Banking system must change — Richards

  • Finance Minister Bob Richards has called for the Island's banking system to change.

    Finance Minister Bob Richards has called for the Island's banking system to change.

Bermuda’s banks are a drag on the Island’s recovery from recession, Finance Minister Bob Richards said.

And he said the sector’s get-tough policy on lending and tiny deposit interest rates were “at odds with Bermuda’s national interests” — and added that Government would be pushing the Bermuda Bankers’ Association to change the sector’s course.

Mr Richards took a swipe at the powerful banking system as he unveiled his first full Budget.

But last night the Island’s two main banks, HSBC Bermuda and the Bank of Butterfield, buried themselves behind their balance books and declined to comment, referring requests to the Bermuda Bankers’ Association.

No one from the Association could be contacted for comment last night.

Mr Richards said that in most countries central banks dictated policies that were in line with Government priorities.

But he added: “In Bermuda, banks follow the monetary dictates of the Federal Reserve in the US and also their own individual appetites for lending.

“In the last ten years, the combination of these two factors has put bank lending policies at odds with Bermuda’s national economic interests — that is ultra-easy money lending when the economy was already red-hot followed by debilitating ultra-cautious lending during economic weakness.”

And he turned the spotlight on “infinitesimally low” interest rates coupled with “excessively wide” margins between deposits and loans.

Mr Richards said: “Moreover, there is currently no appetite for lending. And to top it off, banks continue to lay off Bermudian staff.

“This is, on multiple levels, contradictory banking policy at a time when we need to expand this economy.

“We have stated repeatedly that in order for Bermuda to move forward, all oars must be pulling in the same direction.”

But he added: “Attaining such forward momentum is much more difficult to achieve when such an important economic driver as the banking sector is pulling in the wrong direction.”

Figures in the Budget statement showed that at their peak, banks lent more than $6.3 billion locally in 2009 — but almost $1 billion less by the third quarter of last year.

Mr Richards said: “The Government is in discussions with the Bermuda Bankers’ Association about these matters to find a way to have everyone pulling in the same direction.”

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Published Feb 22, 2014 at 8:00 am (Updated Feb 21, 2014 at 10:48 pm)

Banking system must change — Richards

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