To say that I understand the LIBOR (London Interbank Offered Rate) scandal would not be quite true. At least I understand that the senior banks submit their rates and decide what it would cost to borrow from one another. This is not without the knowledge of the Bank of England.
By submitting a higher rate Barclays is saying that borrowing from other banks will come at a higher rate. Barclays may not be the only bank doing that. There is the implication that since they are paying higher rates, the eventual LIBOR rate, when other rates are amalgamated, would be higher.
Now all over the world LIBOR is the benchmark rate that banks use to set the finest lending rate to customers. It is the be-all and the “lend”-all. If the rate is a quarter percentage point higher, multiply the difference by the millions of transactions throughout the world, including Barbados, for that day, and one would appreciate the problem. Then multiply whatever figure one gets by the number of bank days since 2006 or so.
We may ask if banks in Barbados are involved in a similar rate-setting process as we often hear them speaking with one voice.
Anyway, whatever happens to the banks, they will survive. A few heads will roll, with suitable payouts. But banks are at the centre of financial transactions that provide the escutcheon, the railroad track for business in our daily living.
That is why President Obama saved the banks. That is why the European Central Bank is saving banks in Greece and Spain that may be bankrupt.
So banks can make mistakes, deliberate or otherwise!
I was listening to the address of the Central Bank of Barbados to the media on policies regarding foreign exchange, which they said lead to stability. I am not so sure if another view attends the argument. They say that we need to tailor our foreign exchange expenditure to our expected income seemingly without making adequate input for any new plans in growth provision.
In other words, we do not factor in measures we should take to increase growth and so on, so that the expectation of foreign exchange in the future would be greater or lesser than what using past graphs could indicate. Hence the draconian taxation that is scheduled to make the future foreign exchange expectations fit into a hole the depth of which is based on the past. I am not sure that this is a recipe for progress.
It is said that the chief strategists on the island, including the Minister of Finance, get together with the Central Bank of Barbados every Friday and decide the level of foreign exchange required in the future and take measures at that point to attend the present. What is important is that the gardener and the maid are not privy to the soirée.
One must remember that in the earliest days of banking, Jesus did not give us a passing grade. Please check St Mathew 21:12 and 13. Neither did Shakespeare 16 centuries later – The Merchant of Venice.
Like many others who fall into the category of bankers, I can be questioned about habits, especially being a fellow among the beleaguered practitioners. However, stepping back, I tend to feel that the way banking is done today differs in several ways from the way it was done when I first entered the field.
As a branch manager, I interfaced with all customers and had the authority to lend and make decisions. This is not so today in most cases. Maybe the remuneration of trained managers has something to do with the shareholders’ decision to centralize. Bad debts were no worse then than now; in fact I believe they are worse now.
One of the things that gets me angry is to enter a bank, see 30 or 40 customers in a line, two out of six cashiers working and other clerks performing other duties – customers waiting sometimes for over an hour like docile sheep, with no toilet facilities. That could not happen in my branch.
