WILD COOT: Commercial banker
MR SIR, you do not understand the mindset of the commercial banker. That is why I said in my last article that he is a unique breed. That is also why the efforts of the Central Bank to stimulate small business or support the hotel sector with a loan window have been a complete failure.
Just look at the two attempts made in recent years. There was a window opened to guarantee loans to small and medium-sized businesses by the Central Bank, but those guarantees were not taken up as the commercial banks were supposed to be the primary lenders.
There was a proposal to rescue hotels that were in difficulties by grant of facilities by the Central Bank, but this also came to naught. Why? The Central Bank lacks the oversight facilities to monitor the day-to-day activities and the flexibility for such a programme.
Now in the latest Budget, the minister has agreed with what the Wild Coot has been saying for the last umpteen months; that the banks have taken advantage of the unwise move by the Central Bank of impoverishing savers. It has been a fundamental mistake and one that has been motivated mainly by political considerations.
A shortcut to Government spending support and the fall-off in raising taxes. While one bank has admitted its responsibility to help the country in these times, it does not admit to the lack of or paucity of lending to small business. Banks on the whole are enjoying an unusually high profit with a wide spread.
Now sir, look how you have compounded a grievous mistake. You again play into the hands of the commercial banks without rectifying the original problem. How would I react wearing my banker’s hat? Instead of complaining, call a meeting of my senior staff and plan measures to retaliate.
Agree to cease paying interest even at .25 per cent and instead implement a charge of two per cent on savings and current deposits. That will compensate for the 1.5 per cent increase in bank assets charge. Credit unions whose profits remain in Barbados should not be trapped in this asset tax.
The Wild Coot got no support from the business sector all along for his railing against the raiding of savings by the Central Bank. Now their appeal for no more taxes has been met with a two per cent levy, a virtual VAT increase.
The effect of all of this is that the fundamental basis of the economy (the savings of the people in banks, quasi banks, credit unions and insurance companies) will be further compromised. Sometime ago a banker said that the model was broken. He was referring to the synergy between savings and the lending support for business.
You have to find a way to encourage the commercial banks to start lending to businesses again. This they will only do if the climate is right. For the climate to be right, people have to be able to spend.
While the imposing of two per cent tax on food and other items at the port will yield money for the Treasury, it would further pauperise a people who have suffered eight years without an increase in wages, coupled with having many of their benefits withdrawn. ‘Good Lord, yuh want the meat and the rice too?’ Unions, help!
The continuing pressure on the spending power of people is supposed to be part of the strategy to control the use of foreign exchange. This is a dangerous game as I have seen both in Guyana and Jamaica.
Foreign exchange must be kept in Barbados or repatriated to Barbados. It cannot only be a question of the size of the investment. The fundamental question now is how much foreign exchange will be taken out or how much not repatriated.
The question not answered is, when will those who are waiting get permission to export foreign exchange? Funny how you have a law that prohibits hoarding of foreign currency, yet people are being encouraged to patronise duty-free shops with US dollars. A conundrum.
You have to find ways to encourage the commercial banks to re-enter the fray of supporting businesses and stop pussyfooting with the political manipulating. People’s lives are not a game. Commercial banks have to play their role of lending so as to make profit. They must not be allowed to take the easy way out.
• Harry Russell is a banker. Email: [email protected]