Thanks sir, it seems that you are reading my articles, as I have been pointing out all along the great difficulty today if we try to set up an indigenous bank in Barbados.
I quote from my article A Catastrophic Sale: “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.”
Perhaps this is why our Central Bank is giving commercial banks such considerable leeway. However, banks are reacting to the present problems in the economy by saving themselves first as may be expected. This is of no help to Barbados and in fact is self-defeating. People will find ways of avoiding banks. They see no help coming from them.
Look, the four per cent negotiable mortgages for two years are not a good investment unless you have the ability to service a nine per cent mortgage at least. Most people are opting for a second-hand car rather than an expensive new one. Many who are buying the new ones may be questioned as to the origin of the funds – this could land the banks in trouble and harps back to the genesis of the correspondent banks’ reluctance to offer service.
I have been advocating for a long time now the revival of the use of the bill of exchange. For it to be properly used, you must understand the laws that govern it. You must be prepared to set up a credit and diary system in order to alert about maturing times of drawee and drawer as well as creditworthiness and reliability. These must be scrupulously kept up to date.
Obviously, this involves a certain amount of work on the part of the banks. However, it can have its compensations since a well-oiled department has multiple areas of profitability. But the overarching benefits not only redound to the bank, but also provide an additional mechanism to loans and overdrafts for the customer, especially the entrepreneur or importer/exporter, and the country as a whole.
The Wild Coot does not see much of this operation at present in Barbados. He puts it down to laziness on the part of commercial banks not wanting to invest in training and staff.
This observation may draw challenges from the banks, although such challenges might not be openly given. Banks like to do their business in private. However, the service is much needed in Barbados if you want to assist entrepreneurs in importing mostly raw material and exporting finished goods and ideas. The Wild Coot paid particular attention to this area of training when setting up the National Commercial Bank St Lucia Ltd. and the Bank of Nevis Ltd, to name just a few.
You cannot force the banks to get involved in this form of financing to a greater extent once the banks concentrate on 28 per cent credit card, financing of discount loans for Christmas shopping, and travel and car loans. These services come with minimum effort and cost. They serve the present bottom line.
There is another area of banking that is sadly neglected by banks in Barbados. Once upon a time a branch had a manager who was responsible for earning for the bank a certain amount of profit. Indeed, the manager was supposed to scour his catchment area, visiting customers and non-customers in an effort to increase business. Today I challenge you to pinpoint a manager of a branch of a bank who leaves his/her cushy chair to visit an enterprise in search of business.
As you know, the accepted spread (difference between lending and paying) of a bank was three or four per cent. Today it could easily be the average full lending rate – nine or ten per cent – bearing in mind low savings interest. You may ask who inflicted this on the people of Barbados? I must confess that it has to be our Central Bank. It is the poor savers who suffer most. If you make it easy for banks to profit, why is the governor saying “access to finance remains an area of weakness”, as is reported? The Central Bank is a poor substitute for a commercial bank. Its balance sheet shows that.
• Harry Russell is a banker. Email quijote70@gmail.com