The Eastern Caribbean Monetary Council is considering a proposed amalgamation of the region’s banks in order to create more efficiency and stability within the financial system.
There are currently over three dozen banks listed across the OECS region where individual countries hold responsibility for licensing banks in their respective territories.
It is a situation which is described by Governor of the Eastern Caribbean Central Bank Sir Dwight Venner as a “banking overload”.
Sir Venner says there exists a strong case for amalgamating banks across the Eastern Caribbean which has a population of just over half a million.
“Legally we have 40 banks in the OECS and that is to say that because each country licenses banks separately, the Bank of Nova Scotia for example, which has seven branches in the Eastern Caribbean Currency Union, is regarded as seven banks, so we end up with 26 foreign banks and 14 local banks. For a population of 600,000 based on all the arithmetic, these are too many banks,” he said.
The Eastern Caribbean Monetary Council has examined the possibility of amalgamating banks across the Currency Union and there is consensus that steps must be taken to advance this initiative.
But the ECCB Governor advises that the amalgamation process must be undertaken carefully.
“Banks are not like supermarkets, if so they could be closed down with impunity. Banks hold the deposits of citizens and therefore must be treated differently. There is also the payment system where cheques are exchanged, not only within countries but between currencies, and any unraveling of that system could be chaotic so one must proceed in a very measured way and that is what is taking place,” he noted.
The ECCB governor warns that in order for the region’s banking system to remain profitable and viable several banks must join forces.
you all want to create the problem they are having with the euro and them mr venner will ask us to print our own currency .then the exchange rate will be $300.00 for 1 u.s dollar.
The only idea worse than this is Skerrit’s nomination of Alix Boyd Knight as president of dominica.
Why would Dwight want to create a monopoly in the financial services sector, when all over the world the direction towards dismantling monopoly, and encouraging competition.
What Mr. Venner needs to do is to implement interest rate policy that will provide relief to borrowers. Why is it that developed countries use interest rate as a tool to manage fiscal and monetary policy, in conjunction with effective regulatory and supervisory process in place to monitor and control the tendency of some bankers to engage in imprudent banking practices.
I believe that Mr. Venner has failed in the effective supervision of the financial services sector, in its current form, how in God’s creation is he going to manage the monopoly that he wants to create?
I suggest that Dwight spend time advising the OECS governments on the restructuring of the financial services sector to include consumer Lending, Mortgages Lending, The credit Union, The Insurance Companies, Payday Loan Providers, Western union, Money Gram, etc., the entire sector, Provide guidance and direction on relevant legislation to manage the sector much better than he has done in the past; or in the alternative, step aside, get out of the way and let more contemporary minds take over the position. Bring fresh ideas in monetary economics to these countries.
We have the talent, why are we wasting time with DEAD WOOD.
They looking for a serious demonstration this time. Up to now Dominicans cannot get their mony from those insurance companies, now already our money in jeopardy in all kind of doggy ventures, they want to finish us off. Let Dominicans stay there and think is because they love us, all they want to do us take our excess liquidity and say they making use of it while people will be living it large in private jets.
On what basis does he conclude that 40 banks is too much? Isn’t it a fact that smaller entities closer to the people would be more responsive to their needs? I think that based on the content of the gentleman’s other comments what he might be referring to is amalgamation of the regulatory structures for the financial industry. That makes more sense, especially given our common currency but it raises questions of sovereignty. Do you think our several finance ministries will be willing to give up what little power they have?
I think that just because a government official says we need to re-organize a sector of our society does not mean that it is a good or advisable thing. As citizens we need to take a hard and skeptical look at those proposals because men with power tend to use it to gain more power and the more power we allow them to accumulate, the less free we are as a people.
That is a very inward view.
The system works just fine. you want offload your workload and let the countries with stronger economies dominate the weaker ones. this is a form of financial colonization. Every Caribbean nation is sovereign and should be treated as such. We all work together but we are not married.
The good Governor fell short of zeroing on the type of amalgamation he recommends. To just say that OECS banks need to amalgamate is not saying much. A simple amalgamation may not reduce the number of banking outlets in the OECS, you know! For example, the amalgamation of five credit unions in Dominica to form the NCCU did not result in lesser branches. So, the good Governor needs to bring clarity to his recommendation.
This is an interesting development and I hope that the ECCB will carefully study the implications of such a groundbreaking move, not just from the point of view of bankers and regulators, but more importantly, from the viewpoint of the consumer.
While I agree that the current state of fragmentation in the banking industry is not an optimal model for delivering banking services, it appears to me to be a leap to arrive at a conclusion that an amalgamation is necessarily in the interest of banking consumers. On the contrary , it is conventional economic wisdom that more competition is better than less, particularly where consumers face higher prices and shoddy service from a monopoly.
But before I arrive at a conclusion about the merits or otherwise of this “amalgamation”, I would need to hear more details from ECCB about the nature of the banking industry they foresee in the Eastern Caribbean, going forward. Will there essentially be one bank and several “branches” in various jurisdictions in the region, as amalgamation implies? If so, how will there be the essential element of competition to guarantee the banking consumer competitive interest rates and better service?
My preference would have been a process of amalgamation that results in two or three major players. They would benefit from economies of scale to some degree, but more importantly, we would have a competitive playing field.
The benefits of competition must be preserved.
I believe the Governor is referring to the amalgamation of the same banks! For ex the amalgamation of all Scotia Banks . It may be similar to the amalgamation of the Credit Unions here on island. If there is a move in this direction, I believe there would be better monitoring of funds disbursement among others allowing these financial institutions to be at lesser credit risk . Base on research Credit risk seem to be crippling our financial institutions in the OECS . My main concern though is the interest rate risks etc long story. This is for another forum! (ignore all grammatical errors .just wanted to be succinct)
i had actually proposed something similar to your idea. I suggested the 12 Indigenous banks in the ECCU should be merged into three big banks with branches. have a wide cross section of Board Directors, larger reserves and mandatory compliance and corporate governance policies. then these banks could establish branches in the various islands.
“governor warns that in order for the region’s banking system to remain profitable and viable several banks must join forces”… Join forces for what sir? So they would become “too big to fail”, like what happened in America banking section a few yrs ago???
Caribbean Government don’t even hav money to stimulate their economies when times are tuff, how are they going to bailout those banks tht unite??, God forbid they become too big to fail when they unite….
NEW WORLD ORDER!!!!