BANKING IN TRINBAGO
This week we will explore banking in Trinidad and Tobago and the English-speaking Caribbean. Let me be clear, this is not offshore banking. This is banking for people living and working in the Caribbean.
Trinidad and Tobago’s banking sector comprises commercial banks, which are licensed to conduct the BUSINESS OF BANKING, and non-bank financial institutions (NBFI), which are licensed to conduct BUSINESS OF A FINANCIAL NATURE, under the Financial Institutions Act, 2008. Eight commercial banks make up the banking sector, four of which are subsidiaries of North American banks; one started life as the subsidiary of the UK’s Barclays Bank and three are truly indigenous.
Four of these banks (CTTL, FCIB, JMMB and Scotia) have operations in Jamaica, which has eight commercial banks. FCIB, FCB, RBC, RBL and Scotia also have operations in Barbados along with Sagicor Bank. And RBL and Scotia have operations in Guyana, which has six commercial banks. The eight islands that are covered by the Eastern Caribbean Central Bank (ECCB) have 33 registered financial institutions, 6 of which are RBL and 4 FCIB branches or subsidiaries.
There are sixteen NBFIs in Trinidad and Tobago, nine of which are subsidiaries of the eight licenced banks.
The products and services offered by these twenty four regulated institutions are wide ranging and include TT- and US-dollar savings and investment instruments, foreign exchange dealings, money market instruments, trade financing, project financing, floating and underwriting of shares and bonds.
The business of banking, which can only be done by the eight banks, permits two major products which are excluded from ‘business of a financial nature’. Under the business of banking, only the commercial banks can accept deposits that are repayable on demand, and grant loans for periods of less than one year. Additionally, commercial banks can take deposits from the public on current accounts and offer chequing facilities to their customers.
Commercial banks, not NBFIs, can accept deposits that are repayable on demand, grant loans for periods of less than one year, take deposits from the public on current accounts and offer chequing facilities.
Deposit Insurance in Trinidad and Tobago
The Deposit Insurance Corporation of Trinidad and Tobago plays a major role in maintaining the stability of the financial system. Its primary function is to manage a fund to provide insurance protection for depositors against the potential loss of their deposits, should a member financial institution fail. As the CBTT’s website notes:
This coverage is up to TT$125,000 per depositor, per institution. It is applied across three different "rights" or "capacities" which refer to the type of account ownership, namely, Single (Individual) Accounts, Joint Accounts and Trust Accounts. Ultimately, a depositor can receive protection up to a maximum of TT$375,000 in any one member institution, assuming all three "rights" or "capacities" are provided by the institution. Membership in the Fund is compulsory for all institutions licensed under the Financial Institutions Act, 2008.
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Therefore, if you are concerned, it makes sense to have accounts at all banks and to have funds in the three account types, i.e., Individual Accounts, Joint Accounts and Trust Accounts. For example, you, your husband, and two children can be protected up to TT$1.5 million at any ONE financial institution, if you each have single and trust accounts and a joint account. This of course assumes that the bank or NBFI offers all three types of account.
Deposit Insurance in the Rest of the English-Speaking Caribbean
The Jamaican Deposit Insurance Act protects up to a limit of JA$1,200,000 per depositor, per institution for each of the following types of account: : Individual Accounts, Joint Accounts, Trust Accounts, Business Accounts, and Nominee Accounts. The Barbadian Deposit Insurance Corporation provides insurance coverage of up to BDS$25,000 for deposits in individual, joint and trust accounts held at commercial banks and deposit-taking trust and finance companies. And the Guyana Deposit Insurance Corporation will reimburse depositors up to a limit of G$2,000,000 on deposits held in chequing accounts (or demand deposits), savings deposits and time deposits (or certificates of deposit) with member financial institutions. The Eastern Caribbean Currency Union is currently working on implementing deposit insurance.
Trinidad and Tobago has only 24 financial institutions and the remaining 11 countries of the English-speaking Caribbean have 69 financial institutions, many of which are branches or subsidiaries of Trinbagonian or Canadian banks. By contrast, the US has almost 5,000, of which 562 have failed since 2000. I do not believe that there have been any bank failures in the English-speaking Caribbean in that time frame.
In Trinidad and Tobago, banks and NBFIs are reasonably well regulated by the CBTT and the CBTT’s Financial Institution Supervision Department (FISD), which is responsible for the stability of the financial system and ensuring that depositors are protected from potential for losses. FISD, under the leadership of the Inspector of Financial Institutions (IOFI) promotes financial stability by administering the Financial Institutions Act and the Insurance Act.
The CBTT’s commitment to protecting depositors was demonstrated in 1993 when three indigenous fledgling banks, Trinidad Co-operative Bank (TCB), National Commercial Bank (NCB), and Workers’ Bank, faced increasing pressure. As FCB notes on its website:
The TCB faced grave liquidity issues and was frequently unable to make any of the reserve deposit requirements of the Central Bank of Trinidad and Tobago. The NCB was dealing with increasing liquidity pressures, and the Central Bank was forced to step in and take action to help avoid a run on the bank. Worker’s Bank had been hindered by rumours of crippling bad debt. It was time for the Central Bank to make a bold move.
In an effort to save the three fledging banks in 1993 the Central Bank of Trinidad and Tobago merged the institutions under a new name: First Citizens Bank Ltd. With little faith in the stability of the organization however, many customers parted ways with the institution. Much to the surprise of many the organization by its first birthday was able to put itself on a path for success. Over the next three decades, the bank would continue its steady growth amassing local and regional acclaim for innovation, customer service and technology.
Banking in Trinidad and Tobago and the English-speaking Caribbean has therefore had a history of stability and reliability carrying on the tradition of sound banking inherited from the UK and Canada. This tradition and the oversight of Central Banks in Jamaica, Barbados, Guyana, the Eastern Caribbean and Trinidad and Tobago should ensure that the scenes experienced in the US in March 2023 are not something we should have to worry about in this part of the world.
Have a disciplined week as you work to build your financial freedom. If you find this advice helpful, please share with your friends and colleagues. As usual, I look forward to your questions and comments. Be safe. Take good care, and if you can, help someone in need.
Cheers, Nigel
Nigel Romano, Partner, Moore Trinidad & Tobago, Chartered Accountants
Bank Regulation/Supervision/Resolution | Deposit Insurance | Quantitative/Qualitative Research | Financial Stability | Artificial Intelligence
1yGreat piece Trevor. One minor addition to the assumption associated with offering the three products/accounts. So it should read, "assuming that the institution accept deposits and offer the three different rigths and capacities." Not all do. Some NBFIs do not accept deposits.