WILD COOT: Where angels fear
WHILE ONE WOULD HAVE NOTICED from the articles of the Wild Coot that he is critical of the unscrupulous fees and charges of the commercial banks, he is also aware that the banks are fighting for survival in the present environment. You notice it in the published balance sheets. If banks in Barbados do not make a profit, they will leave for greener pastures, viz Citibank, Bank of America, Butterfield, Barclays and so on. Shareholders see dollars and cents.
Independent Senator Tony Marshall was the only person in the Senate in my opinion qualified to speak on the issue with which the Senate was dealing in respect of the 0.20 per cent tax. He sought to make a difference between banks and credit unions. Most of the contributions of the others could be dismissed out of hand, even “the harsh words for banks”. Perhaps while we continue to target the banks with taxes and the banks in turn exact charges from the public highlighted by articles of the Wild Coot, something will have to give sooner or later.
The crux of the matter is the relationship of the banks to the present financial atmosphere. It is untenable. The Government is woefully short of cash, so it cannot pay for the investments it demands from the banks, the public, the Central Bank and the National Insurance except with low interest rates. Because the climate for business in Barbados is poor, banks prefer the relatively safer route of investing in short-term bonds rather than lend for business and domestic household support.
Given that interest comes from bonds where the interest rate is low, there has to be a way of achieving profit. Thus it comes from fees left, right and centre, and from the encouragement of citizens to go with the flow in taking out credit cards. Credit cards lead to residual balances on their accounts that in turn attract heavy interest charges.
It is a vicious circle in which we operate and the enthusiasm shown by the Senate denotes a lack of appreciation for the root cause. Unless we attract investment that lends to export growth or import substitution, we will be tax-chasing our shadow like a dog with an itch.
The downgrades of Barbados have discouraged most investors, and we need to question the enthusiastic ones who are making funds available. Most outsiders will see the denial in some quarters that the downgrades mean nothing, as a negative sign of the country’s approach to the precariousness of the economic position. What is more, outsiders look at the stance of the Central Bank to give assurance of level heads prevailing. With the blind support of the Central Bank, the current policies have not been working for the past six years; rather, they have been failing. Investors prefer to watch and wait.
It is untenable that the judiciary seems to have been drawn into the fracas. It is shameful that outsiders see the Government as the biggest defaulter in carrying out the decisions of the judges. Will they get fair treatment in the event of a dispute? Will/can the Government honour refunds?
The levy on the credit unions and the banks is the thin edge of the wedge. Remember the value added increase in taxes was temporary; maybe the waste tax will go another year.
By the way, credit unions are not part of the clearing system by which banks interchange customers’ cheques with one another as a means of payment. They need to keep their deposits (liabilities from the public) with a bank. Their deposits, as a contra to assets in the balance sheet, add to the asset value that the minister is taxing. It is taxed again when formed part of the assets of the bank. Therefore it is taxed twice. Lord, forgive me!
Savings are the bedrock of a society. Without savings, there are no loans. Surpluses of the credit union benefit members. This is diametrically opposite to the profits of a bank. So how can you treat them in the same way as you treat banks?
Harry Russell is a banker. Email [email protected]