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WILD COOT: Bank balance sheets

Harry Russell

WILD COOT: Bank balance sheets

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An old lady emailed me to say that she does not understand the balance sheet of the commercial banks. She said: “I used to do the books of a bakery shop when I was young. Every debit had to have a credit, and the credit had to make sense.
“We did not put in any goodwill or reverse revaluation of assets. If the manager had asked me to put in any figure representing excess of liabilities over assets as an asset or any esoteric bamboozlement I would have told him ‘no dice’, and shut my ledger.
“Now I see all kind of fancy footwork in the balance sheets, although I must say that my 92 years eyes can’t focus well.”
The Wild Coot was astounded that such an advanced doyen of our society could be so perceptive.
I immediately emailed her. I said that she should try to give the expert observation to the Central Bank and the newly formed Financial Services Commission so that they could get to work to ensure that Bajans get a better deal. I myself was staying out of the melee as nobody is paying any mind to the ramblings of the Wild Coot.
I confessed to her, requesting non-disclosure, that I was not at all satisfied with the modus operandi of the banks; that Bajans were getting a raw deal. I reiterated that we will live to regret the sale of the Barbados National Bank; yet again we may not, as that bank had too much political interference for it to serve its initial purpose as espoused by Tom Adams.
I went into a bank the other day, waited one hour and 15 minutes to do a simple transaction. Although the bank had seven teller stations only one was open to the general public, and a new recruit manned that one.
The line stretched from 10 people when I entered to 30 people when I left. People were “steupsing” and restless.
An old man who wanted to pee had to leave in a hurry, as there was no bathroom for customers.
By virtue of improved technology, tellers are required to perform tasks that were previously done by clerical officers. That holds up the line but it reduces the need for as many clerical officers, which is to the advantage of the bank. Less staff cost; there is no excuse for one cashier.
Managers are cheaper too as lending is centralised. But customers are shafted. There is no reciprocity of loyalty to customers as they are charged even for their savings. You see the more savings in the bank, the more the bank has to invest in liquid assets (government paper) at low interest rates (dictated by government’s perilous position).
But the $8.6 billion savings in the banks are satisfying the $4 billion Treasury Bills limit.
The banks resort to spurious charges, some of which the customer is unaware. Somehow the banks have to make a profit. The Central Bank knows this, but it may be caught in an awkward position as we already see the banks reducing presence to the public.
In the light of the banks’ behaviour, customers have to consider their loyalty and regard the credit unions as an alternative even though they are now under serious threat from the minister of finance. There are private sector quasi banks with Barbadian interest that are alternatives. Their drawback is correspondent banking relations and foreign exchange dealings. However, these are not insurmountable issues.
The old lady sent me a follow up email. “To add insult to injury some banks are trying to explain the obvious increasing losses by inane newspaper paid advertisements, as if the public cannot read between the lines. If a credit union had ever talked about an asset as a ‘reverse acquisition reserve’, the Financial Service Commission (FSC) would be on its tail like lightning.
On the other hand the FSC may be like me, not understanding what it means. If a credit union had ever paid out “dividends” to its members despite huge losses the hierarchy would be in the hostel in St Philip long time.
Both the FSC and the Central Bank are supposed to be official watchdogs, not the Wild Coot. Why should he worry that the government may be “in hock” to the banks.
• Harry Russell is a banker.