Financial Regulation Explained in Barbados

Barbados has a rich history of commercial banking, with both international and local institutions playing a significant role. The country’s financial sector is governed by a robust regulatory framework that ensures the stability and soundness of its banks.

The Role of Banks in Barbados

• Commercial banks
• Regional and local development institutions (focusing on long-term lending and risk financing)
• Credit unions and provident societies (operating solely within their member bases)

The Central Bank of Barbados (CBB)

• Oversees the banking regulatory framework
• Implements measures to strengthen the financial sector, including increased lending from commercial banks and credit unions
• Responsible for administering the Financial Institutions Act (FIA)
• Issues licenses to domestic, regional, and international banks operating in Barbados

The Financial Institutions Act (FIA)

• Governs domestic, regional, and international banks operating in Barbados
• CBB is responsible for its administration
• Minister of Finance issues licenses
• Banks can operate under various categories:
  • Commercial banks
  • Trust companies
  • Finance companies
  • Money transmission service providers

Regulations and Supervision

• Regulations, guidelines, and supervisory practices issued by the CBB govern banks and financial institutions
• Unlike commercial banks, the CBB does not offer public banking services but works with the government to promote development and maintain economic stability
• The CBB’s main responsibilities:
  • Monetary regulation
  • Acting as banker to the government and commercial banks
  • Advising on monetary and financial issues
  • Foreign exchange reserves management
  • Public debt management
  • Supervising financial institution operations

International Cooperation and Standards

• Barbados’ regulatory framework conforms to international standards and best practices, including the Basel Core Principles for Effective Banking Supervision
• The CBB cooperates with other regulators through memoranda of understanding (MOUs)
• Meets regularly as part of supervisory colleges of pan-Caribbean banks
• Works closely with domestic sectoral regulators and international regulatory groupings

Ties to Canada

• A significant number of Barbados’ banking institutions have ties to Canada
• More than 50% of commercial banks and bank holding companies originate from or have connections to Canada
• Barbados has developed strong relationships with Canadian regulators, including an MOU signed in 2010 with the Office of the Supervisor of Financial Institutions (OSFI) to facilitate cooperation and information sharing.