WILD COOT: Our poor Central Bank
Oh shoot, the Central Bank made a loss. What a calamity! Not even the Central Bank is immune from trouble. And the commercial banks braying like Jack in the box jackasses. You know how a fellow feels when he succeeds in besting you. Talk about bullying!
An old woman called me saying: “Wild Coot, didn’t you tell them all the time in several articles not to pursue such a low interest rate regime that the commercial banks were hollering for?
I think that the excuse was that interest rates were low in the United States; but the United States’ economy is different from ours. The Central Bank is minding the Government and keeping interest rates low, depriving poor people of income. Even now it is not mending its ways.”
The commercial banks have more flexibility than the Central Bank or even the Government. You see banks can reduce staff, select lending opportunities (cars, mortgages), reduce responsibility of officers (hence pay), close branches, and so on; Government can hire and fire willy nilly, keeping the unions in the dark with promises of appointments.
Banks have not lowered their interest rates on loans commensurate with the reduction in interest paid. The charges on credit cards are punitive and once credit cards are maxed out through hard times, they are hard to repay. There is no cat among the banking pigeons. The only buttress to date is the credit union – now it is targeted.
The best of the commercial banks left the Caribbean, maybe because Jamaica, where it had most branches, was taken over by the government and Trinidad was ‘Republicanised’. But Barclays Bank left its mark. Many of the corporate companies and the banks themselves benefited from the training given to Barclays staff. The Wild Coot was fortunate to have taken advantage of its copious tutelage.
I cannot for the life of me understand why the Central Bank would agree to let the commercial banks dictate whether to pay savings interest or not. It is effete and toothless. If a bank decides to issue debit cards on its savings accounts, that is its business. It reduces pressure on its cashiers, and the computerised system deals with that. Banks already get free use of credit balances on current accounts, and even charges for their upkeep; if the current account is in debit interest is charged, and for an unauthorised debit balance or a balance above a limit a commission is charged. Therefore not paying interest on savings accounts in unconscionable.
But when you say A, you must say B. Our fiscal position is not only impacting on the citizenry and private sector companies, but also on the banks. Exacting vengeance on customers is to survive – and pay dividends to shareholders.
The Central Bank believes Government is its friend; but who is in the lurch now? Is the Central Bank going to lay off staff, its highly trained staff? Our Central Bank has reversed its role. It should be the watchdog of the people both in terms of the commercial banks’ relationship with the public and in terms of keeping Government in check.
The Wild Coot got licks from the corporate sector when he advocated higher interest rates, and also from some “maguffies”, but higher interest rates could be as effective and sometimes more effective than taxation in dampening demand – hence foreign exchange. It leaves the citizens with choice, that is, the businesses to import and the individual to buy.
The International Monetary Fund (IMF) encourages “the Central Bank to reorient monetary policy towards the exchange peg by curtailing direct finance of the Government, and allowing domestic short-term interest rates to rise to a level that reflects a credible country risk premium”. (IMF Press release No 14/51 12/2/2014). Not me, the IMF.
But you know, “a poppet is not recognised even in his own country”.
• Harry Russell is a banker.