Barbados’ financial space is a complex one and from the looks of things, it is likely to remain that way for some time. For consumers of banking and financial services and the providers of those services, the clash of priorities continues.
Consumers are facing increasing pressure from rapidly rising costs and a challenging economic environment. For us in Barbados, we have effectively been confronted with a devaluation as our purchasing power has been so depressed by rising prices and stagnated salaries, further burdening the many people who live from pay cheque to pay cheque.
The pressures on commercial banks are also real. For those operating in the Caribbean where economic growth has been stifled for several years, firstly from the international financial crisis and then the COVID-19 pandemic, this climate requires strategic management of operations and resources.
Commercial banks, particularly the foreign owned institutions, have enjoyed decades-long runs of healthy profits out of our population. The period of largess and super-profits have come to an end with increased competition and a changing financial landscape.
Moreover, with limited economies of scale, and competition from non-deposit taking institutions that have mushroomed, offering fast cash without the constrictions imposed by traditional lenders, banks face a tough market.
The result is that some banks have decided it is time to cut their losses. They are scaling back operations, restructuring services, and attaching fees for many services that were free.
There are still many Barbadians who have a love affair with their banks even though the relationship is now so heavily tipped in favour of the bank. Customers are paying banks to keep their money, while getting no interest on their savings.
The level of bank fees is now so high that even commercial banks have had to concede in the financial reporting that it is largely fees, and not interest from loans or investments that are accounting for the rise in profits.
When it costs more for a person to put their money in the bank than for the bank to keep it, suggest the need for re-examination of that relationship.
People have options that did not exist 20 or 30 years ago. The credit union sector, at least the big four, are offering similar services and conveniences as commercial banks and at way less cost to consumers.
Despite the inroads made by other institutions, commercial banks still exercise significant control over the financial services regime in Barbados. Their fraternity, the Barbados Bankers’ Association (BBA) still flexes its muscle, often coordinating policy positions on issues facing the sector.
Over the past three years, Prime Minister Mottley has been quite vocal in her criticism of local commercial banks, calling them out on the imposition of fees and their lending policies.
She took another swipe at banks and their imposition of fees over the weekend. During her announcement of a social partnership agreement to tackle rising prices, she disclosed her instructions to Governor of the Central Bank of Barbados Mr Cleviston Haynes, to investigate reports of commercial banks charging transactional fees on debit cards, and to then report back to her Ministry.
For his part, Governor Haynes has explained that the matter was not a simple one, adding that banks must understand they too have to make some sacrifices.
Playing a graceful balancing act, the Governor told the media: “Traditionally, we were not involved in the pricing of transactions, but this is an ongoing matter and when we intervened, we always intended to come back to that issue. We said to the banks and credit unions that is something we would revisit once we had the opportunity to.
“However, it is not something you can do overnight, so I can’t give a specific timeline, but hopefully, in the near future we’ll be able to come back to you and say what the outcome is.”
The response of the President of the BBA, Mr Anthony Clerk, suggests some level of frustration at the criticism.
“The Prime Minister said she has entrusted the Central Bank Governor to speak with the banks, so we await that discussion. I’m staying away from that for the time being. Let it play out as she would like it to play out,” he was quoted as saying on Monday.
Barbadians are crying out for an ease, and they see the rising bank fees as an unnecessary imposition at this time. We will soon discover if this has been a storm in a teacup or an authentic defence of consumers.