WILD COOT: On a volcano’s edge
The Central Bank of Barbados may be sitting on the edge of a volcano. First we have a report from the Daily Nation’s investigators that they have consulted past governors of the Central Bank with respect to the right or wrong of Mr Parris’ “deposit”.
It is reported that Mr Parris had deposits with Royal Bank who presumably required him to remove the deposits. Maybe he did not respond to the bank. If he did not, then Royal Bank’s position would be to get rid of the deposit.
A course open to Royal Bank would be to seek assistance from the regulator the Central Bank, by sending it the deposit. Just as it may send a deposit that is in escheat, that is, unclaimed.
I said in my previous article that the Central Bank could hold deposits. The report that Mr Parris may have claimed to have a deposit with the Central Bank may have given the wrong impression and the opinions of past governors incomplete and irrelevant. If the postulation above is correct, it is the bounden duty of the Central Bank to publicly clarify the report as it affects its international reputation. However, the Central Bank and the Press seem to be on different wavelengths.
The other vexing question is about the Central Bank entering the field of commercial banking. A wide interpretation of the objectives of the bank is contemplated. However, as I have said, it is poorly equipped to handle transactions with which it will be faced from commercial customers – for example, correspondent arrangements with commercial banks for foreign transactions. A documentary credit established and confirmed by the Central Bank commits the Government of Barbados being the owner of the Central Bank.
But there is an even more troubling problem outlined by the Prime Minister of The Bahamas. The Wild Coot can confirm that it exists. Back at the time of 9/11, Caribbean indigenous banks with correspondent relations with main-line banks in the world were sent scrambling to develop correspondent accounts with secondary banks in order to do overseas banking worldwide. The Wild Coot helped certain banks in the search.
While the minister of finance hastened to assure overseas investors that there were no plans to go to the International Monetary Fund for money, the damage of suggesting that Canadian banks were about to pull out of the Caribbean – including the “powerhouse” Barbados – has very wide, troubling implications. It further exacerbates the talk of withdrawal of correspondent banking facilities of overseas banks.
More troubling could be the impact on the indigenous banks. American banking inspectors are scrutinising the United States’ corresponding bank and requiring of them even closer scrutiny of our indigenous banks (for Barbados that would be those with Trinidad headquarters). It may be felt that the due diligence with respect to drugs and terrorism is not stringent enough, including our ambivalent and elephantine approach on the issue of the legalisation of marijuana. Besides, they can be heavily fined for infringements caused directly or indirectly though their associates in the Caribbean. How costly can be the risk? What double standards!
What Prime Minister Perry Christie is saying is that Caribbean indigenous banks will be “unable to settle their transactions in the US, in Canada and in Britain, [which] clearly has serious implications for the payment system within the Caribbean region and certainly for the economies of our respective countries”. It is uncertain how a moribund CARICOM can help.
When these developments are considered, we question the judgement of our Central Bank for so far not clarifying the newspaper report mentioned, if misleading.
An apparent reported decision to allow Mr Parris access to the prestigious Central Bank as a depositor if left unchallenged therefore must be borne in mind and juxtaposed against the Caribbean threat observed by Prime Ministers Perry Christie and Gaston Browne.
On Friday the Wild Coot spent two hours changing a fixed deposit account to a savings account because of the new stringencies of the bank. Previously this transaction would have taken ten minutes. Maybe our banks are trying.
Harry Russell is a banker. Email [email protected]