The Central Bank of Barbados yesterday announced a series of measures to support the domestic banking sector in light of the projected impact of COVID-19 on the economy and the financial system.
In outlining the changes, the Bank said that, while the financial system is very liquid, liquidity at individual institutions may fluctuate from time to time, particularly in strained conditions. The Bank noted that financial institutions have access to the interbank market and/or negotiated credit line facilities. These actions, therefore, are intended to further help Barbados’ commercial banks and other deposit taking companies that it regulates navigate these trying circumstances.
Effective April 1, 2020:
◾The Bank’s discount rate at which it provides overnight lending to banks and deposit-taking non-banks licensed under the Financial Institutions Act will be reduced from 7 percent to 2 percent
◾The Bank will reduce the securities ratio for banks from 17.5 percent to 5 percent
◾The Bank will eliminate the 1.5 percent securities ratio for non-bank deposit taking licensees
◾The Bank also stands ready to make collateralised loans for up to six months as liquidity support for licensees, if necessary.
These actions will make it easier for financial institutions to assist their personal and business clients during the pandemic. The island’s commercial banks previously announced measures to help affected borrowers on a case by case basis. Those initiatives include:
◾A moratorium on loan payments for firms and individuals directly impacted by the pandemic and resulting economic downturn, for up to six months
◾Adjusted loan terms to reduce monthly payments and improve cash flows
◾Additional credit to existing customers to address short-term liquidity challenges
“COVID-19 has had a crippling effect on the global economy. Its impact on global tourism has already led to the suspension of incoming flights to Barbados and the closure of hotels, attractions and restaurants, which in turn has impacted other ancillary sectors,” said Central Bank Governor, Cleviston Haynes. “We expect economic activity to contract, bringing with it the potential for significant job losses.”