A noted economist says it is crying shame that the island’s Central Bank has now found itself in a position where it has chalked up over $7.3 million in losses in 2014 – that’s double the loss it reported in prior year.
Ryan Straughn’s comments came even as the Bank’s Governor Dr DeLisle Worrell today assured that steps were being taken to achieve a turnaround in the Central Bank’s overall balance sheet, which has been in the red for the past four years.
On the heels of a 2013 deficit in the order of $3.7 million, the Bank made a loss of $7.3 million, bringing the accumulated deficit at December 31, 2014 to $22.1 million, according to the latest Annual Review of Policy Operation Report.
In a brief interview with Barbados TODAY this afternoon, the Governor acknowledged that a number of steps would have to be taken to ameliorate the institution’s loss position, which is said to have exceeded the Bank’s General Reserve.
However, Dr Worrell, who had earlier this year indicated that restructuring of the Bank would take place by the middle of this year and would result in a smaller team, said he would await the outcome of work by consultants before saying exactly what areas would be addressed and what specific steps would be taken.
“We are in a process of renewal for the Central Bank because this is not the first year we have made losses,” the Governor told Barbados TODAY.
“So we have got to make some fairly basic changes in order to ensure that we are in a position where our expenses match our revenues.
“We have engaged with consultants to assist us in identifying options for that, then we will report to our board of directors, who will then make decisions going forward,” he added.
In response, Straughn said the Central Bank’s losses did not come as a surprise to him, even though he was of the firm view that they should never have occurred in the first place, given the Bank’s position of supporting the Government’s fiscal policy.
He insisted that steps should have been taken years ago to ensure the losses were minimized, while blaming them on “a lack of effective management”.
“With respect to the losses, the Bank, as the chief regulator and chief banker in the economy, it really should be in the vanguard of being able to cover its additional costs,” Straughn told Barbados TODAY.
“That above all else, [is] where the focus [should] be,” he emphasized.
The former president of the Barbados Economic Society also warned that the Central Bank’s deficit position stood to impact on the credibility of the country’s leading financial institution, pointing out that the Bank would most likely require a cash injection from the Government.
He noted that commercial banks had in the past taken actions early enough to ensure that they did not register losses.
“So the fact that they [Central Bank] are now looking at what they can do internally, raises some concerns to mind, because this is not the first time they have made losses,” said Straughn.
“The fact that the Central Bank may need some recapitalization, which could only come from Government if they are making losses, suggests to me that the management of the institution would have to be under greater scrutiny,” he said, while querying how it could advise Government on finances, when its own financial house seemed to be out of line.
“So if they are now presumably looking at what they can do internally, then I must say we are in for a sweet ride, because it really points to a lack of foresight in my mind.
“It is not a good thing because this is where the market is concerned, as far as the credibility of the Bank.
“I think it is a big issue as far as I can see with the fact that the Central Bank is making losses,” said Straughn.“I am not surprised at the loss, but what surprised me a little bit is the loss is so small.
“I was expecting a bigger loss given the amount of money they printed,” he added.