Home' Trinidad and Tobago Guardian : August 10th 2014 Contents Anecdote vs the evidence
The RBC managing director was also asked
about the possibility of gap between what level
of debt people were experiencing and what
statistical evidence was actually showing.
White said while he recognised that people
often talked about debt, the facts were, in
terms of numbers, the evidence was not there.
He also said in addition to looking at delin-
quency rates, the level of savings and invest-
ments should be studied.
"One of the statistics that I would challenge
people to look at is how much saving is taking
place and how much investment. And I think
a fair amount of savings and investment is
On the many options for consumers to
access credit in T&T, particularly in the low
interest rate, high liquidity environment, White
said: "All that ends up creating is a wide range
of credit products that the market could get.
They can get it through hire purchase, they
can get it through a hire purchase arrangement,
and that can go anywhere from cars, fridges
to furniture or whatever.
You can get it through credit unions; you
can get it through your non-bank financial
institution. You can get it through an insurance
company; you can get it through the banking
system. All of that and you are not even talking
about credit from the neighbourhood store.
So, you have this abundance of credit products
and options outside there."
He said the good thing here was that steps
were being taken to regulate more of the non-
banking financial sector, and there were also
more checks and balances to keep credit con-
sumers on the straight and narrow.
"Certain things, institutionally, work well
for us. For example, we have a strong regulatory
framework and we are strengthening it by
bringing credit unions into that framework.
We now have a credit scoring systems in
Trinidad and we have a credit bureau. That
is very important. It is more difficult. There
are people who get turned down because they
have a telephone bill outstanding. Sometimes
that s a little harsh but it (the system) tracks
to that extent. So we do have the elements
that enforce, create a credit discipline."
Banks, he said, are being so cautious where
lending is concerned that the RBC managing
director was worried that his bank was saying
no to people who they should be saying yes
to.Referring to the RBC s three per cent delin-
quency on retail lending, White said: "That
is so low we end up asking ourselves: are we
turning away good business? When the delin-
quency rate is too low, that is the flip side of
In fact, the BATT president said increasing
the number of loans on the books was a good
way for banks to guard against delinquencies.
"If I have a larger book, that means, when
things go bad, I have more assets to protect
me. I can protect against delinquency by grow-
ing my business. So if I have the same amount
of delinquency, let s say I have $200 million
out of $2 billion That is 10 per cent. If I keep
that $200 million and I go up to $2.5 billion.
It is less."
White also said, balanced with the institu-
tional protections, many people brought their
own sense of personal responsibility when
coming to handling their borrowing.
But while the BATT president said there
was no weakening of the quality of credit
offered by most of the financial sector, he said,
there were pockets that, for all intents and
purposes, operated like financial institutions
that could not be regulated by current legis-
"I have to careful how I say it, because we
have a wide financial institution sector. There
are entities that do hire purchase, that function
like a financial institution. Even though they
may sell furniture and appliances and these
types of things, they lend, effectively. Are they
as rigorous? Bear in mind that the only reason
they are not regulated by the Financial Insti-
tutions Act is that they do not take deposits."
Like the deputy Central Bank governor said
some months ago, White said the
corporate/business sector presented more
problems to financial institutions than con-
According to White, not only was business
slower to borrow, they were also more likely
to be delinquent. He blamed 2008 s global
"Businesses have not been as aggressive in
terms of growth prospects. They are not seek-
ing to grow as much, so they are not borrowing
Still, he said, the situation is improving. In
recent years past, business confidence was
benign. White said, this business confidence
has been upgraded moderate.
Confidence and US currency
The senior banker said business credit was
not the only area the lack of confidence and
the high liquidity/low interest rate environment
was affecting. When asked if this lack of con-
fidence could be connected with the ongoing
shortfalls in the availability of US currency,
White said it could be.
He explained that the high liquidity, low
interest rate environment caused the TT dollar
to lose value quickly.
"If you look at your real rates, you lose
money literally. You are having negative returns
all the time if you leave your money in a bank
and you don t invest it. On the flip side, you
have this whole world and universe of things
that you can do with US dollars that you
cannot do with TT dollars. So I think some
of it is undeniably capital flight."
White also observed that while individuals
were demanding US dollars, the business com-
munity was, by far, the largest consumer of
the commodity. Taken altogether, this would
create heightened demand.
"If everybody wants all of it at the same
time, you are never really going to meet that
However, in his opinion, the continuing rise
in demand was out of line with the type of
consumption done by consumers and busi-
"We are consuming more in T&T. We are
consuming more luxury-type items and obvi-
ously the cost of that will also drives things
up. But it is not in line with the type of demand
for foreign currency. You can t see the demand
for foreign currency going up by a US$ billion
a year, every year. And I think some of it is
underground, you can t deny that. That takes
place. Money is moving out, because it doesn t
want to be here."
When asked to, White chose not elaborate
further on this point.
AUGUST 10 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG5
Business sector borrowing
You can't see the demand for foreign currency going up by a US$ billion a year, every
year. And I think some of it is underground, you can't deny that. That takes place.
Money is moving out, because it doesn't want to be here."
From Page 4
managing director of RBC T&T and
president of the Bankers Association
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