alternative asset classes to support reserve management and meet the key objectives of foreign reserve management and strategy. The assessment included evaluating each asset’s risk/return profile, operational requirements and any policy implications. The investment guidelines for the Bank’s external managers were reviewed and updated. The revision included additional securities allowing the money managers greater latitude to outperform their respective benchmarks while maintaining the Bank’s risk tolerance. The annual review of the reserve portfolios’ risk tolerance and benchmarks was also conducted. Review and Adoption of a Revised Reserve Management Framework The Bank completed a Request for Proposal (RFP) and due diligence process for custodial services relevant to foreign reserve management and the Bank’s Pension Fund. The Bank will transition to the new custodian in the second quarter of the Bank’s 2021/22 financial year. The Bank continued its engagement with the World Bank’s Reserves Advisory Management Partnership (RAMP) for a second three-year term. The first term ended during the financial year and a second engagement was deemed appropriate for the continued development of the newly formed Risk and Analytics Unit and in furthering the advancement of the internal manager’s portfolio management skills. The newly formed Risk and Analytics Unit has operationalised its compliance and performance functions. Compliance is monitored on a daily basis for all investment portfolios. The Unit generates performance reports daily and monthly for the internally managed fund. Advise Monetary Council on Monetary and Credit Conditions Consistent with the ECCB Agreement In its ongoing efforts to ensure that conditions were consistent with the ECCB Agreement, the Bank monitored and prepared reports regarding the Banking System and overall ECCU liquidity, maintenance of the required 6.0 per cent reserves and the status of governments and related accounts. In accordance with the mandate given in the ECCB Agreement, reports on monetary and credit conditions affecting the Eastern Caribbean Currency Union (ECCU) were presented at the meetings of the Monetary Council. During the year under review, the format and structure of the report was changed to capture financial conditions and developments. The report retitled: Monetary, Credit and Financial Conditions Report , captures key analysis provided by the Bank Supervision Department, the Banking and Monetary Operations Department, the Advisory Services Unit and the Research Department. In this new iteration, the Monetary Council and the Board of Directors were advised and updated on the status of, and developments in, monetary and credit aggregates as well as financial stability matters in the ECCU. The Monetary and Credit Conditions Report was produced twice during the financial year 2020/2021, while the new Monetary, Credit and Financial Conditions Report was produced once during the financial year and will continue to be produced. During the year, the Bank also convened several Special Meetings of the Monetary Council which focused on the social and economic challenges emanating from the COVID-19 pandemic. Recommendations to the Council focused on policies for addressing fiscal and debt sustainability, financial stability, legislative reforms, and a Programme of Action for Recovery, Resilience and Transformation for repositioning the region post the COVID-19 pandemic.

EASTERN CARIBBEAN CENTRAL BANK ANNUAL REPORT 2020/2021 3