Banks under fire from credit unions

Unreasonable and ridiculous!

That is how the umbrella organization for credit unions here is describing the recent decision by commercial banks to cut their interest rates on savings to nearly zero per cent.

“We still feel in relation to a matter like that, that the direction the commercial banks have taken is somewhat unreasonable. We still believe there is scope to pay a more decent rate on savings,” General Manager of the Barbados Cooperative and Credit Union League Limited (BCCULL) Anthony Pilgrim told Barbados TODAY this afternoon.

Pilgrim admitted financial institutions had to review their interest rates from time to time. However, he insisted customers should receive “a fairly reasonable and decent rate of return on savings”.

The credit union boss said the banks’ action was not a surprise since the Central Bank of Barbados deregulated the market in April 2015, ending the minimum interest rate of 2.5 per cent it had set back in 1991.

A year later the commercial banks had slashed their interest rates to a then record low of 0.5 per cent – the lowest in over 20 years – and are expected to cut even further to between 0.05 per cent to 0.15 per cent.

“There is no reward for savers; and that is a fairly ridiculous situation,” Pilgrim stressed, adding this was an opportunity for credit unions to attract more customers.

However, President of the Bankers Association of Barbados Donna Wellington is defending the decision to cut the interest rates.

“The savings rate for many years did not keep pace with the reduction in interest rates on loans and the negative growth the banks were facing. Removal of the minimum savings rate allows for market forces to balance the equilibrium of supply and demand,” Wellington said.

The association spokesperson said the decision was prompted by low demand and continued negative growth, plus increased taxation on banks and excess liquidity.

She said demands for loans from commercial banks had been declining since 2010 as a result of the sluggish economy.

“The prime rate is not the gauge by which to measure this, but the actual rates provided to borrowers. The rate war and fierce competition between commercial banks is clearly seen in the press. Five years ago, rates were prime ‘plus’, but for some time now they have been prime ‘minus’. Anybody who has bought a car, gotten a consumer loan or gotten a mortgage can testify to the fierce competition that exists and rock bottom rates being offered,” the banking official stated.

She said commercial banks had dropped their lending rates by more than 2.5 per cent, a point made earlier by Managing Director and Chief Executive Officer of Republic Bank (Barbados) Limited Ian De Souza.

The Republic Bank’s executive had suggested that lower lending rates were a bright side to the near zero per cent interest rates the commercial banks would soon be offering on savings.

“While our savings rate has been lowered, so too has the lending rate through the mortgage, as well as the other loan products that we have. So the interest rate environment in total on the savings, deposit side and on the lending side, the entire interest rate structure in Barbados has fallen,” De Souza explained.

Source: (EJ/MM)

8 Responses to Banks under fire from credit unions

  1. Hal Austin January 18, 2017 at 3:32 am

    I am glad people now realise that the foreign-owned banks have been taking Barbadians to the cleaners for years and the so-called regulators have been allowing them to by their silence.
    We must have a Barbados-domiciled bank: we have 18 post offices, a post office bank can be established at minimum cost, including joining the global payments system; we can introduce new legislation allowing a cooperative/credit union bank.
    Why is this government so scared of a balance sheet bank owned by and controlled by Barbadians?
    The selling off of the BNB whatever its management faults, was the biggest blow to the financialisation of the Barbados economy since independence.
    The Opposition must now commit itself to re-establishing a Barbados bank if elected.

    Reply
  2. Sunshine Sunny Shine January 18, 2017 at 7:04 am

    Well take your money out of the banks and put in the credit unions. Let the over and away banks go back to over and away, and we reestablish the Barbados National Bank under decent management.

    Reply
    • Gearbox1964 January 18, 2017 at 4:01 pm

      I agree.

      Reply
  3. Ferreira Claude
    Ferreira Claude January 18, 2017 at 8:20 am

    So the bank will be using your savings to make money and you will be getting almost 1%, what about you saving you money overseas ?

    Reply
  4. Hal Austin January 18, 2017 at 8:32 am

    Sunshine,

    In have been saying this for ages. Because of their business models banks do not have enough cash to pay out all their account holders at any one time. This is called a run on the bank.
    What we need is someone to organise a run and close one of these foreign-owned banks. The others will get the message that Bajans are not fools.

    Reply
  5. Gearbox1964 January 18, 2017 at 4:06 pm

    We use to be able to claim up to $2500 of credit union savings when we filed our taxes, but that is one of the things this Administration took away from us. It was a real incentive for many people to save with the credit unions rather than the commercial banks.

    Reply
  6. Helicopter(8P) January 19, 2017 at 12:29 pm

    OK so the offshore bank would like to own about 78% of real estate!!

    Reply
  7. Helicopter(8P) January 19, 2017 at 2:15 pm

    The Off Shore banks have to find investments in the progressive and lucrative businesses around the globe ; If these businesses are not corporate friendly to them then there is no investment and the bank’s investors suffer because it’s marketing is not supplying enough business activity transactions.

    Reply

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