Tenth Anniversary Review By Angus Smith, Executive Director – GARFIN
The Grenada Authority for the Regulation of Financial Institutions (GARFIN) was created by an Act of Parliament in 2006 and began its formal existence when the Act was proclaimed effective from February 01, 2007. After some enhancements in 2008 the GARFIN Act became CAP 125A in the 2010 Continuous Revised Edition of the Laws of Grenada.
The Authority was created to consolidate supervision of the non-bank financial sector in Grenada. This entailed assuming responsibility for the supervision of a number of other regulatory authorities including the Supervisor of Insurance, the Registrar of Cooperatives as it related to credit unions and the Grenada International Financial Services Authority (GIFSA). This consolidation enabled among other things the creation of economies of scale in supervision and led to a better trained supervisory staff and a higher level of supervision throughout.
GARFIN’s main task in its early days of existence was to establish itself as a credible and professional regulatory body having the respect of the entities supervised. GARFIN can be proud of its achievements in this area. Good working relationships were gradually established with all entities through regular communication and dialogue, recognizing at the same time that there will be differences of opinion at times. It was also recognized that once all parties carried out their statutory duties and responsibilities progress could be made in maintaining sound regulation of the non-bank financial sector.
GARFIN’s main objective is to maintain stability in the financial sector it supervises and the safety and soundness of the entities operating therein. This requires strong legislation, not only for the regulatory authority, but for the entities being regulated. To this end new and modern legislation was enacted in several areas including a new Insurance Act, a new Cooperative Societies Act and, for the first time, Money Services Business Legislation. In order to remain current with international best practices a number of amendments to these Acts are presently being pursued as well as updated regulations.
GARFIN conducts its key responsibilities through off-site and on-site supervision procedures. Off-site supervision was developed mainly through the introduction of regular (quarterly, monthly, annual) reporting to GARFIN and through the holding of prudential meetings. GARFIN places great emphasis on compliance with all relevant legislation by the entities it supervises and close monitoring is maintained over key prudential items. In particular GARFIN enforced the establishment of insurance funds by all insurance companies and supervises this area very closely. On-site examinations are regularly conducted on all entities. GARFIN has taken regulatory action over the years against various entities as necessary including the appointment of administrative supervisors and the issue of directives and guidelines and memoranda of understanding. The High Court was petitioned for the appointment of Judicial Managers for British American and CLICO Insurance Companies and the Grenada Building and Loan Association in order to protect policyholders and investors.
Since its formation GARFIN has facilitated the consolidation of the credit union sector. From a total of some 17 credit unions in 2007 Grenada now has 10 functioning credit unions plus the Grenada Cooperative League. Total assets of the sector however increased from $240 million in 2007 to $650 million in 2017. A framework was also established for the effective oversight of the junior cooperatives or schools savings unions.
GARFIN has been an active participant in regional regulatory activities. Thanks to sponsorship from the Caribbean Regional Technical Assistance Centre (CARTAC) staff have received extensive training in most areas of supervision. GARFIN hosted the annual workshops and meetings of the Caribbean Association of Insurance Regulators (CAIR) in 2009, the Caribbean Association of Pension Supervisors (CAPS) in 2013 and the Caribbean Association of Credit Union Supervisors (CACS) in 2016. These workshops were sponsored by CARTAC. GARFIN also hosted a number of smaller meetings of OECS regulators. GARFIN presently holds the Secretariat of CACS and held the post of Treasurer of CAIR for some 4 years.
GARFIN has produced and submitted to the Minister of Finance, and to Parliament, the required statutory Annual Audited Financial Statements and the Annual Report of the Supervisor of Insurance each year. GARFIN has always been self-funded since its formation having inherited the assets including cash balances from GIFSA in 2007. On exhaustion of these balances in 2013 the Government enacted legislation which provided a fixed source of funding for GARFIN through the imposition of a levy on insurers’ premium income. In 2015 an annual licence fee was introduced for credit unions for the first time.
In 2011 GARFIN commenced supervision of pension plans as provided for in the new Insurance Act. This initially entailed efforts to register all existing plans and to date 45 such plans have been registered. Training workshops were held in 2013 and 2015 for sponsoring companies and trustees of pension plans. Annual reporting forms for pension plans were introduced in 2014 and GARFIN has been following aggressively for audited financial statements and actuarial assessments as required by the Act. GARFIN’s staff have received specific training in pension supervision and on-site examination of plans will commence in 2017.
In reflecting on GARFIN’s first 10 years in existence it is obvious that much progress has been made in streamlining and strengthening the non-bank financial sector in Grenada. Significant overall improvements can be seen in areas such as corporate governance, reporting, compliance and financial performance. At the same time it must be recognized that there is still much to be done. The work which was started on moving to a more risk based approach to supervision must be pursued and tight off-site and on-site supervision must be enhanced. Even as Grenada emerges from a successful, homegrown, economic structural adjustment programme and the economy improves, the institutions supervised by GARFIN face challenges. This makes it extremely important for GARFIN to continue its vigilance to ensure that the sector remains safe and sound. GARFIN itself is at a crossroads as efforts are continuing to create a single insurance regulator for the ECCU region. In the meantime GARFIN will continue to carry out its work with diligence since a well regulated, stable, financial sector enhances the overall economy which redounds to the benefit of the country as a whole.