Liquidity Challenge in the T&T Banking Sector

• Liquidity conditions in the Trinidad and Tobago (T&T) banking sector, especially within the automatic clearing house, have tightened as excess liquidity has declined in recent months. As at November 2025, commercial banks' excess liquidity fell to $3.5Bn from $6.6Bn in May, pushing up borrowing costs and slowing credit growth.
• The Central Bank of Trinidad and Tobago (CBTT) attributes this decline to factors like open market operations and foreign exchange sales, which removed over $4.5 billion from the system, though it is augmented by government spending of the income from the energy sector locally.
• The banking sector is regulated by the CBTT, which oversees monetary policy, financial stability, and commercial banks. Regulations include capital requirements, risk management guidelines, and consumer protection laws. The Central Bank also monitors liquidity and solvency to safeguard depositors' interests.
• Liquidity issues in Trinidad and Tobago's banking sector are having a significant impact on the economy. With excess liquidity decreasing, borrowing costs are rising, and credit growth is slowing down. This is affecting various sectors, including motor vehicle loans and bridging finance.
• It has resulted in a multi-front challenge for the real economy, primarily by driving up interest rates that price out businesses, particularly those in non-energy sectors, from essential investment opportunities. This tightening is already manifesting as visible stagnation in consumer and commercial credit, with a marked slowdown in motor vehicle loans and bridging finance.
• Compounding these issues are inflationary pressures from global price hikes and domestic wage adjustments that squeeze household disposable income. While these wage increases aim to provide relief, the IMF has cautioned that without strict fiscal discipline, they risk fueling further economic uncertainty and potentially hindering long-term growth

(Sources: Trinidad & Tobago Guardian)