Speaking to the Bahama Journal last week, Barbadian Minister of State for Finance James Smith said that the establishment of a regional stock exchange existing outside of the CSME (Caribbean Single Market and Economy) would enhance the flow of capital and equity throughout the region, though he was less enthusiastic about the creation of a regional credit ratings agency.
Mr Smith was responding to comments made by the Barbados Central Bank Governor Dr Marion Williams recently who made the case for the setting up of both institutions.
"A credit rating agency could help to remove distorted perceptions among financial entities within the financial system, and promote the move away from rule-based supervision to the more proactive risk-based supervision," said Dr Williams.
The Finance Minister begs to differ on the question of a regional credit rating agency however, citing such an institution's probable lack of credibility amongst the world's investment community.
"I think a regional agency may not have the same type of credibility of the international agencies, simply because when we go to market, we go to international markets and not to regional markets to raise capital… it's a way of assessing the credibility of the borrower," responded Mr Smith.
Nevertheless, the minister concurred with the Central banker's view on the creation of a regional stock exchange, an idea which is also supported by the Inter-American Development Bank. "You would be making it easier for capital to move around the region for investments by way of equity," explained Smith, adding: "There would be more opportunities for investors." The minister conceded though that exchange controls would have to be relaxed on the flow of equities for its full potential to be unleashed.
Still, given the inexorable move towards a Caribbean free trade area, which is likely to become a reality within the next couple of years, the minister predicted that a regional exchange "would have to become a reality if the Caribbean including The Bahamas is to participate more and more in international trade."
By Amanda Banks, Tax-News.com
