BASSETERRE, St. Kitts – AS the recession in larger economies deepens and the pressures on smaller ones increase, the Governor of the Eastern Caribbean Central Bank (ECCB) Sir K. Dwight Venner has declared that the region’s economies are working well and show no indication being dysfunctional.
In a February 12 interview with SKNVibes, Director of Caribbean Centre for Money and Finance Dr. DeLisle Worrell indicated that the Caribbean may be experiencing “a failure of financial systems” and may be leading toward market failure, noting that the region must wait for recovery in US and UK economies before seeing any upturn.
“I do not think that we are bordering market failure, at least not in the [Eastern Caribbean] Currency Union (ECCU) because in fact, our economic markets are working much better than those in the [United] States. They are functioning while the economic markets in the United States have been described as dysfunctional,” Venner countered.
“In our region, the [commercial] banks borrow from the Central Bank. We have a bulletin board in the Central Bank where banks that want money post their name there; banks engage well with each other including indigenous banks and foreign banks. So our markets are working well; fortunately for us.”
Sir Dwight said the situation is “ironical” as the region’s economies are not fully integrated and sophisticated as international markets yet they do not break down easily and are “quite robust”. He stressed that as the region’s economies get more sophisticated over time and the ECCU is learning from what is transpiring in larger economies to safeguarding the region from the likes of sub-bank lending.
In addressing the regulatory policy and risk assessment of the region’s financial institutions, Venner said, “We have stress testing models. The Central Bank does strict regulation of commercial banks and each one is given a rating on their performance. If it [receives an] indifferent [rating], the bank would be issued a Memorandum of Understanding stating that its performance has been inefficient in a particular area and would be given a specific timeframe within which the bank would have to rectify that.”
However, Governor Venner stressed that although the financial crisis may pose a number of challenges to the region, the economic markets of the Currency Union have been effective for the most part.
