Eastern Caribbean Central Bank 2024-2025 Annual Report

EASTERN CARIBBEAN CENTRAL BANK ANNUAL REPORT 2024 - 2025

Financial Stability

I n 2024, the Eastern Caribbean Currency Union (ECCU) faced complex global challenges, including geopolitical tensions, climate disruptions, and a slowing global economy. Key factors impacting the global landscape were declining inflation rates in advanced economies, continued monetary tightening in the USA and Eurozone area, high energy prices due to geopolitical conflicts, and significant climate-related economic losses. Within the ECCU, tourism-driven growth moderated, inflation decelerated, and public debt increased in several member countries. The ECCU’s financial sector remained broadly stable, as measured by key indicators developed and monitored by the Bank, despite these global macro-financial developments. The commercial banking sector continued to demonstrate strong resilience, as evidenced by robust capital adequacy ratiosandample liquidity. Credit growth, akey factor in facilitating economic activity and investment in the region, was driven primarily by household

attributable to cybersecurity and climate-related shocks. The ECCU financial system faced heightened cyber risk exposure in 2024, due to multiple incidents, which impacted financial institutions and customers. Those incidents underscored operational vulnerabilities and the need for stronger cybersecurity. On the climate front, the ECCB member countries of Grenada and Saint Vincent and the Grenadines were severely impacted by Hurricane Beryl in July 2024, which caused a combined EC$1.2 billion in damage to property. Additionally, climatic events in the Atlantic basin contributed to rising reinsurance costs. The Bank therefore implemented several measures and advanced initiatives to strengthen andmaintain the soundness of the financial system, mitigate risks and vulnerabilities and transform the ECCU through innovation and collective action. The ECCB continued to strengthen the regulatory architecture in 2024, with a view to mitigating systemic risk and enhancing the regulatory framework. Consequently, efforts advanced in developing the following frameworks: ; Institutional Arrangements to Support the Macro-Prudential Stability in the ECCU; ; A Crisis Resolution Mechanism for the ECCU’s Financial System; and ; The Office of Financial Conduct and Inclusion. These frameworks, combined, are expected to strengthen resilience of the ECCU’s financial Prudential and Regulatory Developments Financial Sector Reforms

borrowing, mainly for real estate purposes. Credit quality continued to improve into the financial year, as non-performing loan ratios fell across most sectors. and v u l n e r a b i l i t i e s in the ECCU increased, mainly Risks

The commercial banking sector continued to demonstrate strong resilience, as evidenced by robust capital adequacy ratios and ample liquidity.

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