Financial System

Trinidad and Tobago has a well developed financial system comprising :

• Commercial Banks
• Mortgage Finance Companies
• Unit Trusts and Mutual Funds
• Trust and Pension Fund Managers
  • Life and General Insurance Companies
  • Development Finance Institutions
  • Credit Unions
  • Other Non-Bank Financial Institutions
  • The Stock Exchange.

Key legislation governing the above institutions in Trinidad and Tobago are the Central Bank Act, the Financial Institutions Act, the Insurance Act, the Money Lender's Act, The Trustee Ordinance, The Co-operative Society Act, The Securities Industry Act and The Company's Ordinance.

• Interest Rates

  Interest Rates (At third Quarter of 1995, Local Currency)

  LOANS	Range	Median
  Commercial Banks Basic Prime Rate Term Demand Overdraft	14.50-15.00 11.00-15.00 14.50-15.00 14.50-15.00	15.00 14.75 15.00 15.00
  Trust and Mortgage Finance Companies Residential Commercial	8.00-13.50 14.00-15.00	12.25 14.50
  DEPOSITS
  Commercial Banks Ordinary Savings Special Savings Time Deposits 3 months 6 months 1 year	2.00-3.50 4.00-8.50   4.00-8.50 5.00-9.13 5.50-8.25	2.50 5.88   6.27 6.88 7.36
  Trust and Mortgage Finance Company 1-3 year deposits	7.50 - 12.00	8.63

  Interest Rates (At third Quarter of 1995, Foreign Currency)

  LOANS	Range
  Commercial Banks Weighted average rate on foreign currency loans	9.19
  Weighted average rate on foreign currency deposits	4.96

• Foreign Currency Accounts

  There are no foreign exchange controls in force in Trinidad and Tobago. Companies and individuals can hold foreign currency deposit and chequing accounts in Trinidad and Tobago, and financial institutions are now allowed to give foreign currency loans. Interest rates vary according to the currency and institution.

• 936 Lending

  Under Section 936 of the US Internal Revenue Code, funds generated in Puerto Rico, can be used by Caribbean Basin Initiative countries. 936 funds are lent to investors at interest rates below market rates for large scale projects (e.g. US$8-10 million).

  To access these funds, the project must fall within the criteria outlined by U.S. Treasury regulations. Eligible projects include active business assets, or development project such as industrial parks.

• Access to Long -Term Finance

  Bonds

  Long-term Financing is available through mortgage companies, trust companies, merchant banks, the Development Finance Limited and the Agricultural Development Bank, and through the issue of bonds.

• The Capital Market- Bonds, Mutual Funds and Stock Market

  Bonds

  In Trinidad and Tobago, bonds have been used very successfully to raise funds by the Central Government, state owned enterprises and some of the larger, private companies, both in the local market as well as in foreign markets. In general, bonds issued on the local market are administered through private placement with a merchant bank, or trust company. The experience in Trinidad and Tobago has been one in which bonds have been fully subscribed and quite often, over subscribed.

  Mutual Funds

  At the end of 1995, there were three major entrants into the local mutual funds market, the Unit Trust Corporation (UTC) which was established in 1981, the Royal Bank of Trinidad and Tobago Limited which established its fund, the Roytrin Mutual Income and Growth Fund in March 1994 and the Republic Bank Limited which established its fund, the Republic Global Equity Fund, in July 1995. There are also institutions in Trinidad and Tobago which allow for participation in mutual funds invested abroad.

  The Unit Trust Corporation was established by an Act of Parliament. It is regulated by the Unit Trust Corporation of Trinidad and Tobago Act 83:03. Other institutions licensed to conduct the business of a mutual fund nature, at present operate under the Financial Institutions Act. It is expected that new legislation to regulate the mutual fund market will be developed. Among the 3 Institutions operating in Trinidad and Tobago, there are Balanced (Growth and Income) Funds, Money Market Funds and Capital Appreciation Funds. A series of investment plans has also been structured to facilitate participation in the funds.

  These funds are invested in company and debt securities, certificates of deposits and mortgages and are invested both locally and overseas.

  Stock Market

  At December 31, 1995, there were 29 companies being traded on the stock market in Trinidad and Tobago, with a total market capitalisation of TT$6,750.7 million (approximately US$1,125 million). The total volume of shares traded was 131.7 million with a total value of TT$812.4 million (approximately US$135.4 million).

  Issues from the banking industry tend to be the most consistently active in terms of volume and value, followed by the conglomerates and then the manufacturing sector. In 1995 however, the manufacturing sector (industrial class) made a significant improvement in terms of volume and value when compared to 1994.

  In 1994, the stock exchanges of Trinidad and Tobago, Jamaica, Barbados and Santo Domingo entered into an agreement for the harmonization of the regional capital markets. The project, funded by the Inter-American Development Bank, will examine and seek to improve the regulation, trading and clearance and settlement procedures in the region.

  Government has taken other steps to promote further development of the capital market in Trinidad and Tobago, with a view to broadening and deepening the range of financial instruments available to the private and public sector. One measure in particular, is the establishment of a Securities and Exchange Commission. This will provide an appropriate legislative and regulatory framework for the establishment of securities businesses. Legislation has also been developed and is currently being reviewed for the regulation and administration of the Venture Capital Industry.

Also see: Trinidad and Tobago Economic Indicators

Sources:
http://www.cso.gov.tt/
http://www.central-bank.org.tt/