The region has been urged to step up its investor protection legislation as well as its corporate disclosure requirements.
The call has come from Dave Seerattan, a research fellow at the Caribbean Centre for Money and Finance at the University of the West Indies’ St Augustine campus in Trinidad and Tobago.
Writing on Resilience And Innovation Of Caribbean Financial Institutions After The Last Global Economic Crisis, Seerattan said: “The crisis has taught us many lessons in the Caribbean.
“In particular, we must have stronger investor protection in the retail sector, stricter disclosure requirements, more frequent disclosure of information on risk-based performance and the need for the regulatory and supervisory system to keep pace with the innovations to avoid loopholes that allow institutions to exploit opportunities without necessary due diligence.”
The academic, who has researched financial innovations, financial regulations and foreign exchange markets, said steps such as securitization with appropriate regulatory changes could help to better manage risks and improve performance in the financial sector.
“In fact, innovations might actually emerge from the crisis that lead to better outcomes in the regional financial sector. We have to resist the complacency of returning to business as usual because the region largely avoided the worst of the crisis,” Seerattan stressed.
Examining the effects of the crisis on the financial sector, he noted that loan delinquency and profitability in the region’s commercial banks had weakened.
The research fellow said that as depressed economic conditions took their toll on the balance sheet of bank clients, demand for credit would also fall.
“In spite of this, the Caribbean banking sector generally compared well internationally and improvement was expected as economic growth firms up,” said Seerattan.
For other financial institutions, particularly insurance companies, the negative fallout was more significant.
“Indicators of financial soundness on non-bank financial institutions are not readily available but the information that is available suggests that the negative impact on these institutions was more significant,” he argued.
