BARBADIANS SHOULD CONTINUE to voice disapproval of the way that commercial banks are handling the savings of the country entrusted to them – $1.9 billion!
While we are not content with the meagre reward from the banks for the savings, to park the savings at the Central Bank is a virtual insult as to its use. Those savings that are taken at about 0.5 per cent can earn the banks up to seven per cent for just keeping them at the Central Bank and not using them for loans. Does not make sense.
For some of those savings the commercial banks charge customers simply for keeping the money, then turn around and make a profit on it. That is not only wrong, it is immoral. And the Central Bank condones that. To say that it facilitates Government paying debt on loans and bonds is to excuse a merry-go-round of its use. There is no production in that.
That is tantamount to standing still. You are really paying workers with their own savings. But, Wild Coot, you may also deduce that without saying so, the banks are in fact registering disapproval on the way the economy is managed. Remember Ronald Harford’s warning to the indigenous bankers. (My article on 15/12/14.)
In newspapers and on the airways, simple Barbadiansare voicing opinions that commercial banks are not playing their part in the economic progress of the island. It certainly makes the minister’s task more difficult, perhaps leadingto a penchant for taxation and the dangerous habit of printing money. As a banker I can see both sides of this three-sided argument.
One of the banks recently said it has opened a door to small businesses that need funds. The much-criticised by the Wild Coot of the Central Bank guarantee scheme can now play a part in the structure of loans that this probable move on the part of a commercial bank can facilitate. Perhaps the banks have been listening to the agonising cries of the citizens, perhaps not. Perhaps they are not making enough profitby simply hiving off a commission here and there. It may be that conforming to their raison d’être presents a better way of profit.
Whatever the reason, we have to wait and see if theclarion call to get your businesses going will be answered by Barbadians.
Someone said recently that young people frustrated by being ignored by the banks over the past few years, are getting together and promoting businesses without the help of the banks.
The concept of bitcoins is an enticing one. It cuts out the middle man – the banker. People are quietly devising ways of bypassing the banks and relying mainly on themselves. The Trident Angels have come on the scene as a venture capital funder. Maybe as soon as people are comfortable with the safety of bitcoins, they will do less business with the banks.
The position of banks as an essential part of business will diminish as confidence is eroded by the behaviour of banks especially over the past ten years. Already we see it happening in the area of foreign exchange. More attention is being paid to barter and to parking both in and out of the country.
La Fontaine, in his fable The Wolf And The Lamb, said: Il faut que je venge’/ Là-dessus, au fond des forêts/ Le loup l’emporte et puis le mange/ Sans autre forme de procès (‘Tis time I made my vengeance good’/ Thereon he hauled him to the wood,/And ate him in a righteous fury/ Without recourse to judge and jury). Can an entity get too big to control?
The Wild Coot may be the only voice in the wilderness proclaiming the need for caution as Sandals builds its empire in Barbados. What does it profit Barbados if Sandals expands, more tourists come to Barbados, but the money does not eventuate? We said no to a private beach once but can we say no to what is going on at Dover? The wolf bares its fangs. But there is another problem.
Sandals has set precedence and God only knows who else are enjoying the same benefits or like concessions, or are leaving their collections overseas. After all, did most of the hotels not report a healthy winter season? So where is the foreign exchange? Why are we now seeking to borrow in order to support our foreign exchange?So our biggest industry is not contributing its full share of taxes while the vast population feels the burden?
All we are doing is magnifying the call by outsiders for us to devalue because of a junk rating of Caa1. Just where are we to devalue to? Devaluation would be catastrophic. We would suck salt if we do, but we can suck salt now without devaluation with the hope of improvement over time.
• Harry Russell is a banker. Email: quijote70@gmail.com