Central Bank 2021 Half Year Review – Hard Road to Recovery

The Governor of the Central Bank reported two consecutive quarters of growth although it must be stated Barbados economy performed below pre COVID 19 GDP levels – 3.2% to be exact. There was an increase in activity in the tourism sector even as COVID 19 continues to run rampant in the country. The thousands of workers serving the hospitality industry must be happy. The cold reality however is that the economy shrunk 18% in 2020 therefore any mention of the word GROWTH in 2021 must be translated in context.

There is a long, hard road to travel.

117 comments

  • Clerk: Chiding was unfair

    By Colville Mounsey
    colvillemounsey@nationnews.com

    Head of the Barbados Bankers’ Association, Anthony Clerk, is pushing back against criticisms levied against the banks’ high automated teller machine (ATM) and user fees as well as low interest on savings.
    Categorising them as “unfair”, he said they did not accurately reflect the realities within the financial services sector.
    Last week Prime Minister Mia Amor Mottley said that apart from the issue of fees, the low interest paid on savings accounts and below-par loan to deposit ratio basically relegated the banking sector to “watchmen” over people’s monies.
    However, Clerk told the Sunday Sun that low interest rates on savings were as a result of a low appetite for borrowing in a depressed economy.
    “I definitely do not think that this is a fair comment. Speaking generally for the banking community, I can tell you that there is not a lot of demand for loans. This is the reality of the situation, and it should not be surprising to anyone because we are going through a pandemic.
    “It is a very uncertain time for all of us, so obviously developers and would-be borrowers are adopting a cautious wait-and-see approach. So, the bank does not have a long line of people coming to borrow money, even though we would love to lend because that is the business that we are in. If we don’t lend, we can’t make interest,” Clerk explained.
    The Prime Minister said last Wednesday that a loans/deposit ratio of 55 per cent, when the developed world was at 80 per cent, was an untenable situation. However, Clerk said that while this was true, it was not a position of the banking sector’s making, but a reflection of the economic realities.
    “The Prime Minister spoke of our loans/ deposit ratio being low and she is correct; it is less than we would like it to be. We actually have targets, and we are below those targets for the loan to deposit ratio. We don’t want to be there, but that is the reality of the economy in which we operate.
    “Look at the projects which the Prime Minister herself has touted. Those projects have not started because the developers are taking a cautious approach and that is understandable in the current environment,” he said.
    The president pointed out that the low returns on savings was also tied into the low appetite for loans.
    Free market
    “That would have started when they removed the minimum savings rates and once they did that, they allowed the free market system to work. It comes down to supply
    and demand and right now there is a whole lot of supply of money. The banks are all very liquid and when the supply is more than the demand, the price goes down, which in this case is the interest rates. If the economy was to start to heat up again, we might see that situation change where banks have to be paying to raise deposits because of strong loan demand.”
    As it relates to ATM and user fees, Clerk said that contrary to public perception, the cap announced by Central Bank Governor Cleviston Haynes was not forced upon the banking sector, but was a mutual agreement.
    Haynes, during his third quarter economic review on Tuesday, said that following complaints from Barbadians, the Central Bank had intervened to mandate that from November 1, these financial institutions charge no more than $3 per transaction when customers use ATMs other than those owned by their bank or credit union.
    There will also be no charges when shoppers use their Visa and Mastercard debit cards at businesses with point-of-sale terminals, he added.
    Clerk said: “It sort of came across from the Governor that this was something that was forced on the banks, but that was not in fact the case. This was something that came out of amicable discussions and negotiations and the banks are quite comfortable with it. In getting to this point, one has to bear in mind that fees are something banks keep very confidential; we don’t discuss it amongst ourselves because we are competing. So the banks would not have known what the other was doing and we would not have all been at the same place, having submitted our proposals to the Central Bank.”

    Source: Nation

    Like

  • Why yall lowlife don’t pay these people their money though.

    https://www.nationnews.com/2021/10/31/former-liat-workers-still-waiting-severance/

    “Eighteen months after being severed, 94 former LIAT workers are still awaiting their severance.

    And in an effort to get some form of relief, the pilots, flight attendants, engineers and other former employees are calling once more on the Barbados Government to make a case on their behalf.”

    Like

  • Cool it with the banks
    THERE WILL BE NO public response from the banks; they do not operate like that. You can talk as much as you like, their lips are sealed. They may talk at a meeting of the Governor of the Central Bank, but not in public or to the media. The Wild Coot being a wild coot owes nobody anything and does not pay taxes for his mouth.
    Above all, what are they to do with the $10 billion in their banks consisting of, inter alia, National Insurance, deposits of credit unions, pension funds, insurance companies and so on? The fact that the money is there does not mean they have to use it. Way back when, banks used to charge for keeping people’s money. We cannot say that we have the best environment for the banks to lend.
    There are a few underlying problems that we have to think about before we start pitting the banks against the small man even in an election mode. There is the propensity to save but not to invest that is endemic among Barbadians. Just look at participants of the stock exchange. People may buy Government bonds, but little else.
    The operation of the Barbados Savings Bank was a prime example. It even had a branch in England where Barbadians placed their savings in the diplomatic pouch to be put in an account at Fairchild Street. I believe that Prime Minister Owen Arthur sold the balance of shares of the Barbados National Bank because people would not invest in shares in the bank.
    Opportunities for lending to Barbadians are limited as Barbadians are risk averse. In my two years of lending here I can attest to that. Although you will find small borrowers who go to Fund Access, projects that would utilise the savings are not there. Besides, banks have reduced the cost of training local staff for assessment locally. When last have we seen a bank manager who can tell you over the phone that you can have an overdraft of $10 000 unsecured to go for an urgent operation? When last have we seen a bank manager out in the hot sun inspecting a proposed site for a construction project or monitoring the operations of a business?
    Local mortgages with tourism uncertainty have given the banks problems also and exacerbated the profitability of mortgage loans. The banks facilitated mortgage payments for workers in the tourism industry. This means that banks had reduced profit and had to make it up somewhere else – to pay their own staff. Therefore, the banks are seeking profitability in other areas such as commission, credit cards and technology.
    Will not lend
    Unless there are opportunities that the banks consider worthy, they will not lend, and the Central Bank can do nothing about it. If it mandates charges
    that the banks deem unprofitable, they will just leave. Shareholders have a say in this, not only our regulators.
    But we had an opportunity to buy a bank since this Government was elected, as there were banks in difficulties where the price was within our range. Competition is the only way in which to control a bank. I have preached it here ad nauseum.
    Now instructions to the Governor of the Central Bank to micromanage the commercial banks may sound good but will land us in problems. If the banks cannot operate profitably in the eyes of the shareholders, they will leave. We have seen signs of this already. Lately CIBC had made its intentions known by offering to bankroll another bank. It does not seem that permission has been granted to sell the operation in Barbados; however, the branches in other islands may be sold off to various indigenous banks. Thus, we already see the intentions of the foreign banks.
    We may be left in the hands of Republic Bank if the other banks leave. We should recall who were the first banks to reduce the interest rate on savings. We should make note of the limited lending authority that depends on control abroad before we find ourselves with reduced banking operations.
    While I too consider that the charges of commission of commercial banks are high, I think that we need to show the banks there is a way in which profitable banking can be conducted with a different outreach.
    The art of banking consists of very fine margins. In this respect, it cannot be left to the Central Bank to micromanage, only to set broad guidelines. Be warned!
    Our wills and fates do so contrary run That our devices still are overthrown; Our thoughts are ours, their end none of our own.
    – Hamlet, Shakespeare
    Harry Russell is a banker. Email quijote70@gmail.com.

    Source: Nation

    Like

  • The art of banking consists of very fine margins. In this respect, it cannot be left to the Central Bank to micromanage, only to set broad guidelines. Be warned

    Xxxxxx
    In other words Buyers be ware of the new policy set by the Governor of the Central Bank which has given directives to the Bank to reduce fees
    Xxxxx
    When things are done on a slate built on a political agenda
    All must sit back and await the blow back resonating from the naked truth

    Wild Coot Editorial contains much food for thought both for the customer and as well as govt

    Like

  • Do you understand what Russell is saying in his article?

    Like

  • It would be of an interest built on Transparency if the details as to how govt was able to convince the bank to reduce the fees to a guaranteed rate
    Reason being to avoid surprises of the kind which will affect the customer bottom line negatively

    Like

  • DavidNovember 1, 2021 8:12 AM

    Do you understand what Russell is saying in his article?

    Xxxxxx
    No I am illiterate of all.things reason why I can invest my money and get a decent return
    Reason why I can pay off my debts including my home
    Reason why I spend only what I can afford
    Reason why I can sit comfortable and be financial secured
    Next

    Like

  • “ I am illiterate …”

    You said it, not the blogmaster.

    Like

  • DavidNovember 1, 2021 1:13 PM

    “I am illiterate …”

    You said it, not the blogmaster

    No I am illiterate of all.things reason why I can invest my money and get a decent return
    Reason why I can pay off my debts including my home
    Reason why I spend only what I can afford
    Reason why I can sit comfortable and be financial secured
    Next
    Can u your financial portfolio match this illiterate s
    If so spread it across the BU economic table
    Then al can get a fair assement of what it takes to be an illiterate
    BTW on my way to invest Ina vacation home

    Like

  • BTW on my way to invest Ina vacation home…where? In Florida?

    Like

  • Rate This
    FrankNovember 1, 2021 2:02 PM

    BTW on my way to invest Ina vacation home…where? In Florida?

    Xxxxx
    None of yuh god dam business

    Like

  • DavidNovember 1, 2021 2:36 PM

    Steuspe

    Xxxc some of wuna get up in here and talk big and ain’t got toilet paper to wipe wunna backside

    Like

  • The report was the same basically with the date changed. We continue to do poorer as the months slip by.

    It’s the same old story the central bank blames the bank for high cost, the banks blame the central bank for lack of direction and the government plans for a republic.

    Like

  • Barbados facing $1 billion deficit

    By Shawn Cumberbatch
    shawncumberbatch@nationnews.com

    The tourism industry’s collapse and its subsequent slow rebound, have left Government with a near $1 billion financial problem which an increased supply of foreign money is currently solving.
    This was evident in new Central Bank data, which showed that the $958.5 million current account deficit on the balance of payments (BOP) at the end of September was also due to increased imports this year, especially for fuel.
    The current account is the difference between the value of exports of goods and services and the value of imports of goods and services. It is part of the BOP, a mechanism used to monitor financial transactions with the rest of the world.
    Finance expert Professor Justin Robinson, of the University of the West Indies, Cave Hill Campus, said while a current account deficit was not unusual for Barbados, the current gap was wider than normal, and he attributed this to the big fall in inflows from travel.
    Robinson told the Weekend Nation tourism’s rebound was key to reducing the current account deficit.
    “Certainly the slowdown in tourism is showing up in that balance of payments. We usually have a deficit on the current account but it has widened and that’s really record low earnings from tourism really leading to a surge in the current account deficit, which has to be financed by capital flows,” he said.
    “That’s a big number, and if you look at prior years September-on-September it’s by a long way the largest September record if you look at 2017, 2018, 2019, and 2020 and that’s all about tourism being so much lower.”
    Barbados’ overall financial outflows reached $3.46 billion at the end of the third quarter, compared with inflows of $2.5 billion.
    The Central Bank said the decline in the foreign intake from tourism was $375.4 million at the end of September when compared with the same period last year. The decline was $1.3 billion in 2020 versus 2019.
    “The reduced earnings from tourism services weakened the current account performance over the first nine months of the year. In addition, exports of goods fell and imports of goods, which contracted the year before, strengthened between April and September,” Central Bank Governor Cleviston Haynes explained in the bank’s latest economic review.
    “Fuel imports represented approximately 70 per cent of the expansion in total imports, reflecting the rising cost of fuel on the international market.
    “However, despite rising international prices and increased import volumes over the past six months, the increase was contained by lower than normal imports of aviation fuel because of the reduced tourism activity in the earlier months of the year.”
    The Central Bank data showed that Barbados’ foreign inflows from services other than tourism increased by $26.7 million at the end of September, and domestic exports fell by about $13.1 million in the same period.
    On the other hand, Barbados has spent $103.3 million more on services this year, $52.1 million more on fuel and about $2 million more on other merchandise imports.
    With tourism still not at 2019 levels, Government has relied on foreign loans to close the financing gap. The financial portion of the BOP published by
    the Central Bank showed that Barbados received $968.1 million in policy loans last year, and $249.1 million at the end of September. Barbados had also received about $325 million in foreign direct investment at the end of September.
    Fitch Solutions Group Ltd, an affiliate of international credit rating agency Fitch Ratings Inc., flagged Barbados’ current account deficit challenge in a country risk commentary dated October 12, 2021.
    It predicted that “rebounding tourism activity in Barbados in fourth quarter 2021, 2022 will underpin stronger services exports and narrow the current account deficit”.
    “We at Fitch Solutions have revised our 2021 and 2022 current account deficit forecasts to 4.7 per cent of GDP and three per cent, from five per cent and 3.2 per cent previously, as remittance inflows surprised to the upside in the first half of 2021,” the firm said.
    “That said, rising import demand in 2022, combined with slowing remittance inflows, will partially offset the impact of increased services exports.”
    Fitch Solutions noted that for Barbados “the COVID-19 pandemic sharply narrowed the services trade surplus in 2020, leading to a significantly wider current account surplus than the average 4.1 per cent deficit from 2015 to 2019”.
    “Goods import growth of five per cent in 2022 and slowing remittance inflows will limit the narrowing of the current account deficit. We forecast that real GDP growth will reach four per cent in 2022 as the impact of the pandemic fades,” the company predicted.

    Source: Nation

    Like

  • “Remittance inflows have surged in recent quarters as Barbadians working overseas have sent more money home to bolster household incomes, which have fallen due to the recession. Remittance inflows increased 260.2% in 2020 and grew 10.8% y-o-y in H121.” (Fitch)
    Hmmm…260%!!! and a further 10.8% growth in 2021. Looks like dem earning their right to vote?
    Murdah.

    Like

  • PAC ended today like a barking dog pelted with rocks
    All bark but no bite
    The principles upon which the committee was founded to investigate and do diligence failed to meet its intended targets
    Once again a poor rakey Parliament left looking like deers in the headlights
    Hope the lunch break was good after all tax payers money was at work

    Like