Our primary role is to “foster monetary and financial stability and public confidence and be favourable to the economy of Trinidad and Tobago’ as established by the Central Bank Act of 1964.
What We Do
Issue and Redemption of Currency
The Central Bank is the only institution in the country which is authorised to issue and redeem currency notes and coins. This involves:
- designing the currency;
- maintaining integrity of the currency; and
- providing an adequate supply of currency to satisfy the needs of the public.
Design of the currency
The Bank, with the approval of the Ministry of Finance, takes decisions on the denomination, the substrate and the characteristics of notes and coins. The Bank engages the services of reputable printers and minters to produce these notes and coins.
Maintenance of the currency’s integrity
Security features are key to preserving the integrity of the country’s currency notes. Some of the security features used include holograms, security threads, watermarks and micro printing.
Provision of an adequate supply of currency
In order to maintain a sufficient supply of notes and coins to meet the public’s demands, the Bank undertakes regular stock assessments and projections of currency needs.
Monetary Policy
The Bank’s monetary policy framework has as its primary objectives, the maintenance of:
- A low and stable rate of inflation;
- An orderly foreign exchange market; and
- An adequate level of foreign exchange reserves.
The Bank employs a range of both direct and indirect instruments to effect monetary policy. The indirect or market based instruments largely comprise open market operations and the use of a policy interest rate – the ‘Repo’ rate, while the direct instruments mainly involve use of the statutory reserve requirement. The Bank may also establish special facilities in order to add liquidity or to absorb excess liquidity from the financial system.
Banker to the Government
In its role as banker to the Government, the Bank maintains deposit accounts, effects domestic and foreign currency transactions and provides advice relative to these matters.
Just as corporations and individuals hold deposit accounts at commercial banks, the Government holds deposit accounts at the Bank. These accounts are used for receiving funds, making payments and clearing cheques issued by the Government.
Banker to the Commercial Banks
The Bank acts as banker to the commercial banks. All commercial banks maintain a deposit account at the Bank. These accounts are used to settle interbank transactions as well as for maintenance of a cash reserve requirement. The Bank provides liquidity to commercial banks through the Intraday Liquidity Facility (ILF).
The Bank is required, in conjunction with the commercial banks, to establish and maintain a Clearinghouse for cheques. The Clearinghouse, automated in 2023, operates each morning and transactions are settled daily over the RTGS.
Exchange Rate Management
Foreign Exchange Market and Exchange Rate Management
The Bank is responsible for the management of the Foreign Exchange Market in the public’s interest. Under the Exchange Control Act, the Bank licenses authorised dealers in foreign exchange which include commercial banks and non-bank financial institutions. The Bank has also licensed a number of institutions to operate as Bureaux de Change.
The Bank may intervene in the foreign exchange market to contain undue volatility in the exchange rate. Before the Bank makes a decision to intervene in the foreign exchange market, it assesses a number of variables including current economic conditions, competitiveness of the exchange rate, short-term imbalances and the level of international reserves.
In April 1993, Trinidad and Tobago adopted a floating exchange rate regime. Since then, the value of the Trinidad and Tobago dollar appreciates or depreciates in response to changes in supply and demand conditions in the foreign exchange market and the intervention policy of the Bank. In practice, the foreign exchange system is a managed float.
Management of Foreign Reserves
The Bank manages the country’s foreign exchange reserves according to well-established guidelines relating to:
- The preservation of the capital value of reserve assets;
- The maintenance of adequate liquid foreign assets to make debt service and other payments on behalf of the central government and for the Central Bank’s own account;
- Achieving an optimum rate of return on investments within well-defined risk parameters.
The Board of the Bank approves the broad operating framework and Strategic Asset Allocation (SAA). The daily management of the foreign exchange reserves is guided by the Reserve Operations Committee. The reserve management function includes the conduct of trading activity, the assessment of the performance of the reserves portfolio and risk management. A portion of the portfolio is managed internally and the remainder managed through a number of external managers.
The Heritage and Stabilisation Fund Act No. 6 of 2007 states that the Board shall delegate the responsibilities for management of the Fund to the Bank. The Bank is responsible for the investment of assets and other resources of the Fund in accordance with the operational and investment guidelines developed by the Board.
Financial Stability
About Financial Stability
Financial stability has been defined as the resilience of the financial system in the face of adverse shocks so as to enable the continued smooth functioning of the financial intermediation process. Effective financial intermediation, which involves the ability of households and businesses to channel savings into productive investments with confidence, is essential for sustained economic growth and the welfare of Trinidad and Tobago.
The Central Bank is aware that focusing on promoting the stability of each of its licensees individually (micro-prudential supervision) is insufficient to minimize the occurrence of domestic financial crises. Macro-prudential policy must also be employed; this focuses on controlling systemic risks in the financial system as a whole that can stem from each of the components of the financial system – financial institutions, financial markets and financial infrastructure or the indirect participants in the system – households, non-financial corporations and the public sector. This comprises a regime of risk management tools, including stress testing, to assess the risks and vulnerabilities of the financial system. In addition, the Central Bank, under the Central Bank Act, has the power to assume emergency control of any bank or insurance company, with a view to resolving any distress of the particular institution. The Central Bank can also act as lender of last resort for any distressed bank.
The financial stability objectives of the Central Bank are:
- To maintain confidence in, and promote the soundness and stability of, the financial system in Trinidad and Tobago;
- To promote the existence of efficient and fair banking and financial services markets;
- To maintain an appropriate level of protection for depositors, policyholders and pension plan members, and
- To supervise all persons regulated by the Central Bank to determine whether they are in sound financial condition and in compliance with their respective legislation.
Economic Intelligence and Research
The Bank monitors domestic and international economic developments and presents its analyses in several publications including the Annual Economic Survey, Balance of Payments Report, Economic Bulletin, Monetary Policy Report and Financial Stability Report.
Agent for Government Securities
The Bank issues securities (Treasury Bills, notes and Bonds) on behalf of the Government. It may also manage the issuance of bonds on behalf of state bodies. The issuance takes place through an automated auction system. A multiple price auction system is used for shorter dated securities – treasury bills (up to one year) and notes ( over one year to five years) while a single price auction system is used for bonds (over five years).
Treasury bills and notes are issued to the public through a system of Primary Dealers while the bonds are issued through a number of Government Securities Intermediaries. The Bank maintains an electronic depository for all securities issued and carries out the functions of Registrar and Paying Agent for these securities. The issuance and depository functions are contained within the Government Securities System (GSS). The depository is linked to the Real Time Gross Settlement System( RTGS) to facilitate the payment side of securities transactions.