No minimum interest rate for savings on cards

The reintroduction of a minimum interest rate on savings is not an option for commercial banks, even as they await discussions with Central Bank officials to possibly offer a facility to customers.

Chairman of the Barbados Bankers Association, Anthony Clerk, in response to customer complaints about high bank charges and low interest rates on savings, said Barbados TODAY“If you reintroduce a minimum interest rate, that means loan rates will go up. I don’t think that will make sense.

In April 2015, the Central Bank abolished the guaranteed minimum savings rate of 2.5%, in the hope that more liquidity would be transferred from the banking system to investment. However, by the end of March this year, the savings had grown to around $14 billion. While loans to households grew faster in the first three months of this year compared to the same period in 2021, new loans overall fell compared to previous years, despite interest rates on loans historically down.

“Rental lending rates at present are the lowest I have ever been in Barbados history. So these are all-time low rates, which is very good for people who want to borrow money to build and buy homes, set up renewable energy systems or for any other reason, both du retail side, personal customers and business customers,” Clerk explained.

“So it bodes very well for the development of the economy. You know, [if] people want to undertake projects, now is the time to do it because you have very low interest rates. So to reintroduce a minimum [savings] means the spread has to increase between deposit rates and lending rates, which means borrowing is going to get more expensive and I don’t think that’s really going to be a good thing for anyone.

Last Thursday, as she announced measures last week to help ease the pressure on residents, Prime Minister Mia Mottley said there was a need to engage with the banking industry to see what bank charges can be changed.

She revealed that Central Bank Governor Cleviston Haynes had been tasked with investigating the issue of bank charges and reporting to the Ministry of Finance.

Mottley said at the time: “While we have already done some things on fees, clearly we need to get back to it and we need to encourage our banks to recognize that their core business of making money from to loans cannot be abandoned as a liability the income from transactions”.

While emphasizing that she was not going after the banks which were heavily affected by the government’s debt restructuring in 2018 and the introduction of a pandemic levy this year, the Prime Minister questioned: ” How can a bank justify charging more to facilitate a $2 digital transaction? 000 than a digital transaction of $200 or $20? It’s the same mechanism. »

The clerk said Barbados TODAY that commercial banks would cooperate with officials to provide information, but there was not much to say at this stage.

“All I can say is that the Governor of the Central Bank contacted the banks for specific information about our debit cards, our newly introduced debit cards, and we gave him the information. is all that’s happened so far,” Clerk said.

“I prefer not to speculate and I prefer to let the process happen on its own. The Prime Minister has announced that she has asked the Governor to discuss with the banks, so we expect a discussion. We await the return of the governor.

Effective November 1 last year, the Governor of the Central Bank announced that the amount Barbadians pay for an ATM transaction at a bank other than their own would be capped at a maximum of $3.

This, Haynes said at the time, was in response to resident complaints about high bank fees associated with debit card transactions.

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