Compliance Risks in Banking Industry of Antigua and Barbuda Highlighted in New Report

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The banking sector of Antigua and Barbuda is facing significant compliance risks due to its high concentration, with the largest bank accounting for a whopping 61% of the sector’s aggregated assets. This has been revealed in a detailed assessment of the country’s compliance with the Basel Core Principles for Effective Banking Supervision.

Concentration of Assets and Compliance Risks

The report highlights that investment portfolios make up the bulk of banks’ assets, with a majority comprising government and corporate bonds and equities. While this may seem stable on the surface, it also increases the sector’s exposure to market risk. Additionally:

• Loan portfolios are characterized by large exposures, some exceeding 25% of capital, which could have devastating consequences in the event of default.
• The high concentration of assets also makes it challenging for regulators to monitor and supervise the sector effectively.

Connected Party Loans: A High-Risk Area

Connected party loans, which often carry higher risks due to their inherent relationships with borrowers, also feature prominently in Antigua and Barbuda’s banking system. The report warns that these types of loans can be particularly challenging for regulators to monitor and supervise, increasing the likelihood of non-compliance with regulatory requirements.

Strengthening Risk Management Practices

The assessment underscores the importance of effective regulation and supervision in mitigating compliance risks within the sector. It also highlights the need for banks to strengthen their risk management practices and internal controls to ensure they are adequately prepared for potential challenges.

Implications and Recommendations

As an offshore financial center, Antigua and Barbuda’s banking industry is under intense scrutiny from regulatory bodies and international organizations. The report serves as a wake-up call for policymakers and regulators to address the compliance risks facing the sector and implement measures to enhance its resilience and stability.

In conclusion, the report highlights the importance of addressing compliance risks in Antigua and Barbuda’s banking industry to ensure the sector remains stable and resilient. It is essential for policymakers, regulators, and banks to work together to strengthen risk management practices and internal controls to mitigate these risks.