Chapter 11. Problem Loans in the Caribbean: Determinants, Impact, and Strategies for Resolution


The Caribbean region weathered the global financial crisis relatively well, but the quality of bank assets gradually deteriorated during the subsequent economic recession, leaving many countries with elevated levels of problem loans. Notwithstanding significant heterogeneity across the region, the share of non-performing loans (NPLs) in total loans, which was relatively low before the global financial crisis, rose to more than 10 percent in 2016 across several Caribbean countries, peaking around 15 percent for many countries over the period 2007–16 (Figures 11.1 and 11.2).1 The increase in NPLs was more significant in tourism-dependent countries compared with commodity exporters. NPL ratios in many countries have been slow to decline from their elevated levels owing to structural and institutional impediments to resolution, as well as subdued or declining loan growth and sluggish economic activity, while in a number of countries, NPL ratios have started to fall from their peaks, owing to increased efforts undertaken by country authorities and banks to reduce impaired assets.