Governor of the Central Bank of Barbados Cleviston Haynes has reported a considerable increase in electronic banking and digital payment methods since April, at the height of the pandemic lockdown.
But he has also promised that the Central Bank would continue to safeguard the financial welfare of individuals and businesses while ensuring that the private sector has access to working capital.
Pointing to how the financial system adjusted to the new realities created by the COVID-19 pandemic and how the country could be prepared to cope with economic obstacles it was likely to face, Haynes said the financial services industry has been at the forefront of adaptation in recent months.
He said in addition to “broad-based moratoria” on loans to customers, the Central Bank adapted its regulatory policy to enable the financial institutions to manage the disruption caused by the pandemic, and to make low-cost liquidity support available if necessary.
The Governor said: “The Bank remains committed to (working) with its licensees during this challenging period to ensure that financial stability is not impaired.”
There has been a “fascinating” response from the private sector during the height of the pandemic here, evident by increased domestic e-commerce and greater use of e-banking and digital payments, said Haynes.
He reported: “Reduced in-person transactions and interactions over these few months have boosted our efforts to reduce the use of paper-based payments instruments such as cash and cheques.
“We have had a glimpse into the future of how business and payments will be conducted, with preliminary data for the April-June quarter indicating a substantial reduction in cheque usage and an increase in the use of electronic transfers via Automated Clearing House.”
He said this transition provided a platform for customers to seek out low-cost banking services “to alter their banking practices in response to the fees charged by some institutions”.
Haynes said the central bank was keen to encourage further financial inclusion, adding that starting Wednesday it had published on its website some of the most common fees charged by commercial banks on traditional services.
This, he said, would give individuals and companies the opportunity to better compare rates and make banking decisions.
The banks are still required to publish their fee structure and give adequate notice before changing their fees.
Haynes said: “Over the course of the next few weeks, as we explore how the sector is adapting to the changes in the environment, we will examine in our virtual forum themes that touch directly or indirectly on the implications of COVID-19, including the emerging payments landscape, AML practices and policy, financial stability and the psycho-social impacts of COVID-19 itself.”
The central banker was addressing the opening of the July Domestic Financial Institutions Conference, which was held virtually under the theme, Mitigating the Effects of Climate Change: A Financial Sector Perspective.
Speaking on the topic, Adapting to Economic Shocks, Haynes also pointed to the need for macroeconomic policies in the region to consider the worrisome issue of climate change.
He argued that too often the destructive forces of climate change created large financing gaps that required financial assistance from abroad, which he said created the potential for delays in starting the process of repair and rebuilding.
He said it was for that reason that Government had negotiated a natural disaster clause in its debt restructuring recently.
“However, we cannot rely on deferred payments alone. It is critical that we continue to strengthen our overall macroeconomic framework and to build buffers that can allow us to react quickly to shocks such as climate change or pandemic,” said Haynes.
Stating that the island’s access to financial resources from international agencies has increased over the past two years, Haynes pointed out that the foreign exchange reserves now stand at over $2.1 billion, or 28 weeks of import cover.
He said this will be further buttressed in coming months through additional budgetary support from international lending agencies.
Haynes said: “It speaks both to increased confidence and to greater diversification of earnings than might have otherwise been thought.
“This buffer to the reserves will allow us to absorb any shocks associated with rising commodity prices or a general pick-up in demand in the coming months without concerns of pressure on the exchange rate.”
He added that while government revenue had taken a hit as jobless levels rose and revenue from domestic sources shrank, it was “partially offset by rising corporation taxes from the international business sector”.
He said in recent weeks Government had been building deposits with the central bank rather than borrowing, and this buffer would help facilitate “planned growth-enhancing expenditures”.