sir k dwight venner : recent financial and economic developments in the eastern caribbean presentation by sir k dwight venner, governor of the eastern caribbean central bank, on the eccb 2010 / 11 annual report, st kitts, 29 june 2011. * * * good evening fellow citizens of the eastern caribbean currency union. this evening i am pleased to present the report on the performance of the eastern caribbean central bank for the financial year 2010 / 2011. the purpose of this report is two - fold : 1. first, it is in - keeping with the transparency and accountability requirements of the eastern caribbean central bank agreement act 1983. 2. second, the operations of the eccb have a direct impact on the lives of all citizens of its member countries. it is therefore important that the public is provided with information on the operations of the bank and the challenges it faces as it continues to pursue its mandate of maintaining the stability of the eastern caribbean currency and the region ’ s banking system. the size and nature of the economies of the eastern caribbean currency union ( eccu ) render them particularly vulnerable to external shocks and natural disasters. this is the stark reality that the eccb faces as it seeks to strengthen the region ’ s financial structure in response to the impact of the global economic and financial crisis. the external shocks which confronted the region over the past year have been manifested through the lingering effects of the global economic and financial meltdown. the global economy has been recovering from the recession of 2008 / 2009, but at a slow rate. moreover, increases in oil eccb member and commodity prices, a significant weakening of the recovery process or a second round recession are possible downside risks given the prevailing uncertainty in the international economy. in the united states of america, one of the region ’ s main trading partners, stimulus interventions contributed to an estimated 2. 8 per cent growth in gdp in 2010. however, the country continues to grapple with high unemployment and the economy continues to perform below capacity. this is particularly evident in the following areas : the very high level of sovereign debt and the stalemate between the major political parties on raising the legal debt ceiling and addressing the fiscal issues ; the difficulties in the housing and real estate markets which are having a marked and negative impact on the pace of the recovery ; the high level of unemployment which is now at approximately 9 per cent ; and the significant impact of these factors on consumer spending which is the main driver of the american economy. the european union constitutes the largest single

bank ’ s performance for the 2010 / 2011 financial year. the bank realised a net income of $ 22. 6m a decrease of $ 14. 5m over the previous year ’ s income of $ 37. 1m. this was due to the decrease in interest income on the bank ’ s investments in a declining interest rate environment. as at 31 march 2011, the bank ’ s total assets amounted to $ 2. 8b an increase of $ 256. 1m when compared to the previous year. this was mainly due to inflows of grants and loans to member governments from international institutions. monetary stability at the end of the financial year, the foreign reserve backing of the currency was 95. 53 per cent, well above the legal benchmark of 60. 0 per cent and the operational benchmark of 80. 0 per cent. the level of foreign exchange reserves measured in months of imports was above the imf benchmark of 3 months. in an effort to ensure that its risk tolerance level was preserved in uncertain market conditions, the bank rebalanced its customised benchmark to a two - year duration. the bank also conducted a review of its reserve management custodian to ensure the continued safety of its foreign reserve assets. in collaboration with de la rue, the authorised printers of the ec banknotes, the bank hosted an expert witness training course. the course was designed to provide law enforcement officers in the eccu with the skills to assist the bank in its quest to reduce the circulation of counterfeit ec notes and to increase the prosecution of offenders. bis central bankers ’ speeches financial stability during the year, the bank ’ s efforts to ensure the safety and soundness of the eccu financial system were concentrated on enhancing its regulatory, supervisory and monitoring frameworks. these initiatives included : the drafting of enabling legislation for the credit union and insurance sectors for passage by member governments ; the implementation of the necessary apparatus for information - sharing and integrated supervision and regulation of the system ; development of a framework for the introduction of a repurchase facility to enhance liquidity support to commercial banks ; development of a liquidity monitoring and forecasting model ; working with the commercial banks to establish the eccu automated clearing house ( ach ) ; and working with the office of the superintendent of financial institutions in canada to adopt an advanced model of financial regulation. throughout the year, the bank accelerated its efforts to mitigate the fallout from the global economic and financial crisis by restructuring and strengthening the financial sector. the