Tuesday, March 19, 2024

WILD COOT: Wary Banks

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AN OLD LADY suitably chastened the Wild Coot in an email. She said, “Why don’t you stick to banking instead of venturing into esoteric subjects as in your last article namely ‘polyamory’? Oh and read St Mathews Gospel Ch 5 verse 28. Even so your knowledge of banking is hazy, especially when you deal with our poor Central Bank.”

With my tail between my legs I however venture to suggest that the Central Bank of Barbados will not succeed in its foray to entice small businesses to access its guarantee fishing expedition.

Good heavens! A guarantee scheme is not an end in itself. It depends on some bank or entity willing to accept a proposal and at the last minute asking the customer, “but what are you going to give me as security?”

I quote from my friend Charlie as reported by my friend Tony. “You can either practice fiscal austerity or fiscal consolidation or you can grow your way out of it. You can stimulate the economy to get it grow fast enough that it outpaces the growth in the debt and make it a smaller percentage of the goods and services you produce.”

Easier said than done! But if politics is your game and not the goodwill of the country you would so make your choice instead of taking the road less travelled.

There is a report attributed to the Central Bank on Page 18 of the Monday DAILY NATION newspaper of January 25, “Banks want to make money. They are not happy that they have all this money sitting at the Central Bank because they know I am not going to pay them anything on it. So they have options. Why aren’t they taking the options?”

Why indeed? Well, maybe we could enlighten the Central Bank about something. Banks are making money as can be seen by their declarations (thanks to the machinations of the Central Bank) and the Central Bank’s effort to force them to lend is not working.

Actually it seems that the Central Bank does not in any way understand how commercial banks make money; we the customers feel it in our pockets. So even the banks, following hard on the general public have lost confidence in what the Central Bank is doing.

Just recently a bank published its balance sheet. It showed $529 million with the Government. Its advances and investments however diminished (less income), customer current, savings and deposits increased (but costing the bank less), yet the bank declared a substantial profit. They realise that support of shoring up the government’s finances will not bite the bullet or stimulate the economy by reducing its draconian tax screw.

Banks are wary that plans to repay them in 2020/21 will be in bonds for bonds just as the poor Wild Coot has foretold. Indeed if people decide to cash in the bonds early with the banks, the banks will be in a serious dilemma. The banks can see this as they are on record for accepting early repayment on bonds.

Many years ago, some of which were sweet to remember, that was when the Coot was unaware of the Bible reference above and when he was a practicing banker, he never was comfortable with bank’s policy of increasing the interest rate on accounts that were bad and doubtful. He carried out the bank’s policy as he was a loyal employee, but he did not agree. Barbados is seeing the same attitude coming from its creditors.

I wholeheartedly agree with the Front Page editorial of the DAILY NATION newspaper of Wednesday, 27 January condemning the antics of the Central Bank. Maybe we should absolve the minister of some of the blame for our poor showing over the years.

While we are part of the global financial world, we cannot but bemoan the fact that the United States threw the whole world into chaos with their tainted mortgages, but now have the gall to impose things like FATCA on struggling economies.

These are the kind of issues that our Central Bank should be accessing by interceding in some way and seeking financial help from the very United States. It should be asking the US, “how are other countries to survive?”

Just the other day a fellow who should know was bemoaning the intrusion into our affairs by foreigners. It is a pity that he did not mention the banking world. That agreement recently signed in Europe to rationalise tax sharing is directed also at Third World countries that allow companies to use their jurisdiction for tax benefit.

Sounds familiar?

• Harry Russell is a banker. Email quijote70@gmail.com

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