“It makes no sense” for the local credit union movement to own a bank, said chief executive officer of the City of Bridgetown (COB) Cooperative Credit Union Steve Belle, who has rejected the idea.
Stressing that his views may not necessarily be those of COB’s board of directors, he told BARBADOS BUSINESS AUTHORITY it was virtually impossible for such an entity to succeed and the idea should therefore not be pursued.
“I heard [former managing director of Butterfield Bank] Mariano Browne make a point that we should’ve bought the Bank of Butterfield.
“The hard fact of life is that the credit union [movement], despite the fact that it has $1.5 billion in assets, has total cash resources of just around $200 million, which is supposed to be for liquidity purposes.
“Now if we took $90 million of that and invested in a bank – which would become long-term funds that you don’t have access to – then you’ve really destroyed the institution. You simply cannot afford it,” he said during an interview at COB’s Broad Street, Bridgetown office.
While it has been argued that setting up a bank would allow credit unions to offer additional services, Belle said the only things cooperatives can’t provide currently are chequeing accounts and foreign exchange services.
“In this environment . . . nobody accepts cheques from you easily. They want your debit card or credit card. Credit unions offer debit card services,” he said, adding that it is very expensive to provide credit card services.
“You can partner, as we have, with an institution to offer credit card services . . . .
“There are models all over the world. You don’t have to go and reinvent the wheel,” he noted.
With regard to foreign exchange transactions, the CEO said only Government and the Central Bank of Barbados were standing in credit unions’ way.
“Between Central Bank and Government, they can decide tomorrow that credit unions will have the option, given certain frameworks, to offer foreign exchange services,” he said.
Belle raised concerns about the proposed bank’s capitalization. “If we take ten per cent of our $200 million in capital and put it into a bank, it’s only $20 million. How many loans can you give with $20 million?
“Typically the Financial Services Act says you can’t lend more than ten per cent of your capital to any one customer.
“That means the maximum loan you can give to anybody would be $2 million,” he said.
The credit union executive went on to say it would be extremely difficult for a credit union bank to compete against those already operating in Barbados.
Furthermore, international banks would not take the entity seriously, he said.
