By YOURI KEMP
Tribune Business Journalist
The president of the Clearing Bank Association (CBA) is not sure that Bahamians will be able to take advantage of the new relaxed lending policies imposed by the Central Bank.
Kenrick Brathwaite, chief executive of the Bank of the Bahamas, told Tribune Business that despite the regulator’s common sense in easing lending policies last week, “a very small percentage of borrowers in this country, the service ratio of total debt (TDSR) falls below 50 percent, so you’re going to find some people rejoicing and the banking industry rejoicing because we’ve always had to adhere to strict TDSR guidelines with the exception of consolidations, but I don’t know how many borrowers will jump for joy this morning to say it’s relaxed”.
The Central Bank has also changed capital requirements for loans, but Mr Brathwaite said ‘it’s not something a customer would jump for joy because I don’t know how many places would be affected’ .
He added: “But it’s a good thing for the central bank to recognize that many Bahamians have loan or borrowing needs and if one way or another if you can help them, even if it’s just a few, you’ve done something right.”
The Central Bank said that effective immediately, lending institutions may, on a case-by-case basis, approve applications for new personal loans, subject to the total debt service ratio for the facility and any pre-existing obligation not exceeding 50%. That is, unless stipulated regulatory requirements have been imposed by the Central Bank on specific banks or credit unions. This brings the total debt service ratio down from the current range of 40% to 45%.
Easing credit at a time when inflation is high and Bahamians are importing it into the country would come across as a financial stimulus, but not necessarily a response to interest rate hikes by the US Federal Reserve on last month.
But Mr Brathwaite ultimately warned that few would benefit from the central bank’s further easing of lending restrictions. “The truth is that a high percentage of the working population is already in too much debt and that’s why I said TDSRs are over 50% and most of them are probably over 50%.