Kevin Greenidge: Enhancing regional cooperation across the
Caribbean
Address by Dr Kevin Greenidge, Governor of the Central Bank of Barbados, at the
Second Caribbean Insolvency Round Table, hosted by INSOL International, the World
Bank Group, and the Eastern Caribbean Central Bank , Bridgetown, 9 December 2024.
* * *
Good morning, distinguished colleagues, esteemed guests, and friends.
It is an honour to address the Second Caribbean Insolvency Round Table, hosted by
INSOL International, the World Bank Group, and the Eastern Caribbean Central Bank.
This gathering reflects our shared commitment to addressing insolvency challenges and
opportunities in our region, a topic that is integral to our economic resilience and
longterm growth.
As Governor of the Central Bank of Barbados, I am particularly aware of the
transformative power of effective insolvency frameworks. These frameworks are not just
tools for resolving financial distress; they are foundational to fostering confidence in our
economies, ensuring that businesses can thrive, and building resilience to external
shocks. Today, I want to explore the role of insolvency systems in promoting stability
and growth, highlight our unique regional challenges, and discuss how we can
collaborate to create a future where our economies are resilient, inclusive, and
sustainable.
Let us begin by looking at the foundational role of insolvency systems in economic
growth.
The Role of Insolvency Systems in Economic Growth
Insolvency systems are the backbone of a healthy financial ecosystem. They provide
the mechanisms to address financial distress, ensuring that businesses, individuals,
and financial institutions can recover and contribute to economic growth. Allow me to
delve into some specific areas where insolvency systems play a critical role.
1. Financial Stability and NPL Management
Non-performing loans (NPLs) pose a systemic risk to financial institutions. Strong
insolvency frameworks, such as those implemented in Barbados, have proven essential
in mitigating these risks. Legislative updates, including amendments to the Financial
Institutions Act, have provided banks with the tools to manage distressed assets
effectively. For example, standardised asset classification regulations ensure consistent
reporting and risk mitigation across institutions, fostering stability in our financial sector.
The introduction of mechanisms to rehabilitate troubled loans rather than outright
liquidation has allowed businesses to continue operating while addressing their financial
challenges, creating a win-win scenario for borrowers and creditors alike.
2. Encouraging Credit Access
Credit access is a critical enabler of economic growth. Insolvency systems that clearly
define creditor rights and recovery mechanisms create a more predictable environment
for lenders. In Barbados, structured credit evaluation mechanisms have made it
possible for MSMEs (micro, small, and medium enterprises) and start-ups to secure
funding. This has resulted in a notable increase in the number of small businesses
accessing finance, which in turn drives job creation and innovation. With lenders
reassured that their interests are protected in cases of borrower default, the overall
volume of credit disbursed has grown significantly.
3. Supporting MSMEs
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of Caribbean
economies, representing more than 70 percent of enterprises. Yet, they are
disproportionately affected during economic downturns. Simplified insolvency
processes tailored to MSMEs allow these businesses to recover from financial setbacks
without facing undue burdens. The introduction of fast-tracked procedures for small
businesses has been a game changer in Barbados, ensuring that small-scale
enterprises can restructure efficiently and return to profitability. One example is the
case of a family-owned agricultural business in St. Lucy that used these mechanisms to
recover from debt and expand operations. Our region must prioritise systems that
preserve these enterprises, given their importance in our economies.
4. Post-Disaster Recovery
Given our vulnerability to natural disasters, insolvency systems must facilitate rapid
recovery. After Hurricane Beryl, for example, the Government of Barbados provided
financial assistance to the fishing industry, underscoring the need for pre-emptive
measures such as mandatory insurance for vulnerable sectors. Beyond this, the
integration of insolvency planning into disaster response frameworks has minimised the
economic impact of climate-related events.
Key Challenges in the Caribbean
While the benefits of robust insolvency systems are evident, the Caribbean faces
unique challenges that hinder their full realisation. These obstacles require not only
local efforts but also regional cooperation to overcome. Let me elaborate on some of
the most pressing issues we face.
1. Institutional Weaknesses
A recurring challenge in many Caribbean nations is the lack of institutional capacity to
enforce insolvency laws effectively. Strong laws on paper mean little without the
necessary infrastructure to implement them. Barbados has taken proactive steps to
address this issue by investing in judicial training programmes aimed at equipping
judges with the tools to handle complex financial disputes. However, in smaller
jurisdictions with fewer resources, the gap remains significant. These disparities create
uneven outcomes and undermine the potential of regional economic integration.
2. Uneven Development
Insolvency systems across the Caribbean vary significantly in terms of their maturity
and efficiency. While some nations have adopted modern frameworks that emphasise
restructuring and recovery, others still rely on outdated models that prioritise liquidation.
This uneven development is a barrier to cross-border business activities, especially for
firms operating in multiple jurisdictions. Harmonising insolvency laws and processes
would create a more predictable and business-friendly environment for the entire region.
3. Climate-Related Risks
Climate change exacerbates vulnerabilities across the Caribbean. The economic impact
of hurricanes, floods, and droughts cannot be overstated. Consider the tourism industry,
which accounts for a significant share of GDP in most Caribbean nations. A single
hurricane season can devastate multiple islands, leaving a trail of bankrupt businesses
in its wake. Insolvency frameworks must evolve to account for these unique risks,
offering tailored solutions for industries disproportionately affected by climate events.
These challenges demand a coordinated regional response.
4. Stigma and Cultural Barriers
Insolvency is often viewed through a cultural lens, and in many Caribbean societies, it
carries a stigma that discourages individuals and businesses from seeking assistance.
This perception needs to change. Public awareness campaigns, community outreach
programmes, and partnerships with civil society can play a pivotal role in reframing
insolvency as a pathway to recovery rather than a mark of failure. Barbados has
already begun to address this by introducing educational initiatives aimed at
demystifying insolvency laws.
Opportunities for Regional Cooperation
The Caribbean is uniquely positioned to lead in harmonising insolvency practices,
thanks to shared legal traditions and cultural ties. Let me highlight some specific
opportunities for regional cooperation.
1. Leveraging Shared Legal Frameworks
With most jurisdictions based on English or Canadian law, there is significant scope for
standardising insolvency processes. Harmonisation would facilitate cross-border
resolution and enhance investor confidence.
2. Building Capacity
Specialised courts or administrative agencies can strengthen enforcement
mechanisms. In Barbados, we are exploring the establishment of a Restructuring
Officers Regime, similar to Chapter 11 in the U.S., to provide businesses with statutory
moratoriums for recovery.
3. Integrating Climate Risk Management
Insolvency systems must account for climate vulnerabilities. The Central Bank of
Barbados has already incorporated climate-related shocks into its stress-testing toolkit,
in collaboration with regional and international partners. These efforts have provided
valuable insights into the systemic risks posed by climate change and informed our
policy decisions.
Success Stories and Best Practices
Barbados and the broader Caribbean have made significant progress in addressing
insolvency challenges. Let me share some success stories and best practices.
1. Barbados' Climate-Adapted Stress Testing
In 2023, Barbados became a regional leader by incorporating climate scenarios into its
financial stability stress testing. These tests provided actionable insights that informed
policy decisions and strengthened the resilience of the financial sector against
environmental shocks.
2. Cross-Border Coordination
The lessons from CLICO's collapse underscore the importance of collaborative
resolution planning among Caribbean regulators. By working together, we can prevent
future systemic crises.
3. Adoption of Modern Insolvency Mechanisms
Countries like Jamaica and Trinidad & Tobago are implementing frameworks that
prioritise restructuring over liquidation, ensuring the preservation of value and
supporting economic recovery. Jamaica, for example, has pioneered the use of digital
tools to streamline insolvency processes, reducing delays and increasing transparency.
Their online insolvency portal allows stakeholders to access case updates, submit
documents, and track the progress of cases in real time. This approach has not only
enhanced efficiency but also improved trust in the system.
Call to Action
As I draw towards the conclusion of this address, I want to leave you with a clear and
actionable roadmap for moving forward. The challenges we face as a region are not
insurmountable. With concerted effort and collaboration, we can transform insolvency
systems into powerful tools for resilience and growth.
1. Enhance Public Awareness and Education
Changing public perceptions of insolvency is critical to encouraging its effective use.
Governments, private sector organisations, and NGOs must work together to raise
awareness about the benefits of insolvency systems and how they can support
individuals and businesses in overcoming financial difficulties. By demystifying these
processes, we can encourage greater participation.
2. Regional Collaboration
The Caribbean must embrace a spirit of unity in addressing insolvency challenges.
Initiatives such as a regional insolvency commission or task force could provide a
platform for harmonising laws, sharing best practices, and offering technical assistance
to member states. While harmonisation of laws is a long-term goal, in the interim, the
development of regional guidelines for insolvency practitioners can provide a consistent
framework for managing cases across borders. These guidelines can address practical
issues such as documentation standards, timelines for resolution, and cross-border
coordination mechanisms. Establishing regional centres for insolvency research and
training can serve as a knowledge hub for policymakers, practitioners, and academics.
Such centres could provide standardised training programmes, publish regional studies,
and host annual conferences to foster collaboration. Such a centre can house a
regional repository of case studies and best practices can provide valuable insights for
policymakers and practitioners. This repository could include data on successful
restructuring efforts, lessons learned from past failures, and innovative approaches to
insolvency management.
3. Incorporating Climate Resilience
Climate change is an existential threat to our region, and our insolvency systems must
reflect this reality. Governments and financial institutions should collaborate to develop
climate-resilient financial products (like Green Recovery Plans) and insurance schemes
(like standstill clauses) that can mitigate the economic fallout of natural disasters.
Additionally, stress-testing for climate scenarios should become a standard practice
across the region's financial sector. Collaborating with international climate funds,
private investors, and multilateral institutions can provide the financial resources
needed to implement climate-resilient insolvency mechanisms. Barbados has already
begun to leverage such partnerships to support green finance initiatives, setting a
benchmark for the region.
4. Strengthening Institutional Frameworks
National governments must prioritise investments in the infrastructure needed to
support insolvency processes. This includes not only physical infrastructure such as
courtrooms but also human capital development, ensuring that our judges, lawyers, and
insolvency practitioners have access to world-class training.
Conclusion
In closing, I want to thank INSOL International, the World Bank, and the Eastern
Caribbean Central Bank for organising this platform. Your efforts in bringing together
experts and policymakers will undoubtedly shape the future of insolvency reform in our
region.
Let us leave this roundtable inspired, committed to action, and united in our vision for a
stronger Caribbean. Together, we can overcome any challenge and build a brighter
future for our region.
Thank you.