The popular online newspaper Barbados Today reported (20.07.2010) the surprising loss incurred by the Central Bank of Barbados (CBB) in the amount of 9.4 million dollars. It is unusual for a Central Bank to report a financial loss in Barbados. Barbados Today quoted President of the Barbados Economic Society Dr. Winston Moore, “The Central Bank of Barbados reporting a loss is a rare occurrence in Barbados. The Central Bank is commonly referred to as the government’s banker, that is, it manages the assets of the central government. The loss reported by the bank implies that the institution was not able to earn enough interest revenue, fees and commissions etc to cover its operating expenses. There are a number of implications…” In response Governor Delisle Worrell referred to 2009 as an “especially challenging” year.
The Central Bank of Barbados has always enjoyed a good reputation at home and abroad. All governments and all politicians have unhesitatingly quoted Central Bank statistics to support arguments. At the start of the global recession the Barbados banking system received a high ranking from the global financial community. As the regulatory body for banks in Barbados the Central Bank would have shared in the praise. The continuing financial stability of Barbados will depend on the good work of our Central Bankers.
One bad financial performance by the CBB should not be reason to panic. Dr. Winston Moore points out in the Barbados Today that if the negative trend continues it could wipe out CBB’s net capital. It appears the CBB is expected to transfer its reserves to the government coffers and therefore is unable to build up adequate reserves to offset significant losses if they were to occur. The article dealt adequately with the financial implications of the CBB continuing to make losses. BU’s interest was piqued by the article for another reason.
Many have questioned the idea whether the Governor of the Central Bank is ‘independent’ in the role. The Governor is appointed by the Prime Minister and probably can be fired by Board of the Central Bank if pressured by the Prime Minister. It must be said that successive governments have treated the position publicly with respect.
BU would have liked Barbados Today to address the issue of independence. To what extent does CBB making financial losses place the Governor under pressure sufficient to compromise decision making.
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