Sunday, April 21, 2024

WILD COOT: To seek a niche

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I HAVE BEEN FOLLOWING the articles subscribed by veteran banker Ronald Harford, chairman of Republic Bank Ltd, reported for us in the Barbados Business Authority.

The articles offer a frank insight into the situation in the Caribbean banks as they face the perilous economic debt obligations of the region. He suggests that the model is broken – that is to say, we now have to take fresh guard in order to face the future.

Coming from the chairman of a bank that held 41.1 of the total asset base per cent of the Caribbean banking industry as at September 2013, and who was addressing the Caribbean Bankers’ Association, we need to sit up and take note.

It is absolute foolishness and downward disrespect to say that the continuing downgrades are not to be taken seriously. It is a myth perpetuated by neophytes. We are not even to debate by opening Barbados’ present position to a debate in Parliament, a debate that is already taking place in the private sector.

Suggestions are that the private sector must lead the way now that Government, whose model is broken, must loosen its stranglehold of taxation and non-refunding of taxes as well as passing necessary legislation so as to set the framework for recovery.

Mr Harford reiterates a point that the Wild Coot has been drawing to the attention of the powers that be. He said: “Why can’t the Caribbean focus on niche market tourism and IQ intensive industries?”

This is particularly applicable to Barbados. We should be tired of only touting sea and sand, especially as we seem reluctant to accept that our service is not always the welcoming kind, and new and other ways of doing things are possible without the insistence of “we don’t do it so in Barbados” – something that the Wild Coot encountered on returning to the island in 1977.

On reading the third article published by Mr Harford, I found myself agreeing with his cogent points. All the while he is harping on the high quality of our education system and our health opportunities. While bemoaning certain disruptive innovations, he is advising that we take advantage of the new opportunities in world technology advances.

But there is one point that I am not quite in agreement with him. To quote: “If we revise the interest rate regime and, in particular, eliminate minimum deposit rate that exists in some jurisdictions, will not some of the shackles that bind the financial sector be broken?” Well, Trinidad bankers have been hollering for a long time to abandon the minimum interest on deposits in Barbados. I disagree. A banker is a serious animal. It was bankers at the root of the world crisis. If we take such a step, bankers are not known to have a conscience. I predict that they would abide by our maxim, ‘maximise profit’.

This has already introduced negative interest rates. This means that people now pay to keep their money in the bank – money that the banks are at liberty to lend out at a profit. My bank is guilty of this practice on my small savings account. Indeed, I was not aware of a $10 monthly charge until a small balance was reached when the bank sent a statement. Banks do not send out statements on savings accounts, so why a statement? If the Central Bank is not protecting us Barbadians from these practices, who are we to turn to? I am asking the bank to give back my money.

The root of the problem in Barbados is the interest rate. This will continue to haunt us even if we have a balanced budget. In order to grow with new projects we need to borrow. The downgrades make us borrow at a high interest rate compounded by further downgrades. We have little leeway for borrowing internally as we are over-borrowed. Witness the situation with the National Insurance Scheme and the pauperised Central Bank, already supporting the Government with over $600 million in mostly printed money.

Government cannot help the banks because interest rates on treasury bills are low. Any uptick in profitability boasted by any bank comes on the back of unconscionable fees and high service charges. Lending is still restricted with high bad debts.

Harry Russell is a banker. Email quijote70@gmail.com

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