OREANDA-NEWS. End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

An International Monetary Fund (IMF) mission, headed by Hiroko Oura, visited Providenciales, Turks and Caicos Islands (TCI), during April 14-27, to conduct a financial stability assessment under the IMF’s Financial Sector Assessment Program (FSAP). The mission met with Governor Peter Beckingham, Financial Services Commission (FSC) Managing Director Kevin Higgins, Minister of Finance, Trade, and Investment Charles Washington Misick, Chief Financial Officer Stephen Turnbull, Permanent Secretary, Finance Sonia Thomas-Been, senior officials from the FSC and other agencies, as well as representatives of financial institutions and professional bodies. The preliminary findings of the mission are summarized below.

The financial system is been gradually recovering from the 2008 economic crisis. Banks continue to show high levels of Non Performing Loan (NPL) ratios and credit growth remains negative. But high levels of capital buffers should help them withstanding a range of adverse shocks. While the economy is recovering, the FSC should remain vigilant and monitor asset quality and liquidity conditions, and ensure the capital buffers remain. The domestic insurance sector is small and do not appear to pose systemic risks. The offshore insurance sector has little link to the domestic financial system.

However, small depositors and policyholders suffered substantially from the lack of standard safety net tools. The territory does not have lender of last resort (namely, a central bank) or a deposit insurance scheme (DIS). Without government support, small depositors of a systemically important indigenous bank, failed in 2010, lost significant amount. Policyholders of a failed local insurance company (originally a branch of failed Trinidad-and-Tobago-based CL Financial) are expected to lose a considerable sum as well.

At this moment, the Turks and Caicos Islands authorities are not ready to introduce a DIS. A DIS can function properly when its two preconditions are met: a strong supervisory framework and a special resolution regime for banks that are not viable. While progress has been made in the first area, more needs to be done in the second area.