Financial Crime World

Trinidad and Tobago Takes Steps to Contain COVID-19 Impact

Port of Spain, Trinidad and Tobago - In response to the ongoing COVID-19 pandemic, the government of Trinidad and Tobago has implemented a range of measures to mitigate its economic impact.

Containment Measures

To slow the spread of the virus, the country’s borders have been closed, travel restrictions put in place, and schools and universities shut down. These measures aim to reduce the risk of transmission and minimize the disruption to daily life.

Fiscal Policy Measures

The government has announced a package of fiscal support measures worth TT$3.7 billion (2.3 percent of GDP) to help mitigate the economic impact of the pandemic. The package includes:

  • Salary relief for up to three months for temporarily unemployed workers
  • VAT and income tax refunds for individuals and small firms
  • Liquidity support for individuals and small businesses through subsidized credit union loans

Monetary Policy Measures

The Central Bank of Trinidad and Tobago (CBTT) has taken steps to ease monetary policy by:

  • Lowering the policy rate by 150 basis points to 3.5 percent
  • Reducing the reserve requirement on commercial bank deposits by 300 basis points to 14 percent
  • Temporarily relaxing regulatory treatment for restructured bank loans, allowing for:
    • Payment deferrals
    • Rate reductions
    • Waivers of penalty charges

Financial Sector Oversight

While the authorities have made progress in implementing recommendations from the Financial Sector Assessment Program (FSAP), further reforms are needed to strengthen financial sector oversight. The CBTT has:

  • Implemented quarterly stress tests on commercial banks, using single-factor and multi-factor shocks to assess their solvency and liquidity
  • Adopted consolidated supervision guidance internally
  • Expanded prudential reporting

Financial System Structure

Trinidad and Tobago’s financial system is large, diversified, and of systemic importance in the region. The country has:

  • Six bank-led and two insurance-lead groups that account for about half of financial sector assets
  • A banking sector that appears resilient, with:
    • Capital adequacy above 20 percent
    • Return on equity above 20 percent
    • Low non-performing loans (NPLs)
    • Retail refinancing and debt consolidation loans have risen in recent years

Risks and Vulnerabilities

Potential vulnerabilities in the financial sector include:

  • Energy dependence, which poses risks to financial stability if there are prolonged downturns
  • Household debt
  • Regional interconnectedness
  • Sovereign exposures
  • Conglomerate structures

The authorities have implemented various measures to address these vulnerabilities, including stress tests for commercial banks and the adoption of consolidated supervision guidance. However, further reforms are needed to strengthen financial sector oversight and mitigate potential risks.