COUNTRY PROFILE
Total land area:.................. 5,130 sq. km.
Official language:............... English
Administrative divisions:..... Eight counties, three municipalities and one ward
Legal system:..................... Based on English Common Law; judicial review of legislative
acts in the Supreme Court; has not accepted compulsory ICJ
jurisdiction.
Executive branch:.............. Chief of statepresident. Head of governmentprime minister.
Cabinet is appointed from among the members of Parliament.
Legislative branch:............. Bicameral Parliament consisting of a Senate (31 seats; members
appointed by the president for a maximum term of five years)
and a House of Representatives (36 seats; members are
elected by popular vote to five-year terms).
Judicial branch:.................. Court of Appeal. Judges are appointed by the president on the
advice of the prime minister.ECONOMIC PROFILE
Currency: Trinidad and Tobago dollar (TT$)
GDP: US$5.63 billion (1997)
Real GDP growth (at market prices): 3.9 (1997p)
GDP (average annual growth rate): 0.9 (1988-1997)
GDP per capita (1990 US$): 4,222.5 (1997)
Consumer price index (average annual growth rate): 3.7% (1997)
Central government fiscal balance (% of current GDP): 0.7 (1997)
Money supply (M1) (% of current GDP): 10.3 (1997)
Interest rate (weighted average lending rate): 13.8 (1997p)
Current account balance: -US$0.5548 billion (1997)
Trade balance: -US$0.2944 billion (1997)
Main exports: Mineral fuels, chemicals, manufactured goods.
Main imports: Machinery and transport equipment, manufactured goods, mineral fuels.
Nominal exchange rate (TT$/US$) end of period: 6.3 (1997)
Real effective exchange rate (Index 1990=100): 117.0 (1997)BANKING INSTITUTIONS
I. Banking Supervision
1. The Central Bank of Trinidad and Tobago is responsible for bank supervision. The
Financial Institutions Act of 1993 (FIA) governs bank supervision. All institutions
licensed under this Act are referred to as licensees. This group includes commercial
banks, merchant banks, trust companies and finance houses.
2. The Central Bank of Trinidad and Tobago is an independent agency.
3. The Central Bank of Trinidad and Tobago reports to the minister of finance.
4. Bank examination takes place at least once every two years. When deemed
necessary, a bank may be examined more frequently.
5. The examination ratings and criteria used to conduct bank examinations are as follows:Rating Definition
1 Indicates strong performance. It is the highest rating and is indicative
of performance that is significantly higher than average.2 Reflects satisfactory performance that is average or above. Includes
performance that adequately provides for the safe and sound
operation of the bank.3 Represents performance that is flawed to some degree; as such, it is
considered fair. It is neither satisfactory nor marginal but is
characterized by performance of below average quality.4 Represents marginal performance which is significantly below average.
If left unchecked ,such performance might evolve into weaknesses or
conditions that could threaten the viability of the institution.5 Is considered unsatisfactory. It is the lowest rating and is indicative
of performance that is critically deficient and in need of immediate
remedial attention. Such performance by itself , or in combination
with other weaknesses, could threaten the viability of the institution.6. Bank examinations are conducted using the CAMELS (Capital
adequacy, Asset quality,Management, Earnings, Liquidity, Sensitivity
to risk/risk management) system.II. Consolidated Supervision
1. The supervisory authority performs comprehensive supervision on a consolidated
basis on a limited scale. Full supervision in this regard is constrained by the legal
powers of the Central Bank. Proposals for amendment to FIA seek to address
this issue.
2. Prior consent to open or close a branch in a foreign country is currently not required
under FIA. However, the Central Bank wishes to be informed of the opening of
branches in foreign countries, and would evaluate the risk implications. Proposed
amendments to FIA would require the prior consent of the Central Bank to establish
foreign branches.
3. FIA has no provisions for the licensing of branches of foreign banking institutions.
Foreign banks wishing to establish a presence in the country are required to set up
a separate corporate entity registered in Trinidad and Tobago.
4. Trinidad and Tobago has the right to gather information from its cross-border
banking establishments. Section 42 (2) of FIA requires every licensee to submit
to the Central Bank, on request, audited balance sheets and profit and loss
accounts for any of its affiliates.III. Interest Rates
1. Individual financial institutions set their own interest rates on loans. However, under
the Central Bank Act, Chapter 79:02 of the laws of Trinidad and Tobago,
the CentralBank may fix the maximum and minimum interest rates, fees and
charges to be charged on loans, advances or other credit facilities by a financial
institution.
2. Under the Central Bank Act, Chapter 79:02 of the laws of Trinidad and Tobago, the
Central Bank may fix the maximum and minimum interest rates payable on deposits
received.IV. Insurance on Deposits
1. The Deposit Insurance Corporation insures bank deposits.
2. The Deposit Insurance Corporation provides insurance on deposits held with member
institutions to a maximum of $50,000 per depositor in each right and capacity in
each institution.V. Trade Finance
1. Trinidad and Tobago defines trade finance as credit facilities, usually short-term in
nature, designed to facilitate imports and exports of good and services.
2. The risk associated with export, import, pre-export, working capital and capital
goods finance, letters of credit, acceptances and drafts is generally borne by
the bank unless there are specific government agency guarantees in place, in which
case the risk is borne by the respective government or government agency.
3. All loans, regardless of the borrowing purpose, are to be realized by deposit set-off,
cash settlement or sale of collateral security. If the facility is partially drawn down
or not drawn at all, the liquidator cannot make any further advances (Section 436,
Companies Act, 1995-Effect of Winding up on Antecedent and Other Transactions).
Any advances made become loans similar to those above and subject to realization.
Drafts sold but not presented are unsecured debts and creditors will have to prove
these in the liquidation.
4. Normal provisioning criteria used for loans will apply to trade finance obligations
during bank liquidations.VI. Capital Adequacy
1. The minimum capital required to open a bank is TT$15 million.
2. A bank may be required to provide additional capital according to the level of risk
inherent in the business it is conducting or the size of its operations.
3. The Financial Institutions (Prudential Criteria) Regulations of 1994 state that the
minimum qualifying capital of a licensee shall be no less than 8% of its risk-weighted
assets. An individual institution may be required to maintain a ratio above the
statutory minimum. In addition, the Central Bank may suspend the operations
of licensees unable to meet a minimum capital adequacy ratio of 4%.VII. Asset Quality
1. Loan portfolios are classified as follows:Loan classification Definition % of reserves
P Pass 0
SM Special mention 0
SS Substandard 17%
D Doubtful 50%
L Loss 100%2. No minimum reserves are required on a bank's assets. However, banks are required
to maintain adequate reserves against impaired assets. The adequacy of such
reserves is assessed during on-site examinations.
3. The following table details the existing lending limits.LENDING LIMITS DETAILS OF FACILITY
Percentage of Paid-Up Share Capital Unsecured Credit Facilities to any of its
and Statutory Reserve Fund-5% directors
Percentage of Paid-Up Share Capital Credit Facilities to any firm or corporation
and Statutory reserve Fund-5% in which the licensee, its manager or a director
director has an interest in an amount
equivalent to 10% of its paid-up share capital
or more
Percentage of Paid-Up Share Capital-5% Unsecured Credit Facilities to any of its
officers or employees beyond the amount
of two years installments of such officer
or employee or 5% its paid-up share
capital, whichever is less
Percentage of Capital Base-5% Unsecured Credit Facilities to any one `
person or borrower group
Percentage of Capital Base-25% Secured Credit Facilities to any one person
Percentage of Capital Base-32% Secured Credit Facilities to any one
borrower group
Definition of Statutory Reserve Fund: Under FIA, each licensee is required to hold a
reserve fund known as the Statutory Reserve Fund. No less than 10% of the net profit
of the licensee (after deduction of taxes) is transferred into this Fund at the end
of each fiscal year, until the amount standing to the credit of the Statutory Reserve
Fund is not less than the paid-up capital of the licensee. The Statutory Reserve Fund
does not form part of distributable reserves.
4. The investment portfolio follows certain criteria for its categorization.
5. The two investment categories are: trading account and long-term. According to the
Financial Institutions (Prudential Criteria) Regulations of 1994, long-term investments
held in an investment account shall be recorded on the balance sheet at the lower of
cost and market value. Trading account investments that are held in the trading
account should be recorded on the balance sheet at market value. For listed
investments the market value is based on closing market quotations. Investments
held in the investment account shall not be valued higher than cost to reflect
unrealized capital gains.
6. The valuation of the investment portfolio requirement affects the profit and loss
statement with respect to the trading account.
Permanent losses on the long-term book may also affect the profit and loss statement.VIII. Liabilities
1. Every bank maintains as a deposit with the Central Bank a cash reserve balance
which is a percentage of the total prescribed liabilities of that institution. According
to FIA:"For purposes of determining the amount of the cash reserve balance required to be
maintained by any licensee in the Reserve Account during a period of one week
a) the amount of the prescribed liabilities of such licensee shall be the average of its
prescribed liabilities at the close of business on Wednesday in each of the four
preceding consecutive weeks ending with the last Wednesday but one;
b) the amount of the cash reserve balance of such licensee with the Central Bank
shall be the average amount of such balance at the close of business on each
day of the current week.Currently, the cash reserve ratio is 21% for banks and prescribed liabilities
include the following:
Note: There is no reserve requirement on deposits denominated in foreign currencies, but a prudential liquidity ratio of 25% (foreign cash and liquid investments to foreign deposit liabilities) is observed.
- Demand, savings and time deposits denominated in local currency.
- All short-term credit instruments placed with the reporting institution on a wholesale basis with a maturity of one day up to and including one year. These include commercial paper, negotiable certificates of deposits and repurchase agreements.
- All fund raising instruments maturing either within or beyond one year of the reporting date. These include mortgage pass-through securities, floating rate tax-free debentures, investment note certificates and secured commercial paper.
- Bonds with an original maturity of not more than five years.
2. The following deposit categories are offered by banks in domestic and foreign currency:
savings, time, demand and call.
3. Sec. 28(19) of FIA states that no licensee shall incur deposit liabilities in Trinidad and
Tobago of an amount exceeding 20 times the sum of its paid-up share capital and
Statutory Reserve Fund.
4. There is no limit on the concentration of specific types of deposits. However, deposit
portfolios are monitored for all types of concentration to assess risk exposure.