Trinidad and Tobago CBG takes the inclusive approach
The governor of Trinidad and Tobago's central bank, Jwala Rambarran, has overseen a hectic period in which the country has considerably tightened its supervision procedures, sought to clarify the role of its international finance centre and developed its capital markets. He tells Silvia Pavoni how improving financial inclusion is his next priority.
Trinidad and Tobago’s central bank regulates and supervises the country’s banking sector, which is by far the largest in the Caribbean and is well capitalised. But the country's financial system is not immune from challenges. Only five years ago, the government had to intervene in Clico, the local insurance business arm of CL Financial – one of the region’s largest financial groups – as well as in other insurance and investment banking businesses of the conglomerate. The case prompted the central bank to tighten supervision of systemically important financial institution that are not banks, as well as to search for new measures to improve financial literacy and financial inclusion.
Q: What is the central bank doing to improve supervision?
A: Following from Clico, we realised that there were a number of financial institutions that were not under the [supervision] of either the central bank or the SEC [the Trinidad and Tobago Securities and Exchange Commission], but were very systemic in nature. What the central bank has done is to identify five institutions that we deem to be systemically important financial institutions [SIFIs] that are outside of the banking system.
Those five institutions are the Trust Corporation, which is Trinidad and Tobago's largest mutual fund provider; the National Insurance Board, which is the public social security provider; the Trinidad and Tobago Mortgage Finance Company, which is a specialised mortgage entity that provides financing for low- and middle-income housing; the Home Mortgage Bank, which is a secondary market player for mortgages in the country; and the Agricultural Development Bank. The minister of finance [agreed] that these five institutions would be deemed SIFIs and would come under the regulatory ambit of the central bank.
Q: Trinidad and Tobago’s financial centre is fighting hard to avoid being grouped with the offshore hubs that are traditionally based in the Caribbean, and disassociate itself with the 'tax haven' reputation that some of these – rightly or not – have attracted over the years. How concerned are you that investors may overlook the country’s plans to develop an onshore international financial centre?
A: There are two points to be made. Our motive for developing an international financial centre is totally different to that followed by [other countries in] the Caribbean with their purely offshore centres, which are really not integrated with the rest of the domestic economies. The second is that Trinidad and Tobago as a jurisdiction has always been very clean when it comes to [preventing] money laundering and dealing with counter-terrorism finance and [other criminal] activities.
We will be one of the first countries to undergo a mutual evaluation process based on the new and revised Financial Action Taskforce guidelines. The central bank, the SEC, the Ministry of Finance and the entire financial sector are working [hard] to meet that examination, which will take place in January 2015.
Q: As part of the plan to build an international financial centre driven by onshore business, the central bank has also been working to develop the local capital markets. Can you give details of the central bank’s involvement, and what are the key changes you want to implement?
A: We’ve been working very closely with the TTIFC [Trinidad and Tobago International Financial Centre] on developing the capital markets; the central bank will focus on developments within the domestic capital market, and the TTIFC, given its mandate, will focus on developments in terms of attracting, from an international perspective, those players that could help sustain and grow our capital markets.
For the central bank’s part, we’ve developed five working groups that comprise the major players in the financial sector. They are working on particular issues, such as: what new instruments should be required? What should be the capacity of the system? What should be the legislative changes to take us to the next stage of maturity?
At the top [of the priorities list] is regulation. You will hear the private sector saying [regulators] are never ‘growth enhancers’, they never allow for the kind of competitive behaviour that the markets need. So what the central bank is saying is: tell us what the friction points are, and we’ll see to what extent we can mitigate or eliminate them.
Q: Five years ago, the government surveyed Trinidadians to assess their level of financial literacy. The results were disappointing. A new survey was launched in 2013 and the findings are being analysed now. Do you expect things to have improved, and what is the central bank doing to support financial literacy and financial inclusion?
A: [Preliminary results] more or less corroborate what we thought would have happened over the past five years, which is that the level of financial literacy really needs strengthening. Financial inclusion has become a key pillar of one of the strategic objectives for the central bank. Last year, we joined the Alliance for Financial Inclusion [AFI], which is a global network of central banks that promotes financial inclusion practices around the world. We became the 100th member. We were the first in the Caribbean to commit to developing an international financial inclusion strategy that will meet the diverse needs of the various players within the country.
One of the key points of that strategy is to take our national financial literacy programme and transform it into a fully accredited financial inclusion training institute. That programme is going to be launched in early September this year, when we host the AFI’s global policy forum. A lot is happening to help the citizens of this country to make better financial decisions.
