Financial Stability Committee holds first meeting for 2023 |10 June 2023

The Financial Stability Committee (FSC) held its first meeting for this year on June 1, 2023, where members discussed several matters that could potentially impact the country’s financial stability.

The Committee was apprised of the ongoing positive performance of the domestic economy, with the tourism industry being the primary contributor.

The inflow of foreign exchange contributed by the sector is supporting the continued stability of the domestic currency, which has resulted in the moderation of domestic inflationary pressures.

With regard to international developments, members noted that the tight monetary policy stance adopted by several central banks across the globe is starting to bear fruit, with inflation slowly decreasing towards set targets. Nonetheless, risks to financial stability remain elevated, with a slowdown in global economic growth projected for 2023.

Furthermore, global financial conditions continue to be challenging, as evidenced by the difficulties being faced by banking and non-banking financial institutions worldwide.

On the domestic front, members deliberated on pertinent risks related to the financial sector, highlighting risks faced by both the banking and non-banking sectors.

The lingering effects of Covid-19 on the economy, particularly the ongoing impact on debtors’ loan repayment ability, which in turn reduces the quality of the banking system’s overall loan portfolio, were among the issues discussed. Members reiterated the importance of ensuring that potential vulnerabilities are efficiently mitigated to maintain financial stability within the domestic economy. The FSC also considered the scarcity of skilled professionals in the financial sector.

Members emphasised the need for adequate succession planning and business continuity plans to ensure that key financial institutions and their respective regulatory authorities are able to fulfil their roles. To promote synergy and effective use of resources, it was proposed that, where appropriate, the boards of the various financial sector regulators consider having joint meetings to discuss overlapping issues.

The Committee was also updated on the development of the country’s Financial Stability Framework. The draft Financial Stability Bill is being finalised for submission to the Attorney General’s Office.

To conclude, the FSC members stressed that financial stability conditions remain challenging and that this poses a threat to both global and domestic economic recovery, hence the need for a continued collaborative approach to monitor and take appropriate steps to mitigate potential risks.

Contributed