“WILD COOT,” said a man meeting me in the fish market, “can you believe that my bank just sent me a letter advising me that it will be charging 0.5 per cent on each deposit that I make. Surely that is not fair.”
“Don’t talk to me,” was my reply. “Tomorrow it will be one per cent. Talk to the people at the Central Bank. Ask them to see that customers get a fair shake from commercial banks.” The banks are retaliating against the Central Bank’s raid on their savings, offering 7.5 per cent on bonds. So the banks are doing this to the customers while the Central Bank appears not to pay any heed. I have always said that savings are the bedrock of an economy. Having to pay interest on savings, the banks are obliged to lend so as to make profit. By transferring the savings through bonds to the Government, the savings then go to pay wages, and in our case does little for the private sector (hence no taxes for Government).
That printing business is a contradiction. Printed Barbadian dollars go to the Government which pays dollars to Barbadians that facilitate imports where 40 cents of each dollar impacts on the foreign exchange. In our case a merry-go-round. The Central Bank is praising the model. Give me a break.
We need to be careful of what investments we attract. Investments that mainly have no residual foreign currency cannot be good for Barbados. For example, the Sandals giveaway that has spawned a “bariffle” of contradictions of the levelness of the playing field.
“We could never pay for the advertisement that Sandals brings to Barbados,” may be the claim. Yes, but Barbados has been known around the world as a paradise already; that is why Sandals itself is here.
Small hotels that need to pay taxes and whose income return to Barbados in foreign currency that may be placed to the benefit of the country cannot be happy. It may already be bringing about negative consequences.
After spending over 56 years, come this October, in the noble profession, I have come to the realisation that the commercial banker is a unique breed. For example, why are banks in the face of our most difficult economic recession declaring super profits? Why are customers complaining? The simple answer is that the Central Bank has handed the banks a perfect wicket on which to bat first and has no Sir Wes Hall or Charlie Griffith.
Look at it this way. While the private sector is struggling and the citizens are finding it hard to make ends meet, the Central Bank has reduced the interest rate to next to nothing. Therefore, one of the commercial banker’s substantial areas of expense is removed (without dealing with a corollary area of income). Thus, the commercial bank does not have to fight for profit when it makes 8/10 per cent on loans. Carte blanche is given for credit cards, thus the banker does not have to fight for profit at 28 per cent. The banker initiates spurious charges and the Central Bank does not intervene, thus the commercial banker does not have to fight for profit. Small wonder then that commercial banking is a profitable enterprise in the face of our downturn.
Oh, the latest trend is to charge customers for keeping their savings account and for the depositing of money in their current account. In my opinion, the continuing policies and the latest intervention of the Central Bank are the cause of our woes. When you allow a banker an inch, he usually takes nine inches.
“So what do we do now that we are in this stranna, Wild Coot? You know that if the Central Bank had not intervened and supported the Government, all like now hundreds more would be laid off and sent home; hundreds would not be paid National Insurance entitlement and there would probably be riots in Barbados.” No, I do not know that, but I know that the measures now pursued will give the same results as the economy contracts further. Maybe there will be a further drop in foreign exchange as people take evasive measures. We are prolonging the agony until 2018 when those in charge who are making the decisions may demit office.
Something is bothering me. If the Barbados Light & Power (BL&P) eventually produces enough solar photovoltaic energy to satisfy its need, what will happen to those who now sell energy to the BL&P system at 41.6 cents per kilowatt (which somebody said should be 50 cents)? Will it mean that those people who have borrowed for their private investment suck salt? Will they have to borrow more to achieve self-sufficiency for electricity, as no money may be forthcoming from the BL&P? Will the BL&P be then able to satisfy customers at such an economic rate as to make private investment in solar panels at 15 degrees (Town Planning should explain the rationale) uneconomic?
• Harry Russell is a banker. Email: quijote70@gmail.