The ECCB released its new Strategic Plan this month, aiming to transform the region
The Eastern Caribbean Central Bank (ECCB) is having a good year. In March the institution posted a $6.3m profit after three consecutive years in the black. This growth reflected the strength of the EC dollar which, at press time, had a backing ratio of 98.3 per cent – well above the statutory baseline of 60 per cent and even exceeding the bank’s 80 per cent operational target.
Fresh from these successes, the ECCB is continuing its forward momentum with the launch of a new roadmap for growth. Unveiled earlier this month, the 2017-2021 Strategic Plan is a “new vision for a new era” according to ECCB Governor Timothy Antoine. He says people are at the heart of the initiative which calls for a new approach to tackle new challenges with the ultimate aim of delivering “socio-economic transformation”.
“It is about raising the quality of life of the people of this region,” says the Governor. “That is essentially the mission of the bank.”
To deliver on the ECCB’s twin mandate of maintaining financial stability and promoting economic development, the strategic plan identifies five main goals including enhancing organisational effectiveness, maintaining the EC dollar, strengthening the financial sector and being an effective advisor to the region’s governments.
A challenging climate
It is a comprehensive and wide-ranging plan, designed to meet the Caribbean’s challenges head-on. Antoine says: “This plan comes at a time when our region is confronted by many challenges, including slow growth, high unemployment and increased frequency and severity of natural disasters.”
The latter is especially relevant given the region’s recent battering by hurricanes Irma and Maria – two back to back category five storms which devastated parts of the Eastern Caribbean last month. Addressing the United Nations Assembly in September, Saint Lucia Prime Minister Allen Chastanet highlighted this issue, and Saint Lucia’s vulnerability, saying: “It is impossible to avoid the facts of climate change. What is fast becoming the new normal is the intensification of extreme weather events which demands from us real solutions in real time. No longer can we depend on old mechanisms with dense bureaucracies that delay or limit a nation’s ability to safeguard its citizens during a crisis and slow the rebuilding effort.”
This year, Irma and Maria are bound to make a dent in the region’s forecasted 3 per cent growth. The ECCB’s new strategy is focusing on making the region more resilient, creating a Regional Resilience Fund that all island nations in the Eastern Caribbean Currency Union (ECCU) will contribute to and benefit from.
“Governments would consistently set aside a portion of revenues from the Citizenship by Investment funds, where they exist. [These] can then be leveraged to attract climate finance from the various facilities established to support the Paris Climate Accord,” explains Antoine. “You save for the rainy day and God knows it has been raining quite heavily around these parts lately.”
In addition, the bank intends to continue to engage in the expansion of infrastructure for clean energy projects. In this area it is leading by example with plans to green the entire ECCB campus in St Kitts within five years, making it wholly carbon neutral. “We are taking the lead, to signal to the world that this is important to us,” says Antoine. “Global warming is hurting our economies so we are not just talking, we are taking it seriously.”
From climate change, to changing the business climate. Like many others in the region, Saint Lucia has seen its business sector stagnate, hindered by lack of access to finance, limited resources and the high cost of doing business. Saint Lucia’s economy grew by just 0.9 per cent in 2016. In delivering the 2017 budget in May, Prime Minister Chastanet called low economic growth the country’s “number one challenge”.
The ECCB aims to create a better environment for business by removing many of the obstacles long faced by the private sector. “The adoption of certain structural reforms to improve the business climate such as modern land registries, partial guarantee scheme and credit bureau are all necessary,” explains Antoine. “These reforms are urgent.”
The bank intends to work with ECCU governments to create the necessary enabling legislation to make it easier for small businesses and entrepreneurs to enter the market. By 2021 the ECCB wants to achieve 5 per cent economic growth in the region (it is currently around 3 per cent although this may be downgraded following recent hurricane damage). It also wants to see member countries enter the top 50 in the World Bank Annual Ease of Doing Business indicators.
To further spur business, the bank is considering an innovative new solution. Financing selected ‘transformation initiatives’ would be a first for the ECCB, but could have long-lasting repercussions. “The bank would consider the deployment of a limited portion of its reserves,” explains Antoine. “The areas have not been decided but could include energy and technology, which are game changers for economic transformation.”
Exploring new avenues of business within the ECCU would help halt soaring unemployment in the region, which Antoine says has the bank “very concerned”. In Saint Lucia unemployment reached 21.6 per cent in 2016 and was especially high among young people with youth unemployment at 43.1 per cent. “We are focusing on unemployment, especially in regard to our young people,” Antoine announced at the launch of the plan. “We have an abundant pool of young people. We want a striving and thriving citizenry that have a sense of wellbeing and progress.”
Building up banks
Progress can only be achieved with the backing of a sound and resilient financial system. Threats such as de-risking and the subsequent loss of Correspondent Banking Relationships (CBR) have had a profound effect on the region’s financial services providers and led to uncertainty over the industry’s future.
To combat this, the ECCB intends to increase its advocacy with correspondent banks to provide information that will dispel any misconceptions about doing business in the region. Often international banks view ECCU institutions as small and unprofitable. To entice more CBRs, the ECCB is encouraging national banks to consolidate in the hope that a larger bank will be viewed more favourably by potential partners.
In addition to de-risking concerns, the industry is now playing catch-up as financial technology, ‘FinTech’, is transforming the sector worldwide. FinTech is a broad term encompassing all aspects of wealth management from digital wallets to cryptocurrencies. According to PricewaterhouseCooper’s Global FinTech Survey 2017, over 80 per cent of financial institutions believe that their business is threatened by innovators and 82 per cent expect to increase FinTech partnerships in the next three to five years.
The rapid development of FinTech brings challenges as well as opportunities, especially for regulators. In its Strategic Plan, the ECCB acknowledges its role in overseeing the adoption of these technologies and vows to strengthen its risk management framework, prioritising KYC, AML/CFT and cybersecurity. It is also looking to implement a pilot scheme to develop a digital EC dollar.
“The region had better get ready,” says the Governor. “There can be no economic transformation without technology. Our region has to leverage technology across all spheres of development. We can either be paralysed by fear and preside over our decline, or take a proactive approach, do our due diligence and embrace a new future. The ECCB has adopted the latter approach.”
Changing the culture
Before the ECCB can effect change in the region, it is looking inward to change its own culture. Like any institution, the bank is only as effective as its staff, and service excellence is a high priority for the Governor.
Professional development, training and stakeholder engagement are all part of the process going forward. “The ECCB must ensure it is fit for purpose in respect of its culture, technical excellence, service excellence and responsiveness,” says Antoine.
In drafting its Strategic Plan, the bank had to look several years into the future – not an easy task given the rapid pace of change globally. The Governor is unconcerned and says the plan was developed to be flexible, with the ability to make adjustments as necessary.”We will stay relevant by keeping a very watchful eye on the bank’s operating environment and by ongoing engagement with the people of the region and the leaders of the region.”
Antoine says the plan belongs to the 628,000 citizens of the ECCU. Every nation had a chance to contribute and each will see its interests reflected in the goals and objectives. “The bank exists to serve the people of the ECCU in various ways. The ultimate end is the development of the people of the region.”