Over 550 Banks But
Not Many to Turn to ...
With news of the recently announced intentionby CIBC and Barclays Banks to merge their regional operationsricocheting across the Caribbean, it is perhaps time that we inthe Cayman Islands consider a similar but limited move by ourresident financial houses with the same purpose as those two banks better positioning to take on challenges and ensure futuregrowth.
This move by the two banks to come togetherand establish the formidable FirstCaribbean International Bankis aimed at producing a mega institution that could grandly offerto the Caribbean services as it takes advantage of the economiesof scale that come with its size.
Hopefully this new institution whichby name and intention is to be truly Caribbean - will be ableto serve us while charging rates competitive enough to keep atbay what all warm-blooded regional people feared the spectreof an invasion by large international banks that will use theirvery size to wipe away any indigenous financial house we have.
Since the talk of free trade arose afterthe Uruguay Round and emergence of the World Trade Organisationas the international regulator and arbiter on borderless trade,it was expected that some regional entities will seek strategiclink-ups to survive in the new order of doing business.
The purpose of the CIBC/Barclays link-upof sorts is to face the changing times and survive.
We are experiencing changing times in theseIslands. The economy is stagnant and slipping, trade issluggish and if something isn't done soon things could get worst.
Maybe the current remaining four banks inthis country should consider a form of link-up to deal with thechanging times. Not a merger, but they could look at a poolingof resources: a pooling of money to provide a massive fundingof locally owned businesses.
Generation of such a massive fund througheach bank putting up a percentage with which it is comfortablecan make available to local entrepreneurs and 'wanna be' investorsa source of financing on conditions more attractive than individualbanks can offer in these hard times when the risk is singly borne.
Availability of such funds on softer termsthan what can be had at the banks now may very well produce thetype of investment catalyst needed to put our economy in a highergear.
Less stringent borrowing conditions makeinvestors less fearful and bring out in them a willingness togo for that project they are very convinced could become a profitableenterprise.
And if there is no interest of the fourother clearing banks to come together for this purpose, then thegreen light should be given to the other 550 to become involvedin local lending.
That fear and unwillingness to invest festersin the minds of entrepreneurs when they come up against toughloan conditions because they know there are possibilities of costoverruns in project preparation, or that the enterprise may takea little longer than projected to realise its true money-earningpotential. In the harsh lending conditions that these times demandof the banks an investor will shy away from borrowing becauseanything happening outside of the plans or projected time forthe beginning of debt repayment brings drastic penalties.
Two banks with region-wide branches mergedto suit changing times. The resulting institution will go forwardin confidence of survival.
At the moment survival for our remainingindividual local banks depends on invigorated commerce. Givingthat process a jump-start may be the remedy for the changing timeshere.