President of the Barbados Bankers Association (BBA), Donna Wellington doesn’t believe the charge levelled that banks are “tight fisted”.
The head of the country’s banking fraternity is in complete disagreement with church leader Bishop Dr Marlon Husbands of the Sanctuary Empowerment Centre, who last month lambasted the financial sector, accusing commercial banks of clinging to their money and not even being willing to lend to churches in Barbados.
The bishop said there were certain banks which had determined they would not provide loans to churches, and some financial institutions which were shunning the church, details of which were carried in a recent Daily Nation newspaper article.
“The remarks by the bishop were unfortunate. A bank’s first and foremost responsibility is to its depositors. We are stewards of those funds and depositors depend on us to have their money when they request it. Banks make money by lending. Banks take in money from depositors for safe keeping and pay those depositors interest in line with the demand and supply of funds available,” she said.
Wellington, the managing director of CIBC First Caribbean International Bank in Barbados and the Eastern Caribbean, said the mandate of banks was clear. “We are in business to lend money, and we are not the only ones,” she stressed.
The bank executive did note, however, that all banks determine a level of risk before lending out their cash. “All financial institutions also have to consider their risk appetites. Risk appetite is a function of several factors, be they macro-economic or considerations around the sources of repayment, financial position, or the portfolio of the institution and past lending experiences, be they positive or negative with a borrower type.”
She noted that generally, risk appetites vary per institution or institution type. Commercial banks for example are highly regulated and aiming for delinquency metrics that are within international standards. Other financial institutions are not measured by the commercial banking industry standards, but banks have to be conservative because of the stringent regulatory nature and impact of loss on the society given the size of their portfolios.”
The BBA boss said when a lending institution chooses not to lend it is not a light decision. “That is what we are in business to do, so it is likely because risk factors presented are not within their appetite, but that does not mean that financing is not available. The financial industry has several players, all with a niche market and a lending base, and in Barbados there are several alternative options to choose from as they are all represented,” she said.
According to Wellington, there are also entities seeking funding that require other types of funding, including equity or venture capital given the type of entity and the nature of their funding.
The BBA president also confirmed many banks and financial institutions are now offering unsecured loans, but believes that is business as usual.
“The unsecured loan offering is not new. Loans are for a wide variety of purposes generally under the banner of personal expenses. These loans are offered by some banks, credit unions, as well as brick and mortar and digital finance companies.”
She said the response to the offers depend on the appetite for higher cost of the borrowing, as these loans, given their unsecured nature, have generally higher interest rates. (BA)