'Outrageous' bank fees slammed
By NEIL HARTNELL
Tribune Business Editor
A FORMER Chamber of Commerce president yesterday blasted Bahamian commercial banks for imposing "astronomical and outrageous" hidden fees that he took four months to pick up on, and urged the Government and regulators to implement greater oversight of an industry he described as "a cartel".
Dionisio D'Aguilar, president of the Superwash laundromat chain, told Tribune Business that he was "outraged" by the 2 per cent 'excess penalty fee' CIBC FirstCaribbean International Bank (Bahamas) had begun imposing on clients who went into overdraft - even for one day a month - and had established no such facilities with the bank.
This fee, Mr D'Aguilar said, was on top of the normal 17 per cent that he as a businessman had to pay on an overdraft, and amounted to an effective annual rate of 730 per cent per year if funds were borrowed for one day. He questioned whether its CIBC parent had such fees in Canada.
Calling for greater government and regulatory oversight of commercial banks, Mr D'Aguilar described the Central Bank of the Bahamas as "useless" when it came to supervising the fees they charged.
He called on the Government to create a new regulatory agency, if necessary, and ensure there was "some sort of approval process" for commercial bank fee increases - focusing on whether they were fair and reasonable.
"The banks, having taken a killing on their bad loans, are implementing outrageous and astronomical fees to try and recoup some of the losses they've incurred on those loans," Mr D'Aguilar charged.
"For example, CIBC FirstCaribbean have decided to impose a 2 per cent fee on a one-day loan. If you happen to go into overdraft, and let's say you go into overdraft for $30,000 for one day, they will charge you $600 for that one day. That equates to an annualised rate of 730 per cent.
"They don't call it interest, and on top of that they charge you the 17 per cent interest they normally charge you for an overdraft if you don't have an overdraft facility fee in place. This is when they impose this fee. Why would you charge such an outrageous fee."
Mr D'Aguilar said that while CIBC FirstCaribbean ultimately reversed the 'excess penalty fees' it had levied on Superwash, totalling $955 during one month, this only happened after he vehemently complained about it.
"I'm a large and reputable customer, and I'm not sure they're doing it for everyone," he added. "I had to complain, and now they're trying to drive me to set up an overdraft facility with them.
"My concern is that I don't know whether they've contacted all their customers about this, and if people know they're being charged these fees. It took me four months to pick this up."
The former Chamber president said that by charging the 2 per cent in the form of a 'fee', and FirstCaribbean applying it in the manner it was, there was no link with the traditional determinants of interest - perceived risk, plus duration and size of the loan.
He explained that if a client without an overdraft fee went into this position for more than one day in a given month, FirstCaribbean would levy the 2 per cent 'excess penalty fee' based on the maximum overdraft amount on the account statement.
"What they do, in the course of a month, is they look at the highest negative balance you have and multiply it by 2 per cent," charged Mr D'Aguilar. "They pick the highest negative number, and multiply it by 2 per cent for the month. I think that's absolutely outrageous."
Mr D'Aguilar said he was charged $955 in 'excess penalty fees' for July as a result of two different accounts going into overdraft for two and three days respectively.
In a letter to FirstCaribbean executives, he wrote: "The excess penalty charge is 2 per cent per day, which equates to an effective annual rate of 730 per cent per year if you borrow money for one day, or 384 per cent per year if you borrow for two days, or 243 per cent per year if you borrow money for three days or 24 per cent per year if your borrow for 30 days. This is, of course, on top of the regular interest rate of 17 per cent that I already have to pay on an overdraft."
Mr D'Aguilar told Tribune Business that Bahamian businesses and consumers were "at the mercy" of the six banks - Royal Bank of Canada, CIBC FirstCaribbean, Fidelity Bank (Bahamas), Commonwealth Bank, Scotiabank and Bank of the Bahamas - who had the ability to operate as "a cartel".
As a result, there was very little option for Bahamian consumers, while changing banks overnight was not an option for many businesses given that they often had existing credit lines and properties mortgaged as collateral with one particular lending institution.
"There should be full disclosure of fees. People should see and view them," Mr D'Aguilar added. "A lot of businesses are not aware of what is going on. I was shocked when I saw $500-$600 of fees for one month.
"The Minister of Finance should focus on this issue, and not allow the banks to do what they want to do."
September 14, 2011
tribune242
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label Central Bank Bahamas. Show all posts
Showing posts with label Central Bank Bahamas. Show all posts
Thursday, September 15, 2011
Monday, January 3, 2011
The Bahamas' ever-expanding national debt: "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects...
'Biggest threat' from $4.1bn national debt
By NEIL HARTNELL
Tribune Business Editor
The ever-expanding national debt, which hit $4.139 billion at end-September 2010 after growing by 12.5 per cent or $460.5 million over the previous 12 months, represents "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects, a former finance minister warned yesterday.
James Smith, minister of state for finance in the former Christie government between 2002-2007, said that while the Bahamas' national finances were "nowhere near crisis" point yet, the "worrisome" aspect was the "aggressive" and "accelerated rate" at which the national debt and its ratio to gross domestic product (GDP) was increasing.
Arguing that the Bahamas urgently needed to regain its fiscal headroom to cope with further unexpected future shocks to its economy, Mr Smith said the main concern was the trajectory at which the national debt and debt-to-GDP ratio were rising, especially since the revenues to service them were still falling.
Commenting on the most recent national debt figures, published by the Central Bank in its 2010 third quarter economic review, Mr Smith said: "The increase is getting a little aggressive. Any time you have this continuing trend, and it's an upward trend, that's the concern, because it comes at a time when there is no increase in revenue, so the debt service element is growing at full steam.
"With less revenue coming in, and the cost of financing the debt going up, a greater part of Government expenditure has to be dedicated to debt servicing." As a result, the sums available for the Government to spend on essential services, such as health, education and national security, would be less.
Concern:
"There ought to be some concern about the rate of increase in the debt, because it's very difficult once you step over that slope to come back," the former finance minister added. "I don't think we're anywhere near crisis; it's the trend that's the worrisome part."
The Bahamas' national debt grew by 12.5 per cent or $460.5 million over the 12 months to September 30, 2010, and by 4.4 per cent or $173.3 million during that third quarter, aided by a $100 million domestic government bond issue.
While many small island economies had managed to withstand the global recession with higher debt-to-GDP ratios than the Bahamas, a number had been forced to head for the International Monetary Fund (IMF) to restructure their debt. And they, like the Bahamas, did not have a hard currency to back their debt, being forced to borrow in foreign currency.
The Central Bank report also highlighted another concern, namely that public sector foreign currency debt stood at $1.324 billion as at September 30, 2010, with 59.3 per cent directly attributed to the central government. And, according to Tribune Business calculations, foreign currency accounts for 32 per cent - almost one-third - of the total national debt.
"That's also worrisome," Mr Smith responded, when informed by Tribune Business about the level of foreign currency debt. "What is happening is that we're seeing a build-up in foreign currency reserves, which is good, but that has been produced by the Government's foreign currency borrowing and the IMF subvention [special drawing rights]."
The real issue for the Bahamas could come "somewhere down the road" when the Government's foreign currency bond issue matured, requiring a multi-million dollar principal repayment, likely to be in the region of $200-$300 million, to be made to the investors.
While the Government's existing foreign currency bonds all had medium and long-term maturities, if the foreign reserves were not boosted by inflows from tourism and foreign direct investment, the principal repayments would represent a substantial drawdown on these reserves - currently standing at $875 million.
Ultimately, this could result in "more and more foreign currency being used for debt reduction, as opposed to bolstering the economy" through import spending and such like, Mr Smith said, adding: "We have to be careful about the foreign currency portion of the debt.
"Right now it looks good on the monetary side because the reserves have increased, but that's not come from tourism or foreign direct investment - it's come from the proceeds of debt.
Rates:
"Again, down the road, in maybe another two or three years' time, when you look at this in a global context where interest rates have been held down by quantitative easing, the rate on our foreign currency borrowing could rise because it's tied to LIBOR.
"This debt servicing component of the Budget could rise even further still."
Describing the national debt and its growth rate as "the biggest threat" to the Bahamas' medium and long-term economic growth and stability, Mr Smith told Tribune Business: "We are rapidly using up the headroom in the event we do have problems down the road, and for us it's external events that put us out."
Pointing to the 'short, sharp shock' to the Bahamian economy caused by the travel hiatus following the September 11 terror attacks, which plunged this nation into a temporary recession, Mr Smith added that with the likes of Europe and US also carrying major debt burdens, the Bahamas would have to compete for "the same pool" of financing, something that could see it crowded out or forced to pay higher interest rates on its debt.
"We're not out of the woods yet. We need to continue to get the headroom in the event of a short-term crisis," Mr Smith said. He urged the Government to conduct a careful, proper analysis of the fiscal picture to ensure the Bahamas enjoyed a soft landing.
And the former finance minister warned that while the Government "may have it under control internally", the growing national debt and falling revenues would be interpreted as a bad sign by the international community. Indeed, the rising level of government debt saw interest payments during the first quarter of the 2010-2011 Budget year to $44 million, a growth of $12.2 million or 5.29 per cent.
The direct debt charge on the Government grew by 5.3 per cent or $181.4 million over the 2010 third quarter, and by 10.6 per cent or $342.6 million in the 12 months to September 30, 2010. Bahamian dollar obligations accounted for 78.1 per cent of this direct charge.
December 31, 2010
tribune242
By NEIL HARTNELL
Tribune Business Editor
The ever-expanding national debt, which hit $4.139 billion at end-September 2010 after growing by 12.5 per cent or $460.5 million over the previous 12 months, represents "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects, a former finance minister warned yesterday.
James Smith, minister of state for finance in the former Christie government between 2002-2007, said that while the Bahamas' national finances were "nowhere near crisis" point yet, the "worrisome" aspect was the "aggressive" and "accelerated rate" at which the national debt and its ratio to gross domestic product (GDP) was increasing.
Arguing that the Bahamas urgently needed to regain its fiscal headroom to cope with further unexpected future shocks to its economy, Mr Smith said the main concern was the trajectory at which the national debt and debt-to-GDP ratio were rising, especially since the revenues to service them were still falling.
Commenting on the most recent national debt figures, published by the Central Bank in its 2010 third quarter economic review, Mr Smith said: "The increase is getting a little aggressive. Any time you have this continuing trend, and it's an upward trend, that's the concern, because it comes at a time when there is no increase in revenue, so the debt service element is growing at full steam.
"With less revenue coming in, and the cost of financing the debt going up, a greater part of Government expenditure has to be dedicated to debt servicing." As a result, the sums available for the Government to spend on essential services, such as health, education and national security, would be less.
Concern:
"There ought to be some concern about the rate of increase in the debt, because it's very difficult once you step over that slope to come back," the former finance minister added. "I don't think we're anywhere near crisis; it's the trend that's the worrisome part."
The Bahamas' national debt grew by 12.5 per cent or $460.5 million over the 12 months to September 30, 2010, and by 4.4 per cent or $173.3 million during that third quarter, aided by a $100 million domestic government bond issue.
While many small island economies had managed to withstand the global recession with higher debt-to-GDP ratios than the Bahamas, a number had been forced to head for the International Monetary Fund (IMF) to restructure their debt. And they, like the Bahamas, did not have a hard currency to back their debt, being forced to borrow in foreign currency.
The Central Bank report also highlighted another concern, namely that public sector foreign currency debt stood at $1.324 billion as at September 30, 2010, with 59.3 per cent directly attributed to the central government. And, according to Tribune Business calculations, foreign currency accounts for 32 per cent - almost one-third - of the total national debt.
"That's also worrisome," Mr Smith responded, when informed by Tribune Business about the level of foreign currency debt. "What is happening is that we're seeing a build-up in foreign currency reserves, which is good, but that has been produced by the Government's foreign currency borrowing and the IMF subvention [special drawing rights]."
The real issue for the Bahamas could come "somewhere down the road" when the Government's foreign currency bond issue matured, requiring a multi-million dollar principal repayment, likely to be in the region of $200-$300 million, to be made to the investors.
While the Government's existing foreign currency bonds all had medium and long-term maturities, if the foreign reserves were not boosted by inflows from tourism and foreign direct investment, the principal repayments would represent a substantial drawdown on these reserves - currently standing at $875 million.
Ultimately, this could result in "more and more foreign currency being used for debt reduction, as opposed to bolstering the economy" through import spending and such like, Mr Smith said, adding: "We have to be careful about the foreign currency portion of the debt.
"Right now it looks good on the monetary side because the reserves have increased, but that's not come from tourism or foreign direct investment - it's come from the proceeds of debt.
Rates:
"Again, down the road, in maybe another two or three years' time, when you look at this in a global context where interest rates have been held down by quantitative easing, the rate on our foreign currency borrowing could rise because it's tied to LIBOR.
"This debt servicing component of the Budget could rise even further still."
Describing the national debt and its growth rate as "the biggest threat" to the Bahamas' medium and long-term economic growth and stability, Mr Smith told Tribune Business: "We are rapidly using up the headroom in the event we do have problems down the road, and for us it's external events that put us out."
Pointing to the 'short, sharp shock' to the Bahamian economy caused by the travel hiatus following the September 11 terror attacks, which plunged this nation into a temporary recession, Mr Smith added that with the likes of Europe and US also carrying major debt burdens, the Bahamas would have to compete for "the same pool" of financing, something that could see it crowded out or forced to pay higher interest rates on its debt.
"We're not out of the woods yet. We need to continue to get the headroom in the event of a short-term crisis," Mr Smith said. He urged the Government to conduct a careful, proper analysis of the fiscal picture to ensure the Bahamas enjoyed a soft landing.
And the former finance minister warned that while the Government "may have it under control internally", the growing national debt and falling revenues would be interpreted as a bad sign by the international community. Indeed, the rising level of government debt saw interest payments during the first quarter of the 2010-2011 Budget year to $44 million, a growth of $12.2 million or 5.29 per cent.
The direct debt charge on the Government grew by 5.3 per cent or $181.4 million over the 2010 third quarter, and by 10.6 per cent or $342.6 million in the 12 months to September 30, 2010. Bahamian dollar obligations accounted for 78.1 per cent of this direct charge.
December 31, 2010
tribune242
Tuesday, February 3, 2004
The Bahamas Government to Rescue Bahamas International Securities Exchange (BISX)
Gov't To Rescue BISX Again
03/02/2004
The Cabinet plans to rescue the Bahamas International Securities Exchange (BISX) if its shareholders agree to match the $450,000 the government intends to provide it through the Central Bank, the Journal has learnt.
This financial shot in the arm would come nearly two years after BISX asked for $2 million in public funds.
A committee that was appointed to look into the affairs of BISX recently recommended that the Government of The Bahamas through the Central Bank "commit to continue its financial support of BISX for an additional amount of $450,000 over the next three years."
It also recommended "it be proposed to the existing and prospective shareholders of BISX that an additional minimum amount of $450,000 to match the government's support be subscribed for by way of a rights offering."
Minister of State for Finance James Smith said Monday that Committee Chairman Julian Francis "was told to go back and speak with the private owners [of BISX] and see if they are in accord with the recommendations [of his committee]."
A Bahama Journal source close to the matter said Monday that "the switch has already been flicked and things are beginning to happen for BISX."
Recognizing the great need for an institution like BISX to the country's developing economy, the committee, recommended late last year that the exchange receive help. This would not be the first time that BISX would be receiving financial assistance from a government-related agency.
In 2002, the Central Bank gave BISX $150,000.
Start-up costs and losses experienced during the first two years of operations resulted in BISX approaching the government in mid 2001 to provide substantial financial assistance to support the continued functioning of the exchange.
When the government announces the decision to help BISX, it will surely be met by some criticism from members of the private sector, some of whom argue that the government should not be in the business of bailing out private companies. Even an official in the Ministry of Finance seems to share this view.
In observations presented to the Minister shortly after the latest report on BISX was released, she wrote, "The recommendation for a further $450,000 of government financial support is divergent to the mandate of BISX being capable of operating without government subvention. It is hoped that with the restructuring of BISX along with the implementation of the other aforementioned recommendations that BISX would become a more efficient, fully operational exchange that requires no government subvention."
The BISX report indicated that the existing shareholders in BISX are unwilling to inject any new capital in the exchange. But it said that existing shareholders and new shareholders might be willing to support the exchange if certain changes were implemented.
An earlier Journal story on the committee's findings revealed that lavish spending on items such as furnishings compounded the exchange's financial problems.
The report also pointed to a number of reasons why BISX faced financial troubles, including the exchange's cost structure, significant cost overruns on management consultancy fees and the lack of anticipated public policy support.
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