In the 1970s and 1980s, it was fashionable for governments in the Caribbean to establish their own commercial bank.
According to late Jamaican Prime Minister Michael Manley, governments wanted to be part of the “commanding heights”.
As a point of reference, let us look at what has happened in Barbados where Prime Minister Tom Adams was instrumental in giving life to the Barbados National Bank (BNB).
Banks are a vital part of the financial landscape of a country and play an essential role in catering to the needs of the people. A country’s budget can incorporate aspects of the monetary policy of the country that may not be part of the way that the private commercial banks want to do business.
For example, when the BNB was first established, Government allowed it to enable its savers with a certain amount in their savings account to have their savings interest free of taxes regardless of their tax status.
This gave a distinct advantage to our own commercial bank as against foreign banks. It not only helped the nascent bank to get of the ground, but moreso, encouraged the savings mentality in the people, since savings is at the very core of economic prosperity of a country.
Under Sir Courtney Blackman, the BNB’s interest rate influenced the maintaining of a higher saving rate at the time that the foreign commercial banks were clamouring for a lowering of savings interest rates.
According to Sir Courtney: “If the BNB could pay five per cent, so can the other banks.”
When people with chattel houses were left to flounder, BNB was instrumental in having the legal luminaries design a chattel mortgage incorporating the chattel house. Its success led other commercial banks to get in on the act rather than lose good business. It was felt that chattel houses predominated the country and so people who lived in them were entitled to make use of the chattel as security for a loan.
There are other advantageous aspects to a government having its own commercial bank where it can influence the banking direction.
The negative side of a government owning a commercial bank has to do with a sense of responsibility. Professional management must be left in place. This does not mean that the broad goals of the government are ignored but rather they must be left to the professionals to assess and implement.
We have seen how unaccepted workings has been the death of the [Barbados] Development Bank (BDB) and we have seen how they have stymied the Barbados National Bank. One suspects that this has led to the present offloading of the bank and the argument that Government can gain more in dividends than under local management.
The financial health of the Government may also play a part in limiting the expansion of a bank. Access to huge resources of a foreign bank can facilitate the playing of a part in financing major development in a country.
One only has to look at the present drama going on with Four Seasons.
Government’s best entry into the arena now is through the National Insurance Scheme – a bone of contention. With a national bank involved, the Almond position could be temporally suspended (thus saving rooms and jobs) pending an issue of bonds by Government to place the outstanding accumulated debt and future required debt over a longer and more manageable period.
See where people’s savings come in handy!
I have never bought the argument that international agencies’ opinion could not be refuted when we considered closing the BDB and selling the shares of the BNB.
Perhaps it was the general “laissez faire” of our people.
