IMF Eyes Sovereign Debt Exposure Of Region's Banks

• The Director of the Western Hemisphere Department at the International Monetary Fund (IMF), Ilan Goldfajn, says the Washington DC-based financial institution is paying close attention to the sovereign debt exposure of regional banks, especially where recent external shocks have significantly stretched public sector balance sheets. 
• He explains that 'Banks with highly concentrated exposures, mainly where these are systemically important institutions, can complicate recovery efforts if sovereign debt sustainability risks materialize.' Therefore, the risks associated with sovereign debt linkages are best mitigated by governments pursuing sustainable fiscal policies and making use of the available concessional financing opportunities. 
• Goldfain also noted that it is essential that financial supervisors promptly identify pockets of excessive risk exposures, enforce and/or tighten exposure concentration limits where warranted, and ensure banks' and other financial institutions' loss-absorbing buffers are commensurate to the risks taken. 
• The Caribbean Community (CARICOM) Secretary-General, Dr. Carla Barnett, said the operationalisation of an integrated country risk management framework, robust enough to strengthen social safety nets, with the capacity to adapt to shocks, will allow the region to 'build back better' following the various 'challenges', including the coronavirus pandemic. 
• Consequently, the newly established Resilience and Sustainability Trust (RST), combined with the additional financing will help catalyse and support countries in building resilience to external shocks, including climate change and pandemic preparedness, and ensuring sustainable growth.

(Source: Trinidad Express Newspapers)