Sep 2009 Financial News

Non-banking sector strong

Sep 23, 2009

CLICO Investment Bank’s failure shook the financial soundness of the non-bank sector but not enough to weaken the entire sector, which remains strong enough to withstand any further economic turbulence.

Central Bank Governor Ewart Williams expressed his confidence when he revealed findings of a Financial Stability Report for 2008, the first such publication issued by the Bank. At the launch of the report yesterday at the Eric Williams Financial Complex in Port-of-Spain, Williams said the report will be issued every year and updated semi-annually through Financial Stability Reviews. The report will improve the Bank’s effectiveness through increased transparency and communication with the public, he said.

Within the report, he said, while the non-bank sector remained profitable and stable with sound indicators, it encountered challenges within the last decade due to competition from the banks which forced these institutions to increase their interest rates and to move to less creditable borrowers.

Under the heading, Finance Companies and Merchant Banks, non-performing loans as a percentage of total loans was 10.7 percent in 2008, up from 7.3 percent in 2007, return on equity was 12 percent in 2008 compared to 33.4 percent in 2007 while operating expenses as a percentage of income made through their operations was 109 percent in 2008 compared to 80.4 percent.

“These figures are heavily influenced by Clico Investment Bank. CIB is part of this group and they were outliers in all three areas. They were certainly outlier in outperforming loans, in terms of their operating expenses because they pay interest rates that were significantly higher than the rest of the market,” Williams said.

The banking system, he showed, remained strong and showed steady growth despite rapid growth in the economy over the years.

With the advent of the international crisis, the impact on the local financial system was fairly limited, Williams said, because of the lack of exposure to the US sub-prime mortgages and limited foreign exposure in general, a strong capital base and conservative operating policies.

“The financial system is robust but it faces challenges. Notwithstanding the changed economic environment, and the challenges and vulnerabilities identified the financial sector remains strong and well positioned to withstand shocks,” Williams said.


Source:
LEISELLE MARAJ
Trinidad Newsday
Wednesday, September 23 2009

http://www.newsday.co.tt/business/0,107827.html