Efforts to revive the local capital market through the issuance of government instruments are expected to start as early as next month.
Word of this has come from Julia Weekes, Director of Banking and Investment at the Central Bank of Barbados, who said the island’s premier financial institution was expected to relaunch some of its traditional investment options while introducing some new ones.
Officials said this would allow for the excess liquidity in the commercial banking system to be put to use.
“Firstly, we are looking to reissue the Treasury Bill market. We haven’t had a Treasury Bill issue in the primary market since the debt restructuring in 2018,” Weekes told a media conference on Wednesday called to announce the purchase of $100 million worth of BOSS Plus bonds by CIBC FirstCaribbean International Bank.
Outlining the plans to breathe new life into the capital market here, Weekes said, “We are proposing to relaunch Treasury Bills and these will be handled by the Treasury as in the past.
“We are going to start with small issue sizes and build up based on demand unlike in the past whereby investors bid for the prices. We are going to set a fixed price and this is important to ensure that the small investor as well as the large have the same yield basis. These Treasury Bills will have maturities of three or six months, and the issues will be advertised as they come to market,” she explained.
She said the Central Bank was also proposing to have a series of savings bonds in the current fiscal year “starting as early as May”.
“These are five-year instruments offered at discount and they can be cashed in at any point in time. So you do not have to wait until the five year maturity to get your money. Go to any commercial bank and give your ID and they will redeem the savings bonds on your behalf,” she said.
Weekes said the Central Bank would also continue to offer the medium-term BOSS Plus option, which carries a five-year maturity with interest rates that are payable semi-annually or quarterly.
“The new feature however, on the treasury note-type instrument will be natural disaster clauses . . . in the event anything unfortunate happens that we have some leeway with respect to the payment of the principal for a two-year period,” she said.
Weekes said the bank was still awaiting the details around the establishment of the proposed Unit Trust Corporation, which was announced in the March 15 Budget by Prime Minister and Minister of Finance Mia Mottley.
During her budget presentation, Mottley also proposed the restart of the local capital market operations “with the introduction of new instruments such as reverse auctions and a bonds-on-demand facility at commercial banks authorised to sell securities to the public”.
Weekes said it was now a matter of putting a timetable in place and determining the size and pricing limit for the reverse auctions, which allow for investors to sell back their securities to the Central Bank.
“The framework as well has to be finalised and we may be asking the commercial banks to assist in terms of having this process,” said Weekes.
She said the bonds-on-demand facility would allow for individuals to go to the commercial banks to apply for securities. This, she added, would be another channel by which they are able to access the capital market for medium-term securities and savings bonds.
Donna Wellington, Managing Director for Barbados and the OECS at CIBC FirstCaribbean International Bank, said there was need for improvement in the capital market to provide more opportunities for investment.
She said CIBC FirstCaribbean was keen on supporting the revitalisation of the capital market and would continue to do so through public education and support of both Government and private sector clients.
“There are going to be a number of things that need to happen with the capital market in Barbados, and it is not just the government capital market. We would like to see some changes, we also want to see improvements in the local capital market with private institutions getting back onto the trading of securities.
“Everybody knows when you look at the stock exchange there is not a lot going on there. We believe there are opportunities for the capital market in general for people to invest. So we want to build the stock exchange – building by adding new securities for both private companies as well as the government,” said Wellington.
She identified the renewable energy sector as one of the areas with the opportunity for tradable instruments to be introduced to the market.
Central Bank Governor Dr Kevin Greenidge said the banking sector regulator was keen on working in partnership with commercial banks, the Barbados Stock Exchange and other financial sector stakeholders to revive the capital market here.
“The reason for restarting the capital market is not just because we want to do it. We want to move savings into investments, what we call financial intermediation. A person may not want to buy a solar farm but he can buy a stock or bond that is tied to that and therefore he is getting some returns from that,” said Greenidge. (MM)