Financial Interconnectedness and Financial Sector Reforms in the Caribbean
35 Pages Posted: 29 Aug 2013
Date Written: July 2013
Financial sector linkages have increased continuously in the Caribbean with cross border capital flows and financial conglomerates dominating the financial system. While the greater interconnectedness can heighten systemic risks and likelihood of contagion, it can have positive impacts provided the regional authorities take steps to prevent the systemic risk. In this context, financial sector reform measures aimed at bolstering and harmonizing prudential regulations in line with international best practices, the strengthening and enhancement of financial sector supervision to include cross border linkages through consolidated supervision, increased cooperation across supervisors in the region, and the establishment of deposit insurance and crisis resolution frameworks will be critical to maintain financial sector stability and minimize the repercussions of any negative shocks.
Keywords: Financial sector, Caribbean, Economic integration, Banks, Nonbank financial sector, Credit risk, Bank supervision, Bank reforms, Financial soundness indicators, financial interconnectedness, financial sector in the Caribbean region, regulatory and supervision system
JEL Classification: F36, G21, G22, G23, G28
Suggested Citation: Suggested Citation