Governor of the Eastern Caribbean Central Bank (ECCB), Timothy Antoine has announced that the Eastern Caribbean dollar remains strong in the region.
He made that announcement while addressing the Dominica Association of Industry and Commerce (DAIC) ‘Eggs and Issues’ Annual General Meeting (AGM) on Thursday, which focuses on the Theme “Improving Monetary Stability through Growth, Competitiveness and Employment”.
According to him in terms of monetary stability the EC dollar has been strong pegged to the US dollar 1 to 2.7 for the last 41 years.
That, he said, is a tremendous achievement.
“I want to confirm to you this morning that our dollar remains strong, it is back at the moment by about 97.6 percent which simply means, for every $1 EC in circulation we have 97.6 cents in foreign reserves, principally US securities backing our dollar,” Antoine explained.
According to Antoine there are benefits to having a strong dollar in the region.
“Low inflation, confidence, free convertibility , so you know if you have EC dollars you can get US dollars,” he noted. “Investors like that because they do not have to worry about exchange risk.”
There are many benefits experienced over time because of the strong dollar, he said.
Meantime he said the region’s financial system is stable and somewhat resilient, pointing out that in the ECCU, the average of non-performing loans stand at 11 percent.
“Now that is coming down from a high of around 18 percent three years ago, but the international bench mark for non-performing loans is in fact 5 percent,” he explained. “So we [are] still more than double and our bankers in the room will understand that remains a big issue. Some banks are actually higher than that and of course there are those who are below that.”
He went on to say that there is work to be done in that regard.
Antoine revealed that Dominica has shown some improvement in the area of non-performing loans.
“It’s coming down a bit slowly, the non-performing loans, so we continue to encourage our countries where that is concerned,” he said.
He revealed that some of the actions that the ECCB is contemplating include, the establishment of the Eastern Caribbean Asset Management Corporation, “that is a regional body that is intended to buy bad loans from our banks, starting with the banks that were resolved in Antigua & Barbuda and Anguilla, then moving on to buy bad loans from other banks.”
He said this is important because, “banks are constrained in their ability to extend credit to the extent that their balance sheet is impaired with the high proportion of non-performing loans.”
Antoine said further that those high non-performing loans not only mean lower interest income for the banks, “but probably [mean] higher fees and charges for you and for me.”
“Because at the end of the day the banks have to make up their income and by the way, banks must make a profit,” he stated.