Zero interest

RBC’s savings rate hits an all-time low

It is becoming harder for Barbadians to earn any form of interest on their domestic savings accounts.

A day after CIBC FirstCaribbean officially slashed its deposits rate to between 0.05 and 0.15 per cent, local customers of Royal Bank of Canada (RBC) said they have also been put on notice that their savings rate is about to hit an all-time low of 0.01 per cent.

The RBC changes, which take effect on March 1, will affect customers with RBC’s Day to Day Savings, Enhanced Savings, Leo Young Savers and SixtyPlus accounts, and essentially means that those deposit accounts with a minimum $100 will only be able to attract one cent in savings interest.

Last month, CIBC FirstCaribbean had put its customers on notice of its reduction, which took effect on February 1.

However, the move by the two Canada-headquartered banks is still seen as a major blow for local depositors, who prior to April 2015 were guaranteed a minimum interest rate of 2.5 per cent until the Central Bank decided to de-regulate the market.

Horace Cobham

In an immediate response, former head of the Barbados Bankers’ Association Horace Cobham suggested that the Central Bank may need to make an about turn in the interest of local customers, who he said were clearly not reaping the benefits of the current surplus in the banking system.

The former RBC head said though he clearly understood that commercial banks were “caught in a quandary” given the current uncertainty in the marketplace, there was no reason why customers should not be guaranteed “a decent rate of return”.

Therefore, he suggested the need for better policing of the banking sector and the reopening of discussion on a minimum savings rate.

“Perhaps there is need for some half-way house, where there is some minimum rate of return,” Cobham told Barbados TODAY, while lamenting that “too often it becomes self-interest and you have to force banks to do what is right in small economies like those which exist in the Caribbean”.

As for what could be considered a decent minimum savings rate, the former banker acknowledged it was by no means an easy policy position to take. In fact, he suggested that the matter might even go above the head of the country’s  Central Bank, since it would amount to a significant shift in Government policy.

“It probably isn’t three per cent. It probably might be closer to a one per cent,” he added.

The former banker acknowledged the right of commercial banks to a decent rate of return.

However, he said those who operate here needed to be more cognizant of the small size of the market and the limited investment options available to them.

“That is why . . . you need a successful domestic bank or regional bank in every society because [they] see their market as the market in which they operate, whereas international banks always have a foot in the door and one outside; meaning when they are looking at an investment they compare making the investment in Barbados versus making the investment in wherever,” he explained.

Cobham also challenged the notion that lending rates were coming down at the same pace as those which apply to savings, saying, “they have lowered lending rates, but not to the same extent they have lowered deposit rates. So their [profit] margins have increased.”

Prior to the Central Bank’s removal of the minimum savings rate, which was in place from 1991 and 2015, interest on loans and mortgages ranged from seven to nine per cent. However, since April 2015, interest on loans has been reduced to between four and six per cent.

Economist Ryan Straughn

Also weighing in on the latest move by members of the banking sector, economist Ryan Straughn warned that it would only make life harder for Barbadians, particularly those whose savings accounts were already below a certain threshold and therefore had already been subjected to undesirable bank charges.

“It is not just that it is nothing you are getting, it makes it worse because the fees now put you completely in a negative interest rate scenario and that is not something that the average householder in Barbados can afford right now,” a surprised Straughn said.

The former Central Bank employee, now a political candidate for the Opposition Barbados Labour Party, stressed that while the move would be of obvious commercial benefit to the banks, “it is really a very serious situation for households.

“Even on top of that you have inflation to contend with. So under normal circumstances where you would have a deposit rate of about three per cent or something like that . . . depending on the money you had, it would help to offset any inflationary effects they would have normally. But I think 0.01 per cent is a negative interest rate without the banks officially saying they are having negative interest rates, because the fees and inflation already put you in that negative territory,” he explained.

Straughn went as far as to suggest that putting money in the bank now was “pointless”, but expressed reservation about switching to credit unions, pointing out that while they were presently offering higher interest on savings, their lending rates were slightly higher than that of the banks.

To make matters worse, the economist said, he did not see any alternative opportunities for investment coming any time soon, while suggesting that the soon-to-be sold Barbados National Terminal Company Limited (BNTCL) would have been one such investment vehicle for Barbadians.

“The thing is, where do you move the money to?” Straughn asked, lamenting that the local economy was simply not growing fast enough.
marlonmadden@barbadostoday.bb

22 Responses to Zero interest

  1. Hal Austin February 3, 2017 at 4:33 am

    Well written story.

    Reply
  2. Samantha Best February 3, 2017 at 5:06 am

    Barbadians are between a rock and a hard place! They put their money in the banks and it is charged with excessive fees; they keep it at home in the mattress and it is stolen. It is carried away by crooks whether legal or criminal. Note too that the lending rate has been lowered yet some banks have refused to lower the lending rates.

    Reply
  3. Tony Webster February 3, 2017 at 5:45 am

    WHY, WE NEVER HAD IT SO GOOD GOD!
    WHY WE NEVER HAD IT SO? GOOD GOD!
    WHY GOD?
    WHY?
    GOD?

    Reply
  4. Jennifer February 3, 2017 at 6:40 am

    Tony Webster – BECAUSE we BROKE THE COVENANT of our God, AND WAS SCATTERED to the four corners of the earth with our oppressors at the helm. Thought u knew this. And he ain’t PLAYING with us either. But remember the movie independence day. Guess who will be liberated. And nothing will happen in 2017 either, HE tainted the year. Remember the DONKEY AND THE PIG, sweet life won’t last much longer. Thought you knew this.

    @Samatha – True. This is the treatment of slaves (nobodies). This is what happens when you have no FINANCIAL, MILITARY, or ECONOMIC MIGHT. NONE OF THIS Bull $hit happens to any of the European or Large nations.

    Reply
    • Richard Johnston February 3, 2017 at 8:15 am

      US banks are offering 0.02% APY – 1.15% APY on US dollar savings accounts. God can’t do anything about that.

      Reply
  5. Sue Donym February 3, 2017 at 8:34 am

    One question to be asked is whether this is the practice in the country of origin of these banks: are the rates so insultingly low and is the spread between savings interest and loan/mortgage interest as great?

    Banks’ main business involves money, but they are not willing to pay the providers of the money! Barbadians are known to be quite passive and will be expected to easily give in to these predatory moves. Would the bankers dare tell the providers of their furniture, computers or executive vehicles that they would pay some ridiculous rate for them?

    Consumers should talk with their walk – take as much of their business elsewhere without disrupting their own activities. There are already plenty of non-interest bearing business accounts, which increase the margin for banks. Let them see if they can’t be more creative in providing more low-cost loans and business options. They blame ‘conservatism’ for their laziness and refuse to adapt to the needs of PEOPLE when in fact they contribute significantly to sluggishness in the economy.

    Reply
    • Watchman February 3, 2017 at 12:36 pm

      This place ratehub dot ca can answer wrt rates in one convenient location.
      Savings rates in Canada have been abysmal for several years from the so called big banks. GICs also pay pittance. Mutual funds or get an account that lets one gamble at the stock market are the only ways to get a return that beats inflation that I know of.

      Reply
  6. Jennifer February 3, 2017 at 9:02 am

    In a NUTSHELL we need to get away from that b**** GOLDILOCKS. Who is in the bears house, eating the porridge (food), breaking the chair (strength and power) and sleeping in the bed (comfort in all things).

    Reply
  7. Sanky February 3, 2017 at 9:35 am

    Waitttt….this is Horace Cobham….. RETIRED former top Banker and Head of the Banking Association talking???

    Reply
    • Milli Watt February 3, 2017 at 5:14 pm

      It is……It is Horace. This is what gran would call a SMALL mercy!

      Reply
  8. Richard Johnston February 3, 2017 at 9:56 am

    The interest rates on loans in Barbados are high because the banks carry them on their books in USD and with the risk of devaluation a BB$100,000 loan worth US$50,000 today might be worth US$40,000 tomorrow. Banks are simply hedging that risk.

    Reply
  9. Alex Alleyne February 3, 2017 at 12:38 pm

    @R.Johnson, that is exactly the point i always try to put across.

    Reply
  10. Hal Austin February 3, 2017 at 1:10 pm

    Richard Johnston,
    This is outright fraud. A loan agreed under Barbadian law in Barbadian should be written in Barbadian currency. If banks want to hedge tat loan, or re-insure it, that is their business.
    I know from experience this takes place. Sometime ago I was interested in buying a time share in Christ Church and the document was not only written in US dollars, but the agreement was under US law.
    I reported it to the regulators and the run round I had with them I dropped it. I realised that if |I hire a local lawyer it would cost me a hell of a lot more than the money |I was writing off.
    There are similar frauds with mortgages, such as the mortgage indemnity guarantee, usually written for about 75 per cent of the value of the property and with the lender as beneficiary, although the borrower pays the premium.
    If the borrower defaults, the lender draws on the protection cover, then re-possesses the home and auctions it at a cut-price rate.
    In fact, the home should be sold at the market price with the lender taking out their share and returning the surplus to the borrower.
    .

    in the

    Reply
    • Richard Johnston February 3, 2017 at 6:42 pm

      The loan is in Barbadian currency, but the bank carries is for their reporting purposes in USD. That has nothing to do with the basic transaction, and there’s nothing a borrower can do about it.

      Reply
  11. jus me February 3, 2017 at 3:12 pm

    Start seeing the WOOD for the TREES.
    Jennifer, while I agree with you on most things.
    PLEASE leave GOD out of it .
    GOD was invented by the REDMEN to screw up all Blacks,they learned early , how superstitious is the Black mind, so they got inside your head and NEVER LEFT.
    Let substitute GOODNESS, because we ARE SURE that exists.

    Bank rates are only the SYMPTOM of the Disease that has engulfed the WORLD.
    That is GREED ,unending in its voraciousness.
    This World has reached a point where it cannot exist under the old rules, a New World Order is being put in place, to permanently subjugate you.

    All of your Rights as previously were, are being extinguished one by one, you shortly , like it or not will be a live Vassal or a DEAD hero.
    To have any recompense for your lifes Labour ,being one of those rights.
    No interest on earned money FOR YOU, but for them, sky high rates for you to PAY.
    Increased prices , static wages ,NO interest, soon all you have will simply disappear.
    Slowly , and surely the New World Order will encompass your existence and absorb you, until you will only exist as a means of wealth production for those who have the power or are appointed by those who have the power to control you totally.

    The Elites have now taken a grip of the entire World.

    The soon to be implemented Plastic Money will be the final chain that goes round your neck and chokes off your freedom.

    Imagine, you can exist only by using this Plastic Currency, and you become Politically undesirable or pronounced to be AGAINST THE SYSTEM, .
    Your Plastic will simply CEASE to work, and there you will be in this WORLD , DESTITUTE, whatever you may have STILL IN THE BANK but YOU DISALLOWED from using it .

    MODERN DAY EXCOMMUNICATION.

    No one will dare to come to your assistance ,or they to will be seen as AGAINST THE SYSTEM.
    The penalty is Plastic Financial EXCOMMUNICATION.

    You will be left with ONE RIGHT, COMPLY or DIE.

    There is ONE consolation, you and all of yours and me and all of mine, after one generation will accept this as the NORM, and never understand what is the taste of freedom-

    Reply
  12. Tony Webster February 3, 2017 at 3:55 pm

    @Jennifer: please assign blame to me, for all the “pushback” you have received…as God will forgive me if I n’used His name, slightly chongue-in-teek! Forgive this sinner, just as He forgives me each time I pray….and I pray A LOT these days girl!

    Reply
  13. Milli Watt February 3, 2017 at 4:45 pm

    Pay down your debts which are at a higher interest rate is a start

    Reply
  14. Mikey February 3, 2017 at 7:24 pm

    Lawyer Hal,, Why you don’t do something about it.
    Stop complaining like a cry-baby and use your Brain to make a difference !!! Stop the whinning about every thing Barbadian.
    Oh, forgot You joined the Slave Masters up North and now want to whip your black slave brethren a la Kunta Kinte in Roots.

    Reply
  15. Peter February 3, 2017 at 9:34 pm

    The message is … Don’t save. Instead, purchase government issued bonds. This way they guarantee no loss when and if the dollar is devalued. They know that the Barbados is protected by Trinidadian business. Massey bought out BS&T and establish a real estate company here. It is unbelievable how many Trinis have offshore US dollar accounts here in Barbados. Barbados were forced to print more BDS dollars because Guyanese are trading it Over the Counter like US dollars. Even Bajan Businesses have US dollar accounts in Guyana Forget Guyana dollars. BDS dollars id the exchange conduit especially by the local Cambio there. So that alone will cause Trinis and Guyanese to protect the Barbados exchange rates. Check the amount of Trinis and Guyanese who owns property, hotels and apartments here in Bim. They collect cheques and cash. deposit the cheques, wait for it to clear and withdraw it which they move into their US accounts and bam it’s gone.

    Reply
  16. hcalndre February 3, 2017 at 10:52 pm

    Well the MOF and his party says that all is well, pay no attention to the economists nor the IMF or S&P because they don`t like barbados. so who are the people to believe?

    Reply
  17. jus me February 4, 2017 at 12:48 am

    @Peter
    You say don’t save.
    Then you say ,THEY MOVE IT INTO THEIR US ACCOUNTS.

    AND then pray, do what with it.?

    People who can are simply DUMPING the B$ and at a loss, see what rate you will be offered in Guyana for B$.

    Anyone who has any quantity of B$ must be at least a little astute.

    Look at the Idiots running Barbados.
    DO YOU HAVE ANY CONFIDENCE in them??

    NO you don’t, and there fore it follows the confidence is also LOST in the Barbados $, that our elected Morons have control over.

    Barbados was ,IS and will ALWAYS BE, a private bank for the Elected and their Cohorts to PLUNDER.

    ITS a TOTALLY corrupt system run by TOTALLY corrupt persons.

    The man in the street is a DONKEY that these people will ride till its DEAD,.

    Barbados Central Bank deregulated !!!
    LOL, sold us up the river more like, they LEGALLY allowed the Banks to SCREW US ALL ROYALY.
    The Politicians and the Banks work hand in hand and its NOT FOR OUR BENEFIT.

    HOW does buying Bonds from a Bankrupt protect your $, from DEVALUATION?

    Look the Barbados $ will sink.
    WHY??
    Cos in this World, THE REAL WORLD I mean, not Barbados WONDERLAND, a worth of anything is dictated by what people will pay for it.
    You and I know that Barbados $ is just COLOURED PAPER< useless in Hard Currency countries.
    Printed in Millions, like they print newspapers, you ever heard of anyone paying ONE US$ for TWO OLD NEWSPAPERS.

    Reply
  18. Hon:Alex-Mitchell: El February 4, 2017 at 3:25 pm

    Nothing but crooks, I told you all removed your money from Sir Richard and Sir Cow,
    All this is also with Clico, First Caribbean CIBC was Beatrice Henry Banks where they handed over 100 million to the DBLP government, Crooks
    Not clear title to land no loans, no loans, no land loans, no building, no car loans nothing. no returns on your deposit, no pennies, no cents, so you can’t even get .01% Barbados Bridge All fall down or was that London Bridge?

    Reply

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