Monday, April 22, 2024

WILD COOT: BNB sale haunts us


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A CATASTROPHIC SALE with long-term consequences.

When our Minister of Finance, in his anxiety to raise money, sold the shares of Barbados National Bank (BNB) to Republic Bank, it was the biggest financial, social and political mistake made in Barbados.

At least when Owen Arthur sold shares in the bank there were sufficient remaining in the account of the National Insurance Scheme’s (NIS) name to allow Barbados to have a say in the direction and management of the bank. Perhaps the minister, not being a banker, did not appreciate the wide import of a bank ownership; maybe it was the harbinger of the genesis of further decisions.

Part of the reason why the head of Republic Bank was crowing lately about the profitability of his bank and the improving prospects of the Barbados economy has to do with the present structure of his bank that follows from BNB divesting of total ownership.

The large credit accounts of NIS and other Government accounts once provided to BNB give free and almost free (at the most 1 per cent) credit balances while credit cards provide at least 23 per cent for interest. That is the first loss that has accrued from the sale of shares.

Secondly, there is a definite bias in the bank towards Barbadian workers, especially at the higher level, as you would expect because of the ownership now in Trinidad.

Thirdly there is the loss of present opportunity for another Barbados bank. In today’s market it would be very difficult to start a new bank, even if owned by the Barbados Government. Small countries today do not have much credit when a local bank is searching for a correspondent bank. Correspondent banks assess the risk for money laundering and prefer not to be involved.

Then there is the social pride. What is the gain to stand up and display the Broken Trident and not say also that we have a stake in holders of our money? (The credit unions are not holders, as they have to place their money in a bank.) In a national crisis, if money is needed urgently, our only recourse is to go to the Central Bank and ask it to raise bonds or print money or break the law (go over the Central Bank limit).

Most important of all, not having the BNB among the banks means that Barbados has lost a catalyst for change of behaviour especially with the Bankers Association. It has lost a cat among the foreign pigeons.

Therefore the Wild Coot would say that the sale of the National Insurance shares was the worse decision in Barbados financial history. Perhaps even now our minister does not understand the import or the export of the action. The Wild Coot would take with a pinch of salt the reported interpretation of Republic Bank’s results as a mark of expected progress in our march to a balanced economy.

In any case the Wild Coot has a problem with banking in Barbados today. Banking is supposed to be the engine of the economy. We put something in and we get something out. Today, we put something in and what we put in is used and abused in the sole interest of the bottom line. Today, there is little use of the bill of exchange – the essence of banking and the motor for entrepreneurial development. If the banks do not lend because they make enough money from credit cards and low interest rates on savings, then the economy suffers.

We are paying for the BNB blunder since we have no say in how banking is being structured. All the forces operating in banking are operating in the interest of foreign dictates and the once common-sense approach of Barbados is missing. If I were an entrepreneur and had no security but I wanted to manufacture Epsom salts and sell to St Lucia where the buyer could not pay for the shipment until he sold it, I would have a problem that an old banker would have easily solved. In all of this the Central Bank is useless. It is so consumed by its desire to support Government that it has neglected its raison d’être – to regulate the banks in the prime interest of Barbados and Barbadians. “We do not want to give the impression that we are interfering in the market,” it says.

My advice is to go and ask Lee Kuan Yew. Ask Charon the boatman to give you a free passage (or use a one cent piece instead of an oble) to the other world and get an audience.

The Wild Coot made a good decision on December 21, 1979 to separate himself from these things. He did not know at the time that worse was to come.

• Harry Russell is a banker. Email


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