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IMF Country Report No. 15/282

TURKS AND CAICOS ISLANDS

FINANCIAL SECTOR ASSESSMENT PROGRAM FINANCIAL SYSTEM STABILITY ASSESSMENT

October 2015

This Report of the Financial System Stability Assessment for Turks and Caicos Islands was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed in September 2015.

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© 2015 International Monetary Fund

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TURKS AND CAICOS ISLANDS

FINANCIAL SYSTEM STABILITY ASSESSMENT

September 24, 2015

Approved By

James Morsink and Philip Gerson

Prepared By

Monetary and Capital Market Department (MCM)

• The FSAP team was led by Hiroko Oura and included Johannes Ehrentraud, Hibiki Ichiue (all MCM), Ernesto Aguirre, Keith Bell, and Rodolfo Wehrhahn (all IMF consultants).

• FSAPs assess the stability of the financial system as a whole and not that of individual institutions. They are intended to help countries identify key sources of systemic risk in the financial sector and implement policies to enhance its resilience to shocks and contagion. Certain categories of risk affecting financial institutions, such as operational or legal risk, or risk related to fraud, are not covered in FSAPs.

• The mission met officials of the Financial Services Commission (FSC) led by Managing Director Mr. Kevin Higgins, the FSC Chairman, Sir Errol Allen, Governor, Mr. Peter Beckingham, Minister of Finance, Trade and Investment, Mr. Charles Washington Misick, Chief Financial Officer, Mr. Stephen Turnbull, other senior officials, and representatives of the financial industry.

• This report was prepared by Hiroko Oura.

Contents

• Glossary

• EXECUTIVE SUMMARY

• INTRODUCTION

• MACROECONOMIC BACKGROUND AND FINANCIAL SYSTEM PROFILE

• A. Macroeconomic and Financial Context

• B. Financial System Profile

• RISKS AND VULNERABILITIES

• A. Risk Assessment

• B. Vulnerability Analysis

• C. Bank Stress Test

• D. Overall Stability Assessment and Recommendations

• FINANCIAL SECTOR OVERSIGHT

• A. Financial Regulation and Supervision: Financial Services Commission

• B. Financial Regulation and Supervision: Banks

• C. Financial Regulation and Supervision: Insurers

• D. Macroprudential Policy Framework

• E. Bank Resolution and Safety Nets

• F. Crisis Prevention and Management

• G. Anti-Money Laundering and Combating the Financing of Terrorism

• BOX

• 1. Failure of Financial Institutions in TCI

• FIGURES

• 1. Development in Real Estate Market

• 2. Balance Sheet Structure of Top Four Banks

• 3. Loans to the Private Sector

• 4. Bank Soundness

• 5. Basel III Liquidity Coverage Ratio, June 2014

• TABLES

• 1. Key Recommendations

• 2. Risk Assessment Matrix

• 3. Financial System Structure

• 4. Solvency Stress Test Results

• 5. Cash Flow Liquidity Test: Assumptions and Results

• APPENDIX FIGURE

• 1. International Comparisons of Macroeconomic Conditions

• APPENDIX TABLES

• 1. Recommendations from 2003 IMF Review on BCP and ICP and Progress

• 2. Selected Economic Indicators

• 3. Financial Soundness Indicators and Bank Balance Sheet Structures

• 4. Banking Sector Stress Testing Matrix

Glossary