Central Bank Warns of Global Threats Despite Resilient Financial System

  • Barbados’ financial system remains robust and well-capitalised, still it faces mounting threats from global economic uncertainty, rising protectionism and climate risks, the Central Bank warned in its latest Financial Stability Report. Deputy Governor Alwyn Jordan launched the 2024 Financial Stability Report (FSR) during a roundtable panel of financial experts.
  • In an overview of the report’s findings, Jordan disclosed that the island’s economic expansion continued in 2024, supported by robust credit growth and stable household and corporate balance sheets. But the deputy governor warned of pending threats to the country’s financial sector.
  • “Looking ahead, global economic uncertainty, rising protectionism, and elevated interest rates may pose increased financial stability risks, particularly if they lead to weaker external demand, inflationary pressures, and tighter financing conditions,” he cautioned.
  • “Stress testing confirms that the financial system remains sound under baseline conditions but highlights material vulnerabilities in scenarios involving severe external shocks, including tariff escalations and heightened geopolitical instability.
  • The Central Bank of Barbados’ latest financial stability assessment highlights a generally resilient financial sector, though with emerging vulnerabilities. Liquidity stress tests show a slight decline in resilience compared to 2023, while capital buffers remain well above regulatory thresholds and credit quality continues to improve. However, profitability has softened due to higher operating costs and fewer write-backs of provisions.
  • The Bank flagged growing systemic risks from climate change, particularly from extreme weather events affecting tourism and real estate, and noted rising cyber threats amid accelerating digitalisation. In response, regulators are prioritising enhanced climate risk mapping, improved cyber risk oversight, stronger data collection, and continued monitoring of sectoral exposures, especially in real estate lending, to safeguard overall financial stability.

(Source: Barbados Today)