Senior Reporter
andrea.perez-sobers@guardian.co.tt
Trinidad and Tobago’s financial system remains exposed to mounting sovereign debt, volatile banking sector liquidity, cyberthreats and household indebtedness, with the Central Bank warning that overall financial stability risks were moderate to elevated in 2025.
The country’s adjusted general government debt (AGGD) reached $147.6 billion at the end of December 2025, equivalent to 84.4 per cent of gross domestic product (GDP), exceeding the International Monetary Fund’s 60 per cent debt-to-GDP threshold for market-access countries.
The banking and insurance sectors together held 39.4 per cent of sovereign debt, reinforcing the close relationship between the Government’s fiscal position and the stability of financial institutions.
In its Financial Stability Report 2025, the Central Bank identified sovereign-financial sector linkages, cybersecurity and operational incidents, liquidity volatility and household indebtedness as the principal risks requiring continued monitoring.
Although regulated financial institutions remained generally resilient, the Bank warned that these vulnerabilities could affect capital adequacy, liquidity, profitability and credit quality.
The report found that the Aggregate Financial Stability Index declined marginally from 88.8 in 2024 to 87.8 in 2025, remaining within the moderate risk range. The deterioration reflected higher non-performing loans, weaker stock market activity, slower non-energy economic activity, weak external accounts, and volatile banking system liquidity.
Persistent fiscal deficits pushed adjusted general government debt from $126.8 billion at the end of FY2021 to $146.9 billion at the end of FY2025. The fiscal deficit widened from $9.1 billion in FY2024 to $10.1 billion in FY2025.
Domestic debt accounted for 74.9 per cent of sovereign debt at December 2025, while commercial banks and insurers remained major holders of Government securities and loans.
The banking sector’s sovereign exposure averaged 17.5 per cent of total assets over the five years to 2025, while the insurance sector’s exposure averaged 49.7 per cent.
By December 2025, Government-related exposures accounted for 56.3 per cent of commercial banks’ total large group exposures, down from 60 per cent a year earlier.
Stress testing showed that a severe sovereign credit shock could reduce the banking sector’s capital adequacy ratio by six percentage points to 10.9 per cent. Some commercial banks, including one domestic systemically important bank, would breach minimum capital requirements under a sovereign default scenario.
Cybersecurity and operational risks remained elevated despite a 22.9 per cent decline in reported cyber incidents to 91 cases in 2025.
The expansion of online banking, electronic payments and artificial intelligence has increased financial institutions’ exposure to cyberattacks and operational disruptions.
Suspicious transaction and activity reports to the Financial Intelligence Unit also returned to pandemic-era highs, with fraud accounting for 59 per cent of submissions.
Although the monetary value associated with reported events declined by approximately 86 per cent from 2024, the total value remained substantial at $1.3 billion. Completed transactions accounted for approximately $762.7 million.
The Central Bank cautioned that phishing, online scams and other forms of cyber-enabled fraud could undermine confidence in the financial system.
Banking sector liquidity remained volatile, although commercial banks’ excess reserves increased by 6.2 per cent to $5.1 billion in 2025.
Banks relied more heavily on short-term funding, with average interbank borrowing rising 46.5 per cent to $169.8 million. Average use of the Central Bank’s repurchase facility also increased to $55.7 million, from $23.8 million in 2024.
Stress testing showed that commercial banks’ ability to withstand a severe deposit run weakened. The banking sector’s survival period fell from 25 days to 23 days when reserves were included, and from 17 days to 15 days when reserves were excluded.
Household debt increased 3.1 per cent year-on-year to $72.3 billion in December 2025, representing 41.5 per cent of GDP. This was slower than the seven per cent growth recorded in 2024.
Despite the increase, household loan quality remained broadly stable, with the non-performing loan ratio unchanged at 2.7 per cent.
The Central Bank assessed household indebtedness and liquidity risks as moderate, but warned that higher living costs, inflation and borrowing expenses could weaken repayment capacity.
