delisle worrell : in praise of foreign banks address by dr delisle worrell, governor of the central bank of barbados, at the re - opening of cibc firstcaribbean ’ s wildey branch, wildley, bridgetown, 9 august 2011. * * * barbados is fortunate to have banking system composed entirely of foreign banks : canadian banks in particular are of high repute internationally, and they dominate our system ; canadian banks have survived the international financial crisis in better shape than most large financial institutions in the industrial world ; their size relative to the barbados market means that they can contemplate projects of a magnitude that a domestically owned bank could not ; the impact of recession on credit quality is more easily absorbed, with no real danger of severe loss of capital or danger of insolvency, when a bank has the backing of a large parent ; local subsidiaries and branches of canadian banks have to meet the regulatory standards of the canadian office of the supervisor of financial institutions, so there is an additional guarantee of internationally acceptable standards of lending, asset management, risk management and financial reporting. i say additional, because the central bank of barbados supervises the local subsidiaries according to the standards of the basel committee of banking supervision. over the years the central bank of barbados has had very good relationships with commercial banks. the principle which undergirds our policy making is one of cooperation, based on a common understanding of the economic and financial circumstances the country faces. this approach has served us well in the past. for example, during the1991 balance of payments crisis short term foreign currency borrowings from commercial banks filled in the gap in the central bank ’ s foreign exchange reserves during an interim period of several months while a programme of financial assistance from the imf was under negotiation. more recently, we have stepped up our collaboration with banks and other financial institutions, as well as with other financial regulators. last year in october we held a one day conference of all financial institutions and financial regulators in barbados, to discuss presentations on topics of immediate importance to the performance and resilience of the financial system. this is intended to be an annual event and we are planning for this year ’ s conference, to be held on november 3. at that meeting we will discuss the health of the financial sector, our common interests as financial institutions, regulators and citizens, and what policy changes may be helpful in charting the way forward. the conference supplements meetings that the central bank arranges with commercial

protection is usually referred to as deposit insurance. in bahrain we have had a deposit insurance system for some years. until now this has protected deposits up to a maximum of 75 % of bd15, 000. it is also what is know as an “ expost ” funded scheme in that the required funds can be collected from the other banks only after a bank has already failed. this takes time, and one of the lessons of the recent financial crisis is that it is important that depositors should be compensated promptly after their bank fails. reflecting the lessons of the financial crisis, and also the recent development of international best practice standards on deposit insurance, the central bank is in the process of finalizing a new regulation on reform of the existing deposit protection arrangements. the purpose of this reform will be to establish a pre - funded scheme. this will be a scheme in which a fund of money is accumulated in advance of the scheme needing to make any payouts to depositors. the fund will be accumulated by regular contributions from the banks that are members of the scheme. the purpose of all the measures i have described to you is to ensure that bahrain ’ s financial system remains sound, stable and able to provide the credit that the domestic economy needs. sometimes these measures might lead to complaints from particular sectors or groups that their access to credit is being impeded, but as a central bank we need to take a broader view of the overall stability of the system. it would be in no one ’ s interests to allow banks in bahrain to take excessive risks. a sound banking system is one in which firms are well - diversified, have many different revenue sources, and do not concentrate their risks in one particular economic sector. this is one of the most important lessons we can draw from the financial crisis. thank you for your attention.