Plans by the Central Bank of Barbados to have at least two credit unions join the Automated Clearing House (ACH) network and to start publishing some fees of commercial banks have been further delayed.
This update comes as Central Bank Governor Cleviston Haynes reported that activity in the financial system remained subdued during the first three months of this year as the spread between deposit and lending rates continued to narrow.
In relation to the ACH, an electronic system that facilitates financial transactions including direct deposits, payroll and other payment services, Haynes said the disruption in economic activity due to the COVID-19 pandemic, has led to a sharp increase in direct payments by public and private sector entities through this network.
He said the Central Bank has been anticipating the “imminent” membership of two credit unions to the ACH during the quarter under review, but that was delayed due to the need for those credit unions to acquire a specific piece of technology, and now the COVID-19 pandemic.
“This is part of a broader initiative to make the payments system faster, more accessible and more competitive. The transition from paper-based payments to electronic payments will ultimately enhance efficiency and productivity which will be required in a more modern economy,” said Haynes.
“So we are really waiting now on the feedback from the credit unions. There are a few technical issues that they have to resolve but I am hopeful that in this quarter the credit unions will be able to come onboard and be able to execute the direct debits, which they want to do,” he said.
In relation to bank fees, Haynes said discussions have been ongoing between the central bank and commercial banks, reiterating that his concern was that “very high fees” could lead to financial exclusion of some individuals.
“What we have discussed with the banks is the need to ensure that only ATM transactions, direct debits, online transfers remain free,” he said, adding that some fees are designed to force individuals to “behave in certain ways and use certain avenues”.
He said: “We are going to publish at least twice a year, the comparative fees for certain basic services, not everything, but those fees that impact the average consumer so that you can see what your bank is charging you versus what other banks are charging and that will help you to make your determination as to whether or not these are services you want to get from your bank.
“At the end of the day we do not want to create a system where people are unwilling to place their funds in the financial system because they feel you put $1000 and when you look back there is only $900. That, to my mind, cannot be what we want our system of financial intermediation to achieve,” he said. He did not give a firm date for the first public notice of bank fees.
So far, banks have agreed to waive certain fees for seniors including the over-the-counter charges.
In his report on the first three months of the year, Haynes said deposit-taking institutions registered a modest uptick of 1.1 per cent in domestic deposits, which was driven mainly by increased holdings of individuals and non-financial corporations.
“In addition, the foreign currency denominated deposits of the resident business sector rose, leading to an increased contribution of 6.4 per cent of total deposits, compared to 5.3 per cent at the end of 2019,” he said.
He added that while the interest rate environment remained “benign”, credit to the non-financial private sector declined by 1.3 per cent, due mainly to early repayments of some tourism-related loans.
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