WHEN THE Barbados National Bank was set up in 1977, it was possibly taking advantage of a last window of opportunity in the banking world. Probably Tom Adams was not conscious of that important occasion. Neither was the Wild Coot nor Sir Harcourt Lewis.
As a matter of fact, we two travelled to the United States and the United Kingdom, and the Wild Coot utilised all his contacts in Canada and the Caribbean in order to make a foothold for correspondent banking services. It was easy and foreign banks welcomed us with open arms, even offered personnel to assist.
When Mr Owen Arthur sold some of the shares and our present Minister of Finance sold the balance to Republic Bank, I wonder if they realised that they were disabling a Barbados bank from ever participating again in the commercial banking business on a worldwide basis. No catalyst among the foreign pigeons.
Incidentally, Mr Arthur also closed the Barbados Development Bank. Attention is drawn to the remarks made last week by Mr Arthur.
Last Sunday morning, I was perusing an article by Louis Parris, a certified compliance professional in anti-money laundering, who is fictionally proposing what he calls a Caribbean Bank for International Trade (CBFIT).
The idea seems to originate from and because of the increasing pressure on Caribbean banks (i) to increase surveillance of the daily banking for customers’ compliance and money laundering scrutiny; and (ii) the evolving reluctance of correspondent banks in the US to continue correspondent relationship with banks in the Caribbean out of fear of being fined in the US when they have little control over the operations of the Caribbean banks seeking relationships. However, this suggestion would not in any way improve the situation.
Inasmuch as most of the banking done in the Caribbean is done by banks whose ownership is foreign, then that compounds the problem and puts pressure on indigenous Caribbean banking operations. One result of this is the new requirement for indigenous banks in the Caribbean to increase capital to an inordinate amount. Recent earnings (losses) will not encourage people to participate in offers to increase capital.
Caribbean countries which say they have been driven to sell economic citizenship should not be boasting about the increase in their gross domestic product but should look at the worldwide deleterious effect on their reputation and the lack of trickle-down in the economy as shown in some banking losses. Recent fines and accusation of malfeasance cannot be helpful.
But what has this got to do with Barbados? We have a situation where our Central Bank is proud to say that it holds $1.1 billion from banks in its coffers – people’s savings. Will banks lend it to certain types of people that may spur the economy? Maybe.
Is there a relationship between this question and the correspondent banking situation? All the more reason why the prospects of ever owning a bank fades into obscurity. All the more why we shall not be able to have any influence over what happens to our savings and its ability to drive the economy. All the more reason why certain actions of the Central Bank are ineffective.
What compounds the problem now is that our foreign exchange earner – tourism – becomes embedded with the increasing popularity of all-inclusive hotels.
The Wild Coot maintains his stance that all-inclusive hotels may increase the “liftage” to Barbados, thus favouring the airlines, but do not increase the foreign exchange earnings. Is the minister aware of this? Even so, we have not moved forward from the tourist arrival figures of 2007; we have decreased the number of long-stay tourists, and this is more than troubling.
Figure that you build or buy a hotel for 100 X dollars. The tourists pay 10 X dollars abroad for their accommodation, meals, entertainment and so on. Of this, one X dollar is remitted to Barbados to pay wages, hotel upkeep and some food items. Unless tourists leave these hotels, no money is circulated outside of those mentioned above. Money paid abroad goes to suppliers and banks abroad. Compound that with the “no tax” treaty with Sandals (and perhaps others) and there is a recipe for disaster.
There is need for a review of the all-inclusive concept. That treaty recently signed for Europe and the US to rationalise tax payments will adversely affect us, not to mention FATCA that now sees American citizens living abroad relinquishing US citizenship in order to conduct simple banking arrangements locally.
• Harry Russell is a banker. Email quijote70@gmail.com
