IMF Working Papers

Financial Interconnectedness and Financial Sector Reforms in the Caribbean

Author/Editor:

Sumiko Ogawa ; Joonkyu Park ; Diva Singh ; Nita Thacker

Publication Date:

July 31, 2013

Electronic Access:

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Summary:

Financial sector linkages have increased continuously in the Caribbean with cross border capital flows and financial conglomerates dominating the financial system. While the greater interconnectedness can heighten systemic risks and likelihood of contagion, it can have positive impacts provided the regional authorities take steps to prevent the systemic risk. In this context, financial sector reform measures aimed at bolstering and harmonizing prudential regulations in line with international best practices, the strengthening and enhancement of financial sector supervision to include cross border linkages through consolidated supervision, increased cooperation across supervisors in the region, and the establishment of deposit insurance and crisis resolution frameworks will be critical to maintain financial sector stability and minimize the repercussions of any negative shocks.

Series:

Working Paper No. 2013/175

Subject:

Banking Commercial banks Credit bureaus Financial contagion Financial institutions Financial markets Financial regulation and supervision Financial sector policy and analysis Insurance companies