29 August 2013 Signing of Memorandum of Understanding between Central Bank of Barbados & Financial Services Commission
Barbados has a history of cooperation among our financial regulators that goes back decades, and Central Bank has for many years lent its regulatory expertise to the regulators of credit unions, insurance companies and securities traders.
More recently we have collaborated with the Financial Services Commission and its predecessors in convening annual conferences for the domestic financial institutions, and in the preparation of the annual Financial Stability Report. As you know the World Bank and IMF are currently conducting a Financial Sector Assessment Programme for Barbados, and our regulatory agencies have worked hand in hand on the preparations, and we continue to partner in the completion of the assessment, when the WB-IMF team returns next month.
The Financial Services Commission and the Central Bank of Barbados are engaged in a common endeavour to ensure that prompt action is taken to ensure the soundness of Barbados’ financial system. Our purpose is to ensure that all residents of Barbados and our international partners are assured that their legitimate interests will be protected. It must be clearly appreciated by everyone that the Central Bank of Barbados and the Financial Services Commission cannot discharge their respective legal responsibilities successfully if their operations are separated by Chinese walls. We recall with great pleasure that about one year ago the senior management of the Commission was invited to a luncheon meeting at the Bank. Governor Worrell graciously extended the hand of cooperation and assistance to the Commission on the occasion of that meeting. We regard the Bank’s offer as one of the richest endowments that the Commission has received during its formative years.
It is important to note that a critical component of this MoU is placed on financial stability. Though this will be the focus it is not a new concept in Barbados’ regulatory environment. The Central Bank of Barbados has been producing financial stability reports for a couple of years. In the recent past the FSC has partnered in its production. The formal signing of this MOU officially cements that collaboration. With respect to the financial stability report it has expanded its scope from an analysis focused on financial soundness indicators primarily within the banking sector to include the non-bank financial institutions.
An element of a risk-based approach has been necessitated by the recent global financial crisis, which required that policy makers: (i) reassess the role that complex financial system structures play in achieving sound economic outcomes, (ii) strengthen frameworks for maintaining systemic financial stability and developing crisis resolution mechanisms, and (iii) the need for regulators to be on top of ways to assess emerging financial risks, including financial engineering/innovation and moral hazard issues by risk-taking financial institutions. We must reiterate that our role is not to stifle innovation, but to ensure that we understand the risks involved; and that they are properly disclosed and managed.
It is generally accepted locally, regionally, and internationally that the Central Bank of Barbados has over the past four decades accumulated a reputation for excellent standards. The signing ceremony formalizes the cooperation that is ongoing. The ability of the Commission to prepare for the first part of the Financial Sector Assessment Programme (FSAP) examination that commenced in July of 2013 was in large measure facilitated by the Central Bank of Barbados. I wish the public to know that the Commission is encouraged by the preliminary findings of the FSAP examiners.
The Commission is conscious of the pivotal role of the financial sector in enhancing the quality of life of our citizens and all residents of Barbados.
In all cases, the enhanced work agenda demands high-frequency and timely data for analysis and policy decision – another area of key collaboration. In the final analysis, as a result of the signing of the MoU today, the FSC and the Central Bank will be able to more efficiently strengthen the financial system and accelerate a process which has already begun and one which we are pleased to be part of. On behalf of my colleagues and the management and staff of the Commission I wish to place on record our full commitment to observing the provisions of the Memorandum of Understanding.