The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber’s chief executive yesterday backed the Central Bank’s move to relax its lending guidelines so storm-ravaged businesses and homeowners could finance restoration, emphasising: “We need to have capital flowing.”

The regulator, in a statement, informed commercial banks that it was relaxing both borrower debt servicing ratios and equity contributions to better facilitate access to much-needed credit in Matthew’s aftermath.

The 15 per cent equity (downpayment) contribution that the Central Bank recommends all borrowers make, prior to receiving a loan, is being waived entirely for an undefined period.

And the maximum debt service ratio recommended by the Central Bank is being increased by at least 10 percentage points - from 40-45 per cent to 55 per cent.

“In the aftermath of the damages caused by Hurricane Matthew, and to facilitate access by households to credit facilities for relief purposes, the Central Bank of the Bahamas announces the temporary relaxation of lending guidelines to domestic banks,” the Central Bank said, adding that this would be subject to continual monitoring.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, praised the Central Bank’s action as “a good move” towards stimulating economic activity in Matthew’s wake.

However, he emphasised that the alterations were merely to ‘guidelines’, not law or policy that was ‘set in stone’, meaning that it would be up to the discretion of each commercial bank as to how they treated borrowers post-Matthew.

“The fact the Central Bank took the move they did to relax the debt service ratios for persons needing to go to the bank to borrow money is a good thing,” Mr Sumner told Tribune Business.

“But it’s for the banks themselves to agree. They will still have to take applications on a case-by-case basis, depending on the borrower’s history and creditworthiness.

“It’s a good thing that the Central Bank has done that, but it doesn’t necessarily mean the banks are going to commit. At least the opportunity’s there.”

The regulator’s move is designed to improve access to credit for hard-pressed businesses and homeowners requiring emergency financing to repair premises/inventories in Matthew’s wake.

Some commercial banks already go beyond the ratios suggested by the Central Bank, depending on a borrower’s history and ability to repay, and Bahamians will have to hope they take the Central Bank relaxation to heart.

“If they have to restructure existing loans and give small loans, they can increase that by 10 percentage points and give them access,” Mr Sumner said of the Central Bank’s move. “All that is going to spur economic activity.”

The Chamber chief said restarting commerce, and getting the economy moving, was the best way for the Bahamas to recover from Matthew, as employment and the associated income would help to finance recovery - especially for those who are either uninsured or underinsured.

“Whilst this has been a very devastating hurricane for the country, particularly for New Providence, Freeport and Andros, it’s going to generate some activity in the economy, particularly for a lot of people who will be employed in construction,” Mr Sumner told Tribune Business.

“The only way that happens is if we have capital flowing through the economy. If capital freezes, we have a problem, and that leads to depressions.

“If capital flows, the economy looks better, so we hope the banks show flexibility and understanding to allow customers to get their homes repaired, with similar monies being handed out to the business community.”