Financial Institutions and Markets

Caribbean financial systems operate within unique structural constraints: small open economies,

shallow capital markets, dependence on banking intermediation, exposure to global interest rate

cycles, and regulatory pressures such as de-risking and correspondent banking withdrawal.

This assignment requires you to critically evaluate how the structure of Caribbean financial

systems, behaviour of financial institutions, and interest rate dynamics shape financial stability and

economic outcomes.

You must analyse a real Caribbean financial development, policy episode, or structural challenge.

Select ONE Caribbean Case

Choose one of the following:

1. Correspondent Banking / De-Risking in the Caribbean

2. Monetary Tightening and Interest Rate Transmission in a Caribbean Economy

3. Bank-Dominated Financial Systems vs Capital Market Development

4. Credit Union Expansion and Financial Inclusion

5. Housing Finance and Mortgage Market Sensitivity to Interest Rates

6. Financial Stability Response to a Global Shock (e.g., COVID-19, inflation cycle)

Your case must be country-specific (e.g., Trinidad & Tobago, Jamaica, Barbados, Guyana, ECCU,

etc.).

Assignment Structure

Part A Structure of the Caribbean Financial System (Unit 1)

(Approx. 800900 words)

Using your selected case:

Describe the structure of the financial system

Role of banks vs capital markets

Direct vs indirect finance dominance

Key financial instruments involved

Evidence of asymmetric information or financial frictions How the structure influenced the outcome of the case

Focus on mechanisms and system behaviour, not description.

Part B Financial Institutions, Intermediation, and Risk (Unit 2)

(Approx. 800900 words)

Critically evaluate:

Role of commercial banks and/or credit unions

Role of insurance, pension, or investment intermediaries (if relevant)

Risk dynamics (credit, liquidity, systemic, regulatory, or external)

Whether financial institutions stabilized or amplified risk

Regulatory and policy response

Demonstrate institutional analysis, not narrative.

Part C Interest Rate Dynamics and Economic Behaviour (Unit 3)

(Approx. 9001,000 words)

Analyse:

How interest rates influenced your case

Transmission to borrowing, investment, housing, or credit

Apply Classical / Loanable Funds / Liquidity Preference theory

Yield curve or monetary policy implications (if applicable)

Evaluate whether interest rate policy improved stability or increased vulnerability

This section must integrate theory + real financial behaviour.

Part D Critical Reflection: Caribbean System Resilience

(Approx. 600800 words) This is the highest-level thinking section.

Evaluate:

Structural strengths of Caribbean financial systems

Structural weaknesses exposed by your case

Role of banking dominance vs capital market depth

Vulnerability to global interest rate cycles ONE major systemic risk facing Caribbean finance today

ONE policy or institutional reform to strengthen system resilience

Your conclusion must show independent judgment and synthesis.

Technical Requirements

Length: 3,200 3,800 words

Academic referencing required

Must use real Caribbean institutional, policy, or market evidence

Use charts/tables where relevant

Descriptive answers will score poorly

Evidence of independent reasoning expected

Marking Rubric (40%)

Criteria Weight

Financial System Structural Analysis 20%

Institutional & Risk Evaluation 20%

Application of Interest Rate Theory 25%

Critical Reflection & Policy Insight 15%

Evidence & Real Caribbean Context 10%

Writing Quality & Structure 10%

What High-Distinction Work Will Demonstrate

Deep understanding of Caribbean financial systems

Integration of theory with real institutional behaviour

Strong causal reasoning (not description)

Use of evidence and policy insight

Independent and critical interpretation

Clear analytical structureAcademic Integrity Note

This assignment requires:

Country-specific analysis

Application of theory to real institutional behaviour

Critical judgment and synthesis

Generic or purely descriptive responses will not meet the required analytical standard