The Trinidad and Tobago Banking System:

Some Stylized Facts

Ewart S. Williams

Governor

Central Bank of Trinidad and Tobago

Selected Economic Indicators  1995-2000 2001-2006p

Growth in Real GDP (%) 4.9 9.2

Energy 4.8 14.6

Non Energy 5.1 6.3

Unemployment 14.7 9.1

  1995 2000 2001 2006*

Inflation (end of period) % change 3.8 5.6 3.2 9.6

Core 3.0 4.2 2.4 3.9

Food Prices 10.4 13.4 7.5 27.4

Gross Official Reserves (US$Mn) 352.1 1405.5 1,876.0 6,089.5

External Current A/c Balance (US$Mn) 269.9 544.3 446.0 3,340.1

* Inflation and Reserves data are for Sept. 2006; External A/c data are provisional to June 2006

Source: Central Statistical Office and Central Bank of Trinidad and Tobago

Commercial BanksChanges in Assets and Liabilities

  1996-2000 2001-2005

Assets    

Loans 11.7 17.4

Investments 15.1 10.1

Liquid Funds 10.3 10.2

     

Liabilities    

Deposits  8.6  13.4

Fund Raising Instruments 18.3 6.3

Borrowings  24.4  16.9

(Annual Average Growth Rates – per cent)

Conglomerates Share of Total Assets - 2004

Conglomerates Total Assets ($Mn) % of System Assets

CL Financial Group 23,268.8 23.50

RBL Group 18,831.5 19.00

RBTT Financial Holdings

18,668.2 18.90

GHL Group 5,450.7 5.50

TOTAL 66,219.2 66.9%

Source: Central Bank of Trinidad and Tobago

Contribution to Total Assets of the Financial System

Type of Institution 1995 1999 2001 2002 2003 2004p 2005p

Central Bank 15.7 13.0 13.9 14.5 13.5 15.1 17.8

Commercial Banks 41.2 40.2 36.8 35.4 33.7 32.1 29.4

Finance Companies & Merchant Banks 4.3 6.1 5.4 5.8 5.8 8.3 7.0

Trust & Mortgage Finance Companies 7.7 7.4 10.2 8.3 7.8 6.8 5.1

Development Banks 2.0 1.5 1.5 1.2 1.1 1.4 1.1

Credit Unions 5.1 4.2 3.2 2.6 2.4 2.0 1.7

Insurance Companies 11.2 12.9 14.1 13.8 15.1 16.2 13.5

Thrift Institutions 0.2 0.1 0.1 0.1 0.1 0.0 0.0

National Insurance Board 6.7 7.3 7.1 7.7 8.1 7.9 6.6

Stock Exchange 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Mutual Funds 2.7 4.3 4.9 7.8 9.5 7.6 15.7

Deposit Insurance Corporations 0.4 0.5 0.6 0.5 0.5 0.5 0.4

Home Mortgage Banks 1.3 1.2 1.0 1.1 1.4 1.2 1.0

Trinidad & Tobago Mortgage Finance 1.4 1.3 1.2 1.1 1.0 0.9 0.7

Total 100 100 100 100 100 100 100

(per cent)

Aggregate Mutual Fund Values and Commercial Bank Deposits

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2000 2001 2002 2003 2004 2005 Jun-06

TT

$Mn

Aggregate Fund Values

Total Deposits

Source: Central Bank of Trinidad and Tobago

Sectoral Distribution of Commercial Bank Loans

PERCENT OF AVERAGE TOTAL LOANS 2001 2002 2003 2004 2005

Real Estate Mortgages 5.2 5.5 5.4 9.9 12.5

Public Sector 6.5 9.4 5.6 8.4 14.6

Agriculture 0.9 0.7 0.5 0.6 0.4

Petroleum 4.3 2.7 2.9 1.6 1.5

Manufacturing 10.7 12.5 10.0 8.5 7.6

Construction 3.7 4.1 6.1 6.3 4.6

Distributive Trades 7.8 7.5 7.3 5.9 7.0

Transport, Communication & Storage 5.0 3.5 3.0 2.3 2.0

Finance, Insurance & Real Estate 11.7 11.5 17.2 15.8 15.2

Personal Services 2.4 3.9 4.0 4.2 3.1

Consumer Loans 38.5 37.4 35.7 32.7 31.0

Miscellaneous 3.4 1.3 2.2 3.9 2.4

TOTAL 100 100 100 100 100

Source: Central Bank of Trinidad and Tobago

Exposure of Domestic Banking System

Regions Dec-04 Dec-05 Jun-06

Caribbean 6,331 6,320 6,216

Belize 416 316 313

Dominica 13 11 11

Grenada 558 311 365

Barbados 1,789 1,571 1,533

Jamaica 1,954 2,579 2,161

St Lucia 1,601 1,532 1,833

Rest of the World 4,269 4,580 7,984

Total 10,600 10,900 14,200

% of Total Assets 14.8 14.6 16.9

Source: Central Bank of Trinidad and Tobago

(TT$ Millions)

Macro Prudential IndicatorsSelected Countries

Macro Prudential Indicators - 2005

  US UK* Jamaica Barbados T & T

Prudential

Capital Adequacy 12.3 12.7 17.8 13.0 18.2

Non-Performing Loans to Gross Loans

0.5 1.9 2.3 5.5 2.2

Loan Loss Provisions to Gross Loans 0.7 … … … 3.7

Profitability

Return on Assets 1.3 0.7 3.6 1.9 2.5

Return on Equity 12.9 10.9 … 15.1** 20.2

* Data up to 2004

** Data up to 2003

Interest Rate Spreads

  1995 2000 2001 2002 2003 2004

Barbados 6.60 7.05 8.00 7.74 7.61 7.30

Bahamas 9.06 7.77 7.23 7.22 8.11 7.47

Belize 9.10 10.80 11.10 10.00 9.30 8.80

Guyana 9.92 10.40 10.90 12.98 13.23 12.49

Jamaica 30.74 13.20 11.87 11.38 12.62 11.68

Suriname 0.00 13.60 12.40 12.90 12.50 11.40

Trinidad and Tobago 9.46 10.50 9.12 8.64 8.34 6.74

Average OECS 6.34 7.35 7.21 7.47 8.28 7.11

Average Caribbean 8.37 8.81 8.56 8.71 9.19 8.18

Source: ECLAC based on official data

Distribution of Loans by Interest Rate Bands

  2003 2004 2005 Jun-06

0 % - 5 % 9 9 11 9

5 % - 7 % 16 20 16 14

7 % - 8 % 6 9 13 15

8 % - 9 % 11 25 17 19

9 % - 10 % 15 11 17 8

10 % - 12 % 20 14 14 19

Over 12 % 23 13 11 17

Total 100 100 100 100

(per cent)

Source: Central Bank of Trinidad and Tobago

Challenges for Regulation

• the presence of financial conglomerates;

• the increase in cross-border lending;

• the introduction of higher risk lending

Pending Legislative Amendments

The Central Bank is currently amending legislation to:

(i) provide for the supervision of conglomerates;

(ii) to accommodate a harmonized approach to regulation among regional jurisdictions, including the exchange of information;

(iii) to emphasize risk-based capital adequacy; and

(iv) to strengthen risk management and governance procedures

The end