In its 84-page report on Grenada’s performance under its Structural Adjustment Programme and Letter of Intent the International Monetary Fund (IMF) touched on the financial services sector in the Spice Isle.
As a public service, THE NEW TODAY reproduces the comments made by the fund on the financial sector:
Financial Sector Reforms
Grenada aims to build a stronger banking system that will contribute more effectively to promoting investment and growth.
With the new Banking Act now legislated across most of the ECCU and approved by Grenada’s parliament, the strengthened regional framework for bank resolution and supervision is now in place.
The priority has shifted to addressing the results of the regional bank diagnostics.
The latter included an asset quality review (AQR) of indigenous banks, viability assessments of individual banks, and a regional assessment of potential mergers and/or groups of assets and liabilities across banks that could be attractive for investors.
This exercise is now complete, although the institution-by-institution plans have not been elaborated.
The ECCB and national authorities are now consulting on the final estimated capital needs of the banks in question and a detailed strategy is expected this autumn.
The final strategy to strengthen Grenadian banks should safeguard fiscal sustainability.
Staff and the authorities concurred that it would be premature to determine a final strategy for Grenada’s banks at this time and agreed to discuss the issue at the next program review.
The authorities’ reiterated their commitment to seeking private sector solutions as the first best option to address weaknesses identified.
Should private sector solutions not be forthcoming, the authorities committed to working with the ECCB to develop an appropriate strategy that would be consistent with a sustainable fiscal framework and commitments under their IMF-supported program, including the program’s goal of debt sustainability
Reforms to strengthen regulation and supervision of the nonbank financial sector are continuing.
Recommendations of an independent evaluation of the Grenada Authority for the Regulation of Financial Institutions’ (GARFIN) operations and supervisory practices, undertaken by CARTAC in early 2015, are guiding reform priorities.
With respect to the credit union sector, priorities remain focused on strengthening regulation by conducting a credit quality review (with assistance from CARTAC), revising the Cooperative Societies Act in 2016 to raise the minimum capital adequacy requirement and, in cooperation with other members of the Caribbean Association of Credit Union Supervisors, developing a risk-weighted capital adequacy framework for credit unions.
In the insurance sector, the priority remains to transition supervision to the Eastern Caribbean Financial Services Regulatory Commission (ECFSRC), the planned regional regulator and supervisor of the proposed single insurance market in the ECCU.
The ECFSRC is expected to commence operations in early 2017.
Finally, with most pension plans in Grenada now registered with GARFIN, offsite supervision of the sector has started and onsite supervision is expected in 2016.