Over the Rainbow

Submitted by Dr. Grenville Phillips II

Like almost every other Barbadian, I used to be unquestioningly confident about our banking system. But in 2018, Barbados banks voted against depositors’ interests. My bank voted for the Government to confiscate some of my retirement savings, and hold the remainder hostage – not allowing me to access all of it until the year 2033. Therefore, they gave me every reason to distrust them.

This year, Credit Suisse, the Swiss bank that lent us money with unfavourable terms, was failing. Fortunately, their depositors were insured to 100,000 Swiss Francs (BD$225,000). In the UK, the insured amount is 85,000 British pounds (BD$215,000). In Canada, it is CAD$100,000 (BD$150,000). In Europe, it is $100,000 Euros (BD$220,000). In the US, it is US$250,000 (BD$500,000).


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Adrian Loveridge Column – No Effective Consumer Banking Regulation

While there have been a very few notable exceptions, I believe there is a great deal more our local based companies could do to ‘smart partner’ and create joint promotions to help stimulate our tourism economy.

Those exceptions include one of our banks offering cash back on credit card usage which accumulates during the year and eventually paid back to individual’s accounts each November. Recently a leading wine merchant partnered with a popular south coast restaurant on its re-opening and during an entire month offered a small discount with a complimentary glass of sparkling wine to encourage local bookings.

Despite the most recently announced potentially devastating 32 day non-essential travel lockdown from our main market, the United Kingdom, our Government has steadfastly chosen not to stimulate domestic tourism through fiscal incentives or any other clearly obvious measures, leaving many of our restaurants and ancillary tourism services floundering for survival on their own in apparent discarded isolation.

For some of us, the rationale, or lack of it, is almost impossible to understand.

While any reduction in direct taxation, like the lowering or removal of VAT (Value Added Tax) or more recently imposed additional levies have some inevitable miniscule consequences for the administration, what is the alternative?

If the population at-large do not spend their available funds, then clearly other negative factors will kick-in.

These include loss of employment, business failure and inability to collect other statutory obligations like NIS contributions, land taxes and the VAT payable on certain utilities, supplies and services.

Similarly, if private sector suppliers are not replenishing our hospitality sector at optimal levels, then they in turn suffer possible ramifications, or in the very least will suffer a much longer road to recovery.

Simple examples could include a wine-of-the month, where specific vintners support local distributors to proffer a particular product, which in turn gives the consumer an attractive price across our restaurants, while at the same time increase brand awareness. Other possibilities include notable ice cream manufacturers wishing to grow market share could also follow suit.

None of this is rocket science of course and all it takes is a little creativity and medium to long term vision. It also represents a minimal risk for all involved, at negligible actual cost to those participating.

While one particular bank has been mentioned, others should also play their part. Few credit cardholders could possibly ignore the virtually obscene interest rates for late statement payment hovering around the low to mid- twenty plus percent’s, especially unconscionable during our current economic challenges.

Sadly, there appears to be no effective consumer banking regulation since Governments debt default, so once again, the public is expected to pick up the loss of anticipated profits through higher interest rates and increased fees. This, while experiencing a further reduction, or in some cases, an almost total absence of service delivery and when branches are being closed without any consultation and thousands of customers disadvantaged.


Adrian Loveridge Column – In Times to Come

While uncertainty currently rules the day, there are still people out there with vision and the fundamental belief that our tourism industry will not only recover, but flourish in times to come.

For most of us, despite having traded though all the previous challenges including 911, SARS and others, the Covid-19 pandemic has been what can only be described as an earth-shattering wake-up call, severely questioning how we do business in the months or years to come.

Our own position is a classic case in point, having recently sold our small hotel, which hopefully sends a tiny beacon of hope that some return to normality may be in sight. To pretend this prolonged sales process was easy would be grossly misleading. It has taken an extraordinary amount of patience, compromise and understanding on both sides.

Are there lessons to be learnt from our personal experience, that may help others in a similar situation or those considering investment in our tourism sector generally, whether at a micro or macro level?

I believe YES, in a number of ways.

The first stumbling blocks are clearly the banks. Most of us can fully understand their reticence to provide loans and the circumstances that has led to this current entrenched position. It is abundantly obvious the need to ‘shop-around’, as the levels of caution vary enormously, depending on either the policies of the individual bank or key decision making personalities involved.

As an aspiring entrepreneur spanning over five decades, if I had accumulated $10 for every financial official who told me that the banks are not in the risk business, probably retirement could have been achieved sometime ago.

People of my generation saw the changes coming a long time ago.  For me, it was when one of Britain’s largest banks, Barclays, took the decision to retire all their branch managers aged over 50 years. It seemed to defy any obvious logic.
At 50, or close to that age, the individual manager has acquired an invaluable local knowledge of the area his or her branch was located, the business movers and shakers, their track record and probable ability to repay any loans.
It was an early sign that things were never going to be the same again in the financial world and that what we had accepted as true ‘customer service’ had been lost, perhaps forever.

Next is our local legal fraternity. Competition, driven by efficiency, attention to detail, the ability to act in a timely manner and accountability has not yet universally arrived on Barbados, with perhaps a few notable exceptions.

And thirdly, but perhaps the single biggest obstacle to even the most ardent investor are the multitude of Government departments that you are forced to deal with.  Persistent unanswered voice and emails and in the unlikely event that you can finally establish any form of human interaction, repeated run-arounds and lack of co-operation to achieve simple goals, except in the rarest cases.

Conversely, in our personal experience we encountered one or two outstandingly helpful individuals, but sadly not in any position of authority.

While there have been some bureaucratic improvements during the last four years, a great deal more could and has to be done to make Barbados a more investment friendly country, especially when the nation’s economic recovery depends on it.

In our technological world, every tool exists to make this possible, but it is frightening that ‘we’ seem to be incapable of implementing the fiscal environment that other countries take for granted and benefit from accordingly.

The Adrian Loveridge Column – Alternative Banking

With the recently announced major changes taking place across the region, is it time for our banks to radically change the way they currently run their businesses?

What prompted these thoughts was looking at new innovative players in the market, noticeably in the United Kingdom and particularly with Starling Bank. Absolutely no service fees, higher interest on deposits than we can currently dream of and perhaps most appealing of all, no indeterminate queuing in a branch to perform what are often mundane banking transactions.

In a video posted on YouTube under the title ‘They Said It Couldn’t be Done – Starling Bank’ the story of what is now a working reality and seemingly successful outcome, is carefully explained.

Of course, it is not a model for all existing users in the Caribbean, as it is entirely dependent on mobile internet availability, but if just ten percent of current traditional banking customers adopted this way of doing business, just think of the potential effect that could have at individual branch level.

When one of our banks unilaterally decided to replace credit cards with new chip and pin alternatives, no-one could reasonably question that it would result in increased security. But then in our case it took a total of five separate personal visits to the branch, before we were finally in possession of cards that were not frequently declined at various merchants.

In all fairness, the bank involved finally agreed to refund the annual card fee, but that certainly did not make up for the numerous branch visits, enormous waste of time and burning up gallons of fuel at the one of the highest petrol prices in the world, even after the recent 20 cents per litre price reduction.

What I cannot understand is, when my new American Express card arrives by normal mail, I can simply go online or call a toll free number to activate it in seconds.

Like many perhaps, I was horrified to read that Barbadians had a quoted ‘$347 million in credit card debt’ according to media report adding that a mind boggling 129,000 credit cards were in use during 2017.

With unpaid balance interest rates hovering around 22 per cent, it is certainly very easy to see the attraction to our financial institutions, especially when they are only paying 0.01 per cent interest on deposited monies.

It is not difficult to understand our banks are trying hard to mitigate the losses on Government debt default or fiscal ‘haircuts’ and perhaps they see that they can only make up these losses by extracting further fallacious fees through their normal customer base.

However, with the introduction of ever more nebulous service charges, I believe that we are getting very close to that much used saying – ‘the straw that broke the camel’s back’, which will inevitably drive current customers into more affordable alternatives.

The banking industry cannot believe that it is immune from the widely practiced competition which takes place in all other industries and services?

Perhaps they are gambling on the existing status quo, where they enjoy unique trading privileges, not afforded to other possible financial challengers.

Of course, a simple change in legislation could fundamentally transform that.

The Adrian Loveridge Column – Banks No Help!

The larger overseas tourism investors appear to be relatively well taken care of through their own ability to negotiate concessions in various degrees, but I wonder if there is sufficient information available in a one-stop shop format that could tempt the potential smaller entities willing and able to take advantage of current development possibilities?

From our experience thirty years ago purchasing a derelict hotel and then over the years that followed, transforming it into a high occupancy, multi award winning property, it would be silly not to admit that there were far too many challenges, hoops and hurdles put in our way. And you are seriously left to wonder, just how daunting it is and does it present too big a deterrent to the overwhelming majority of those with the capital or wherewithal available.

We did everything by the book, all foreign currency brought in to Barbados was properly registered by the Central Bank and with existing bilateral treaties, ratified by both Government’s involved , you would think there were no concerns and that any initial investment together with an agreed return on that investment, could be easily repatriated.

But due to our current economic crisis, that may well be in doubt, if the current administration does not move swiftly to clearly enunciate that foreign funds, properly documented can in fact be returned to the country of origin without lengthy delays and needless bureaucracy.

Of course there is always an element of risk in any private sector venture and while larger developments are structured with inbuilt due diligence and financial checks in place at every turn, we should not dismiss investment at the smaller level, which is often emotionally driven.

While property prices and perhaps to a lesser degree, land values remain depressed to the point of being currently largely a buyer’s market, is there any way we can as a country turn this to a national advantage, at least in the medium to long term?

There remains exceptional ocean front opportunities with some parcels of land costing less per square foot, when you compare with quality floor covering in many first world countries.

Locally, one of the single largest challenges continues to be the availability of development or investment capital. With our banks, seemingly averse to lending, despite tourism effectively being the only engine of growth, it seems almost incomprehensible that they are not playing a greater part in our economic recovery.

Where do they imagine that they are going to recover their lost profits, through the interest lost on the downwardly renegotiated state bonds and debentures by repurchase agreements, often referred to as haircutting?

Is it even vaguely feasible that it is going to be generated by the ever increasing and introduction of new service fees, residential mortgages, car loans and what many consider as usury credit card interest? Perhaps it is long overdue that our non-banking financial institutions devise other monetary tools to help return our economy to sustained growth.

With banks paying almost negligible interest on deposits and Government defaulting, or perhaps more fairly devaluing, what was previously deemed as guaranteed returns on bonds and debentures it may just be the perfect time to creative alternative financing.

Could models like the British Business Bank (www.british-business-bank.co.uk) which is UK Government owned but independently managed be adapted to work effectively for Barbados?

Falling Interest Rates in ‘Lockstep’ with the Economy

The Central Bank of Barbados announces a further tightening of its monetary policy stance. The policy change will be applied to the Barbados Dollar securities reserve requirement ratio for commercial banks licensed under Part II of the Financial Institutions Act and it will be implemented in two phases.

Effective December 1, 2017, commercial banks will be required to hold 18% of their domestic deposits in stipulated securities. From January 1, 2018, commercial banks will be required to hold 20% of their domestic deposits in stipulated securities.

This is the second increase for the year and complements the fiscal initiatives introduced by the Minister of Finance in his Financial Statement and Budgetary Proposals earlier in the year.

The cash reserve requirement for commercial banks remains unchanged at 5%. The reserve requirements for deposit-taking trust and finance companies, and merchant banks also remain unchanged.

Central Bank news release 2017-10-31

The news that commercial banks have significantly reduced interest rates on deposits has not come as a surprise to the BU household. Banks are reportedly paying any where from .01% to .25% on deposits. Clearly if banks are about creating shareholder value- like any good public commercial enterprise states as an objective- why do Barbadians expect the banks to pay interest on deposits if there is no avenue to lend excess funds?

When the central bank conspired with commercial banks to remove the minimum interest rate in April 2015 as a strategy to create demand for 5.5% yielding government savings bonds and reduce the cost of servicing domestic debt, the decision confirmed to BU, Wild Coot  and a few others that the economy was in free fall read deep dodo. It appears Barbadians are not as bullish in buying savings bonds and credit unions, insurance companies and other non banking institutions have benefited from deposit placements.

One of the downsides to a protracted low interest rate climate is the impact  on institutional investors. This is important in the Barbados context because of the limited options available to invest AND the role commercial banks play in the domestic market to satisfy the risk appetite of fund managers. It is no secret that the Barbados investment climate lacks sophistication and can be characterized as a closed market. Although credit unions are promoted as a viable option in the local market, the current legislative framework does not position the movement as a significant player, this is reflected in its asset penetration compared to the banking sector.

Earlier this year when the central bank increase the % of deposits commercial banks are statutorily required to hold to 20%, again Wild Coot, BU and a few others wondered about the response from the banks. Minister Chris Sinckler is on record confirming that the commercial banks have significantly reduced  takeup of government securities ostensibly because of sovereign risk exposure linked to 20+ credit rating downgrades. By ‘forcing’ banks to hold more funds on reserve there was bound to be a price to pay for the extra-risk being carried by the banks. A reminder of Newton’s third law – for every action, there is an equal and opposite reaction.

Where do we go from here?

The market is in a hold position until the next general election is called. No significant decision will be taken by the market to inject significant investment whether local or foreign. Investment from Maloney/Bjerkham is the one exception given the fact they have replaced Leroy Parris and CLICO has the key campaign financier of the incumbent DLP government.

The possibility exist for banks to further signal discomfort to the market by introducing a negative interest policy.

Canadian Banks Looking Elsewhere to Sustain Profits|Can the Credit Unions Do the Job?

The local credit union has 150,000+ members.

Two articles in the Canadian Globe and Mail newspaper caught the eye of those who are not fixated on navel gazing on the shitty affair ‘unfurling’ on the South Coast.  The obvious question is what does it mean? Clearly CIBC- and we include the other Canadian banks operating in Barbados- are concerned about the current and future state of regional economies and have taken decisions to mitigate risk driven by concerns by shareholders whose concern is always to create share value and to satisfy the forecast of the financial analysts.

Some suggest there are indigenous financial intuitions that can fill the void if the Canadian banks were to withdraw from the Caribbean, the credit union unions come quickly to mind. Some question if the credit union movement in Barbados is ready to operate at the level required to deliver a best in class service in a global market fraught with regulation. We are not questioning if the cooperative model can deliver financial services to participants, a look at the balance sheets of the leading credit unions in Barbados suggest there is work to be done to ensure key acid ratios are met.

The Canadian Globe and Mail articles highlight the level of debt which Barbados has accumulated  and the volatility of oil price that has negatively impacted Trinidad’s economy. These are two of the key markets in the English speaking Caribbean that have undergirded the stability of the regional economy in the post oil-crisis period of the 70s. The trivializing of credit rating downgrades and an inability by regional governments to address structural fault lines in our economies that are known by the policymakers must not instil confidence in the boardrooms in Toronto and elsewhere.

The reality is that replacing international institutions with indigenous ones will not address the underlying factors at the root of failing and poorly performing regional economies. The lack of interest by Canadian financial intuitions is symptomatic of a lack of leadership with the result, conspicuous consumption behaviour driven mainly by the globalization construct. Just look at Barbados to confirm the ease with which we- through our representative the government and private sector- have sold our best companies to non Bajan interest. What assets and symbols do we have left to define who we are as a people? How will our children define success in the context of nurturing Bajan esprit de corps?

The BU household has written voluminously for 10 years about the need to remove the weeds from the lawn. The weeds have sprouted to bush. ALL of the regional economies are now heavily indebted nations with decaying infrastructure and limited fiscal space to drive development. Our politicians who ‘lead’ in the model of government we practice continue to rollout policy directives that pander to feathering popularity and satisfying those behind the curtains with the money to finance political campaigns. The people can be characterized as ‘sheep’ in the process.

History is the teacher to portend how this will play out- Crash, Burn, Rise!

Here are the Canadian Globe and Mail articles.

  • CIBC aims to double share of profits from U.S. operations
  • CIBC mulls offering Caribbean subsidiary on U.S. stock markets Subscriber content

The footnote to this submission is that in Barbados we pride ourselves on being an educated people yet we have demonstrated a lack of ability to manage home grown institutions and to leverage the investment in education to separate Barbados from the rest. Why bother to invest in education if this is the result?

De-Risking: The ‘Perfect Hurricane’ Threatening Caribbean IFCs

by caribbeantradelaw

My latest publication is an article entitled “De-Risking: The ‘Perfect Hurricane’ Threatening Caribbean IFCs” in the forthcoming IFC Review 2017. It discusses the implications of the de-risking phenomenon for Caribbean international financial centres (IFCs) and some of the steps they have been taking to fight it. An excerpt from the article is as follows: […]

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Dr. Mascoll Exposes the Central Bank

Dr. Clyde Mascoll

Dr. Clyde Mascoll

BU read Dr. Clyde Mascoll’s weekly column with great interest. The fact that it has not garnered any serious critique on the talk shows and on social media says a lot about our level of discernment.  An advantage over the traditional media is that we (social media) tell it like it is.

Last week the BLP member of parliament for St.James North Edmund Hinkson made the attention grabbing request for Minister Denis Lowe to repay the state the financial loss suffered as a result of his error in judgement concerning the NCC workers matter. To add to Hinkson’s call the BU household calls on the commercial banks of Barbados to redistribute the profit to customers collected as a result of the Governor of the Central Bank Delisle Worrell removal of the minimum savings rate commercials banks had to pay their customers.

Read Mascoll’s column to understand how one of the biggest scams in our post Independence history is being perpetrated on Barbadians. Now go and buy some savings bonds!

WHAT MATTERS MOST: The interest rate gap


Added 20 October 2016


 THE LATE PROFESSOR Roland Craigwell once told me that “a man who has time to read is a dangerous man”. It was his way of emphasising the need to read almost everything in an area of study if you want to present your case.

Those words never stopped resonating with me. He reinforced the need to never go public with anything on the economy, unless I have verified the evidence. In this vein, I read all that I can on issues in the Barbados economy. This requires reading material from the distant past.

There are two issues that engaged me over the last weekend: (1) the increasing gap between loan rates and deposit rates, and (2) the ongoing printing of money that some still want to deny.

In its most recent economic press release, it was noted that the financing needs of the Government had widened the gap between the United States and Barbadian treasury bill rates.

The Central Bank attempted to narrow the gap by intervening in the treasury bill auction after the commercial banks were allowed to set the minimum deposit rate. The concern now is “since April 2015, commercial banks have lowered their deposit rates more substantially than their loan rates”.

First of all, why was the Central Bank trying to narrow the gap between the two rates? There is no good economic reason why the local treasury bill rate should mimic that of the United States.

Why should the widening interest rate spread surprise anyone? This caused me to read material from the past. Worrell (1997) identified powerful reasons why the Central Bank should lead on changes in interest rates. He suggested that “it is the most fully informed, being the repository of a wealth of data, producing the most comprehensive assessment of the economy and maintaining constant economic oversight”.

In analysing interest rate spreads in the past, he noted in periods of Central Bank regulation, they widened. He concluded that the Central Bank “was never able to persuade the banks to agree on narrower spreads and was wisely never willing to risk evasion by defying the banks’ wishes”. So what has changed to expect the banks to act differently now?

On the second issue, Worrell (1997) wrote that “the Central Bank of Barbados was concerned from its inception with the need to avoid money creation [printing of money] through lending to Government”. He also stated “there is no problem of excessive money if banks are happy to leave excess cash with the Central Bank at no interest rate, as they have for extended periods in countries that have stable exchange rates”.

There is evidence that the banks have been leaving excess cash with the Central Bank, which it is using to help finance Government spending. For example, Government needed $273 million in domestic financing between April and June. It received $92 million from the National Insurance Scheme and the private sector not including commercial banks. In fact, the banks reduced their lending to Government by $120 million over the quarter.

As a result, the Central Bank had to provide $301 million in financing to the Government. It did so by using the commercial banks’ additional deposits with the Central Bank of $198 million for the same period April to June. This means that the Central Bank had to print money to the tune of $103 million.

Why did the commercial banks reduce their lending to Government but still put additional deposits at the Central Bank? In the face of excess cash, there is still a problem with financing Government spending from domestic sources.

Why is the Central Bank holding $775 million in treasury bills and $592 million in debentures? The Central Bank is using the commercial banks’ deposits and the printing of money to purchase Government securities. Worrell (1997) also found that “in circumstances where banks were not actively seeking to employ excess cash, the Central Bank has never been able to effect a sale of bills by offering a more attractive return on them”.

In the current circumstances, the Central Bank has become too big a player in the treasury bill market and therefore the banks are prepared to take advantage of the low deposit rates. This is done by widening the spread, while the loan rates are slightly more attractive.

The Central Bank has tried to use monetary policy to accommodate fiscal madness. There is scope for monetary policy to support fiscal adjustment that is well thought out. It cannot correct fiscal adjustment that is inappropriate and insufficient.

• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: clyde_mascoll@hotmail.com

Towards Financial Imperialism – Barbados and the Systemic Fragility of the Global Banking System

Submitted by Pachamama

deeutsche-bankThe current precarious condition of Deutsche Bank is but another sign to the Central Bank of Barbados (CBoB) that more trouble is coming down the pike. Deutsche’s share price has declined by over 50% in recent months. Cash on hand has declined to around 12%. Lehmann held about 7% when it failed. Income flows have declined precipitously. While bank officials, its CEO John Ryan, are claiming that no help would be needed from the Bundesbank or the ECB, that market forces are incorrect, that short-sellers are targeting Deutsche, and generally avoiding the truth, the corporate sharks smell blood in the water, and are circling.

Those sharks are a mixture of shadow banks, hedge funds, large corporations acting as banks, and deposit taking institutions. It could be similar to the Bear Stearns failure where Chase/Citi Bank refused to extend additional short term loans and opted to allow its failure so that a 10-billion-dollar asset, a building in Manhattan, for example, could be acquired for only 2 billion dollars. These are the benefits when a whale dies in shark infested waters.

The Lehmann failure of 2008 is a similar event. Then, the Federal Reserve underestimated the impact of its refusal to act as lender of last resort and extend additional short term loans to that financial house, after Lehmann was clearly on hard times. That singular act led to a cascading of the house of cards, which the global banking system has been. Now it is much larger than it was in 2008 and even more susceptible to a contagion which will more engulf the whole economy.

And this is just one of the problem we face for there are other similar and more deleterious events looming. We have the possibility of a global bond crisis. Certainly, owners of capital, pension funds and so on are not doing well in a climate of zero-interests rates. The private banks, like the Federal Reserve or the ECB and the CBoB, which takes its orders for the international banking cartel, are as clueless as is Delisle Worrell.

The fragility of one of Germany’s leading banks is replicated in many other European countries, and Deutsche Banks is not the only German bank teetering under the weight of bad debts, series of QE, zero interest rates regimes and disappearing operating income. Large banks in Italy, Spain are facing similar difficulties.

In Italy a significant number of the 35000 bank branches were closed or will be closing. Monte Del Raschi Bank is seeking help from JP Morgan for a bail-out and or a bail-in. JP Morgan, as shark, itself, as rent seeker, through the commissions and fees for its own survival. It lacks a plan to properly reorganize institutions like this Italian bank. We have a predation of the banks by banks.

What some observers fail to see is the extent to which banking contagion could quickly spread from depositing taking institutions to mutual funds to shadow banks to hedge funds to pension funds, to the real economy. They all depend on each other, hold paper issued by each other, borrow from each other, turn to the same ultimate source/s as last resort.

In the case of Barbados, the country continues to suffer since the implosion of the financial system in 2008. And before that by decades of ill-advised policies of central government. Local policymakers still appear to be unable to fashion a response to spur ‘growth’ within a context of neo-liberal, Washington Consensus policies. Of course for over a decade before there was a deep immersion into extremes of borrowing, easy money – debt to repay debt.

In current circumstances a lot of easy money is still coming into the system, just not for Barbados. Whether through FDI, loans or other transfers. But less than 25% of the money created is now going into the real economy. Most of the rest goes into the financial economy. It is not readily available for lending to countries like Barbados. For the banks, of all kinds, can create higher value by funding share buy-backs, backing corporate bonds and funding electronic trading schemes. This is casino capitalism on steroids.

A few years ago a couple of Caribbean prime ministers – Barbados and St. Lucia – admitted as much. The nearest to zero-interest-rate loans available to Barbados is when the CB prints money. Even then, there are imposed limits. The Fed, the ECB and the Bank of Japan have no known limits and are therefore in the position to drive the massive Ponzi schemes until the end of time, which may not be too far away. Our sense is that Barbados and other Caribbean countries are up against some hard limitations. For institutions like the IMF and the World Bank get their moneys from the same pool as the banks.

The overt financial imperialism which we have entered cannot be critically spoken of publicly by policymakers in Bridgetown. Theirs is to continue with a Keynesian discourse which has no relevance to current problems, circumstances. Maybe they are playing for time, hoping for a miracle. Well, the one who was said to be able to do such did not even exist in the first place. There will be no miracles as performed by Michel Angelo’s cousin.

The Caribbean economies and cultures are heading off a cliff and we can’t even have a discourse to outline a range of possibilities for us to at least develop responses. Even if we are wrong and the hurricane does not come, the clear thinking which will be necessary is, in and of itself, be developmental, for us!

At every time in the past where we’ve had fiat type currencies we have sentence ourselves to sudden destruction. In circumstances where the orders of magnitude are greater by many, many times and while we can see in with our very eyes policymakers ‘fumbling’ in the dark, where the harvest of tulips is failing, where artificial wealth creation bears no relationship to real wealth, it is not time for a popular intervention?

Caribbean Region Most Affected by Loss in Correspondent Banking Relationships…

by caribbeantradelaw

correspondentbankingThe withdrawal by international banks of correspondent banking relationships with Caribbean-based banks and money transfer businesses has once again been making headlines in the Caribbean. This week Antigua & Barbuda’s Prime Minister raised the issue at the Fourth Summit of the Community of Latin American and Caribbean States (CELAC), terming it a “clear and present danger”. Last year mere weeks after Prime Minister Barrow of Belize raised the issue in his address at the Summit of the Americas in Panama, the Bank of America severed ties with Belize Bank, the largest bank in Belize.

Correspondent banking relationships are Caribbean countries’ umbilical cord to the international financial system. They allow for the conduct of international trade and investment by facilitating crossborder payments, as well as the receipt and sending of remittances through international wire transfers. At the microlevel these relationships help local exporters to receive payments for their goods and services, local businesses to pay for imports, and poor families to receive remittances for their day to day survival. As I mentioned in an earlier article, the loss of correspondent banking relationships could spell disaster for the small, open economies of the region which are highly dependent on trade and investment flows, with implications for poverty reduction and eradication.

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CIBC FirstCaribbean Communication Sets Off Public Backlash

CIBC FirstCaribbean News Release

CIBC FirstCaribbean News Release(clarification)

The the national discussion of late has been about Canadian banks and C&W huffing FLOW. Soon it will be about the Solid Waste Tax as the year end deadline approaches. From one issue to the next, just like a rollercoaster.

BU is not surprised at the turn of of events. It is an open secret the Barbadian is a passive consumer. Why pick on banks when in every sector of the market the sellers and regulators tag team to pummel Barbadian consumers into submission.

When the global financial market collapsed in 2007/8, the government and regulator; the Central Bank of Barbados, referred to the banking sector as being resilient because of the heavy concentration of Canadian banks. Barbados benefited from the Canadian presence in the market we were told while other markets had to endure a volatile period of consolidation.

Again it is an open secret that Canadian interest make up more than 75% of the onshore and offshore banking system. Under the previous government we sold the Barbados National Bank (BNB), one of many local strategic assets handed to foreign interest for pieces of silver to pay for our conspicuous consumption habit.   We cannot have our cake and eat it too. Barbados needs the foreign commercial banks now more than ever until our inept leadership come up with a medium term plan to wean our dependence. And until Barbadians see the value in supporting our own.

One of the economic pillars of the Barbados economy is international business. The offshore sector is heavily concentrated in Canadian assets. One of the reasons banks expand overseas is to serve the foreign operations of domestic companies. A good example is First Citizens Bank and Republic Bank and the proliferation of Trinidad business acquisitions in Barbados in the last decade. If the regulators struggle to regulate less influential entities in Barbados does anyone believe they have a ghost of a chance with the all powerful Canadian banks?

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The Imperialism of the US Dollar and the Global Wars of the Banking Titans

Submitted by Pachamama

BRICS initiative to establish a US$100 billion multilateral bank to rival the World Bank has recently been a subject for discussions between Presidents Putin and Rosseff in Brazil and is sending shockwaves throughout the international financial community

BRICS initiative to establish a US$100 billion multilateral bank… is sending shockwaves throughout the international financial community”

After World War Two virtually all national economies were in ruins, except the United States, of course. These circumstances gave rise to the United States dollar as the medium of exchange between countries. In this process countries were forced to exchange their national currencies for US dollars to settle amounts owned to foreigners. And foreign countries were force to do the same to pay for goods and services. In both cases fees were charged, by predominately American banks, making the transactions more expensive than if national currencies or a basket of currencies could have been used.

This structure gave rise to United States banks as the leading financial institutions in the global economy. In addition, the post Bretton Woods architecture made the US dollar the reserve currency of the world. By 1971 the pretense of a ‘gold standard’ was removed as we entered the age of the supreme fiat currency. This monopoly by the major United States banks was later seen as a source of stupendous political power as the USA then sought to impose sanctions and USA law on world countries and other entities when it perceived that its interests were at stake. In recent times an overarching global grab for power has seen the USA imposing penalties on European banks for alleged violations of US law, for actions occurring outside of US territories. It’s a staggering development that although these competitor institutions never did anything in contravention of their national laws, that the USA could have the audacity to have determined that its laws had been broken. For the laws of Empire must have precedence over those of its colonies.

At the micro level, if a ‘shoemaker man’ from around dey by de bus stand went to Trinidad & Tobago for carnival and sent back 10 US dollars to his son, both the Trinidad and Tobago authorities and the Barbados authorities would have to inform the Treasury Department of the USA about that transaction.

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Is the Caribbean Canadian Dominated Financial System Headed for COLLAPSE ?

Submitted by M.R.Thompson
CIBC announced in mid-May that it would take a $420 million goodwill impairment charge related to its Caribbean operation.  CANADIAN PRESS FILE PHOTO

It is generally recognized that the majority of the Caribbean Financial System is dominated by Large Canadian Banks. As the financial economy of the Caribbean slips every deeper into recession and the banking loses keep piling up what will be the reaction of the major Canadian Banks. They basically have three (3) choices: 1) stay in the Caribbean and make adjustments to ride out the LOSES, 2) Sell their Caribbean assets, 3) Write off their Caribbean Loses and abandon the market totally.

In all three scenarios the Caribbean Financial System is in for a rough ride or total collapse.

A recent news article outlined the situation form CIBC’s point of view…. Canadian banks get burned in the Caribbean.

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Some RBC Employees Feeling the Squeeze

Chief executive, Caribbean Banking at RBC, Suresh Sookoo in an interview on the sixth floor of his St Clair, Port of Spain office last week. —Photo: Mark Bassant

Chief executive, Caribbean Banking at RBC, Suresh Sookoo in an interview on the sixth floor of his St Clair, Port of Spain office last week. —Photo: Mark Bassant

The media across the Caribbean has been highlighting the matter of whether Royal Bank/RBTT employees are being marginalized. According to our source employees are disappointed about the deafening silence of the local media – see Trinidad Express article.  Our source opines that in local banking circles RBC has become a laughing stock, the merger has done nothing except hurled the bank to the doldrums.

BU is being told personal lending has all but dried as a result of increasing delinquency. It is alleged the lenders at the bank are being told to move away from the mass market and to concentrate on the professionals groups like doctors, lawyers for example.

Workers continue to await the outcome of union and management of the bank but it appears to be a ‘Mexican Standoff’.  During the stalled talks employees are being severed, ‘final warning’ letters are given to those especially in  lending who have gotten a ‘low performance’ appraisal for the last two years, with the ultimate action being termination if improvement is not shown.

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