By NEIL HARTNELL
Tribune Business Editor
The Consumer Protection Commission’s chairman is openly questioning whether Bahamians benefit from foreign-owned banks, and urged this country to “get to the position where we say enough; we can’t take all of this”.
Jerome Gomez told Tribune Business that the commercial banks, especially those Canadian-owned, were imposing fee increases and restrictive lending practices at the same time as they were downsizing and sending Bahamian jobs ‘offshore’.
With decision-making power increasingly residing outside the Bahamas in Toronto, and Caribbean regional head offices, Mr Gomez said Bahamians were “better off doing things ourselves, as he repeated his call for more banking licenses to be issued to locals.
He admitted that he wanted to keep the issue before the public as a means “to put the pressure on the Central Bank” to become more proactive in regulating commercial bank fees.
Jamaica’s government last week announced that it was creating a financial services consumer protection agency specifically to regulate that country’s bank fees, following a public outcry over Scotiabank Jamaica’s move to charge a $385 Jamaican dollar fee to change a $5,000 Jamaican dollar bill into smaller denominations.
Applauding Jamaica’s move, Mr Gomez said the Bahamas should follow suit, suggesting the Consumer Protection Commission could set up either a separate Board or offshoot agency to tackle the issue.
He argued that Royal Bank of Canada’s (RBC) decision to close four branch locations, leaving Spanish Wells and Bimini without a physical commercial bank presence, was the latest in a series of burdens that foreign-owned banks had placed on Bahamians.
“They are increasing fees to the Bahamian consumer at the same time as they are moving back office operations out of the country, and laying off staff,” Mr Gomez told Tribune Business.
“What benefit are these banks to us at the end of the day, particularly the foreign-owned banks, moving back offices, cutting staff and increasing fees, all to add to the bottom line?
“We have to get to the point where we say: ‘Enough, we can’t take all of this’. We’re the biggest earner in the Caribbean, but they’re taking jobs to Jamaica, Barbados and Trinidad. All the head offices have gone to those countries as well. The country management are also figure-heads now; they hardly approve anything.”
All three of RBC, Scotiabank and CIBC FirstCaribbean International Bank have reduced staff and branch locations following the 2008-2009 recession, in response to the Bahamas’ weak economic environment that has resulted in low growth and high delinquent loan levels.
The trio have also consolidated back office functions in their Caribbean service hubs in Jamaica, Barbados and Trinidad, transferring jobs from the Bahamas to low labour cost countries, as they seek to drive efficiencies and cut expenses.
In response, Mr Gomez argued: “We are better off doing things ourselves, and I wholeheartedly support the issuance of more bank licenses to Bahamians and let your business compete. Whoever can’t compete in the market will have to close shop.”
He then criticised the Central Bank for its unwillingness to step in and regulate commercial bank fees, the subject of frequent Bahamian consumer complaints, suggesting it was too focused on macroeconomic monetary policy.
“We have to continue to put the pressure on,” Mr Gomez told Tribune Business. “I’m doing all this in the hope the Central Bank might stop for a moment and take a look.
“The Central Bank seems unprepared to do anything about it. They only seem to be concerned with foreign exchange and foreign reserves.”
Despite increases as high as 43 per cent on “a significant number of services” during the six months to end-June 2016, the Central Bank rejected direct intervention on bank fees through mechanisms such as price controls,arguing that these would only create further distortions that negatively impact consumers.
It, like the commercial banks, placed greater emphasis on improved consumer education and awareness, so that Bahamians could understand changes in fees and what drove them.
Mr Gomez acknowledged the ‘cause and effect’ between increased taxes imposed on the commercial banks by the Government, and the subsequent rise in many fees.
However, he argued that commercial bank profits were still high enough to ensure there was “room not to pass on every fee increase to Bahamian consumers”.
Recalling his recent meeting with Commonwealth Bank president, Ian Jennings, who was representing the Clearing Banks Association (CBA), Mr Gomez acknowledged that the 2015 imposition of the 3 per cent Business License fee had increased that bank’s licensee fees from $0.5 million to $5 million.
“When fees are increased on the banks, they increase fees to the consumer, so it’s a pass-on effect,” he told Tribune Business.
“I can understand that, and every bank trying to make shareholders happy, but when you’re making $50 million, $60 million, $80 million in profits, I think there’s room not to pass on every fee increase you have to the consumer.”
Scotiabank’s Bahamas profits more than tripled in 2016 to around $30 million, while RBC and CIBC generated net income of $61 million and $73 million, respectively. All three, though, remain significantly down on the net income they were producing prior to the 2008-2009 recession.
Mr Gomez, though, argued that the commercial banks “don’t seem to be doing anything to attract new business”, adding that they had effectively “shut out” small businesses from access to credit through “almost 100 per cent collateral” demands tied to cash and property.
The Consumer Protection Commission chair described fees as “the easy low hanging fruit”, which banks could increase with impunity as there was no regulatory oversight.
“Once one bank does it, everyone seems to fall in line,” Mr Gomez said. “It seems like a ‘follow the leader’ attitude. You never see the kind of healthy competition you see in the US.”