Barbados Banking System 'Awash With Excess Liquidity'

by Amanda Banks, Tax-News.com, London

19 February 2004

The Barbados banking system is expected to remain highly liquid in the coming year as the jurisdiction’s commercial banks begin to “overflow” with money, according to Central Bank Governor Dr Marion Williams.

Local reports state that the excess liquidity ratio increased 3.1% from December 2002 to reach a level of 20.9%. Most of this excess liquidity appears to have stemmed from an increase in capital inflows resulting from takeovers and divestments.

“I would say over 50 per cent of the excess liquidity in the system can be attributably directly to banks buying other banks and other entities,” explained Dr Williams. “This money has come into Barbados and that is largely responsible for much of the excess liquidity.”

Deposits by financial institutions also rose, by $96.8 million, attributable largely to an increase in National Insurance Scheme Contributions.

However, Dr Williams observed that the excess liquidity was not spread evenly over the banking system, with banks subject to takeovers accounting for much of the excess.

Recommended