Most times the United States journalists get the news before their Barbadian counterparts. This is a long-standing tradition. News from over and away is more credible than local news.
I am not complaining because news is news. However, I am in full agreement with the stance taken by the Minister of Finance. The banks are taking this “ting” for a joke.
But, squad, for . . . ward . . . march! Left right, left right; abou . . . t . . . turn!
These seem to be the marching orders of Barbados. I mean to say, how can you in this enlightened age be flabbergasted at the cost of energy and the amount we pay for oil (I pay $150 to fill up my tank) and then sell our shares to Emera? This means that Emera takes each year dividends in foreign exchange from the island.
How can you be concerned about the banks’ charges and implore the credit unions to do something about them; (that is, rival banks and even become a bank) and hog-tie the ability of the credit unions to raise funds by removing their tax weapon? We are getting contradicting signals as if we are feeling in the dark.
This is a time for hard focus since we are 800 feet down a 1 000-foot well. It reminds me of a cartoon from my youth. When the Phantom was caught, the order was “tie him in a sack, put some bullets in him and toss him down that 1 000-foot well”.
We indeed are in a sack, riddled with bullets, and each day sinking farther into the well. And you know something? Britain, our main source of tourism, is experiencing such trauma that it withdraws farther and farther into its shell in an effort to survive.
That, along with rising oil prices, means that we will have a ready excuse for not reaching the fabled two per cent target.
Shall we begin to panic?
The cacophony of howls from the public and elsewhere has got the banks attempting to respond. They are talking about risk.
Let me give you an example of how a bank assesses risk. David has an overdraft of $50 000 that is secured by a property worth $400 000. His interest rate is eight per cent.
Chris has an overdraft of $50 000, but he can only give a life policy, face value $100 000, cash surrender value $10 000, his interest rate is ten per cent. His overdraft stalls at $50 000 for over a year for some reason and the overdraft is relegated to the bad and doubtful debt category, where it continues to attract suspended interest of 12 per cent, because it is hoped that Chris will be able to pay at some time from a new job.
Chris’ uncle puts up additional security and reduces the overdraft to $20 000 and the overdraft rate drops to ten per cent. The interest rate is a reflection of the risk. Maybe the interest rate says it all. Maybe if the interest rate goes to 20 per cent, the bank would be better off!!
Risk also has to do with the overall state of a country or an area. If the economy is shaky, then the bank will be cautious in lending. There are other factors: liquidity, compliance, portfolio balance, and so on.
I always fail to see how by raising the interest rate when the customer is down that the bank can be in a better position. To me it seems that when the customer is least able to help himself, that’s the time that the bank puts on the screws.
Or is it that when the bank eventually has to write off the asset it has a greater amount to write off against tax?
Bankers, with a few exceptions (some say the Wild Coot) are smart people. They have been in existence from time immemorial and have much experience in honing their craft, as against a Government that may only be in existence for three years.
The gentleman Dr Tennyson Joseph wrote what I found was a great article in last Tuesday’s edition of the DAILY NATION. While I am a CARICOM advocate and welcome what the OECS has done, the goings-on in Europe have me nervous.
Would Antigua be the Germany of the Eastern Caribbean Union?
