ABSTRACT The January 1st, 1995, General Agreement on Trade in Services (GATS), which entered into force in March 1999, is intended to bring about complete liberalization of international trade in all services, the largest and fastest growing component of such trade. This includes the financial services sector. Financial liberalization can generate a number of benefits, including services specialization, economies of scope, economies of scale in technology acquisition, a reduction of systemic risk, and improved risk management. However, in the case of small island developing countries, as with those in the Caribbean, a number of risks are evident, including adverse selection, increased moral hazard, and decreasing loan quality. This research focuses upon the nature of the financial policy framework required in the Republic of Trinidad and Tobago, in order to limit the dangers and enhance the benefits arising from international financial policy liberalization.