• Bank blames ‘market conditions’ for slash
• Loretta advises: ‘Withdraw every penny’
• Bahamians paying RBC to secure savings
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A former Cabinet minister yesterday urged Bahamians to pull their money from Royal Bank of Canada (RBC) after it cut interest rates on savings accounts and term deposits to zero.
Loretta Butler-Turner, who temporarily replaced Dr Hubert Minnis as the Opposition’s House of Assembly leader prior to the 2017 general election, told Tribune Business that the Canadian-owned bank’s move would result in depositors/savers losing money as the value of their holdings is eroded by the highest inflation rate The Bahamas has seen since 2013.
With the International Monetary Fund (IMF) projecting a 5 percent rise in consumer prices this year, she argued that RBC’s decision to eliminate any return individuals and companies can earn on their deposits was a further sign that the bank needed “to close down and push put”.
RBC, in a statement issued to Tribune Business, justified the October 1, 2021, move as “a response to local market and economic conditions” impacting its business and the interest rates offered to depositors with savings accounts and term deposits.
It did not define or explain these “conditions”, although it argued that the move was taken amid “historically low interest rates”. However, it is likely to have been influenced by the continued build-up of surplus liquidity in the overall Bahamian commercial banking system, which hit $2.443bn at end-August having expanded by some $213.5m during the first eight months of 2021.
The former figure represents money available to RBC and the other commercial banks for onward lending as mortgages, personal and consumer loans, but for which they are unable to find qualified buyers to extend it to. “They’ve got too much money sitting around idle,” one source said.
This problem, already significant prior to COVID-19, has been worsened by the pandemic’s devastating economic fall-out for households and businesses. Unable to gain a return on these funds, several sources yesterday suggested RBC’s decision to go to 0 percent interest rates was actually a bid to shed deposits that it did not want.
That, though, could not be confirmed. RBC said: “Like all financial institutions, RBC Royal Bank periodically makes amendments to the products we offer and adjusts them according to various internal and external factors.
“On October 1, we changed our interest rates on savings accounts and term deposits to 0 percent until further notice. This is happening in a period of historically low interest rates. RBC implemented this change in response to local market and economic conditions that effect our business and our approach to the interest rates we offer clients.
“For more than 100 years we have provided dedicated service to the country and have been a good corporate citizen through our charitable donations and community programmes. RBC values the business of all our clients here in The Bahamas and around the world. We remain committed to working with our clients to provide them with the products and solutions to meet their needs.”
RBC, in announcing the move to clients via notices posted at its branches, said: “Please be advised that effective October 1, 2021, interest rates on our Bahamian dollar deposit accounts will be adjusted. All Bahamian dollar savings accounts are now non-interest bearing until further notice.”
As for term deposits, which are more geared to wealthier individuals and corporate clients, RBC added that it will honour existing interest rates until the contractual term expires. Once this happens they, too, will earn no return on their deposits.
“New Bahamian dollar term deposits will be offered at a rate of 0 percent until further notice,” RBC added. “For existing clients with a Bahamian dollar term deposit, the term deposit will be allowed to run at its contractual interest rate until maturity. Renewal/roll overs of existing Bahamian dollar term deposits will be at a rate of 0 percent.”
This drew a blistering response from Mrs Butler-Turner, who wrote on social media: “Firstly I would advise any Bahamian or resident of The Bahamas who has any money in this bank to withdraw any penny... without hesitancy.”
While acknowledging that the Bahamian penny is no longer legal tender, she added: “According to this notice, your money gets absolutely nothing; zilch; nada. For depositing your money in their bank, essentially the value of your money is devalued. Yes, devalued, because of the various fees charged. You are paying them to keep your hard-earned money.
“Even if you put your money in a rock hole or under a mattress it is more valuable than keeping it in RBC. Flipside, your money is used for loans and they incur interest, plus collateral from the borrower. On top of this, each month your reward for putting your money in their bank is taxed with service fees and all manner of other fees.”
With inflation projected at 5 percent, this means that the value of deposits/savings with RBC will be eroded as customers are earning no returns on these funds. And, given that virtually all banks were offering low deposit rates anyway, often a small percentage of 1 percent, depositors at all banks are likely to lose out as consumer prices suffer the highest increase since 2013.
Mrs Butler-Turner, noting that RBC was embroiled in other recent controversy over its decision to stop dispensing $20 notes from its Automated Teller Machines (ATMs), added: “Seriously, they really need to close down and push pat. And to think that they extract such huge returns from our Bahamas government. This is utterly unfathomable, unbelievable and unconscionable.”
In a subsequent interview with Tribune Business, Mrs Butler-Turner said RBC had “been quite egregious in several things they’ve done” and “it seems as if they’re slashing everything”.
She added that “the saddest thing about this is that this is the Government’s primary bank”, with RBC often leading syndicated financing for The Bahamas at both local and international level, as well as providing successive administrations with significant overdrafts.
And, arguing that numerous Bahamian staff have been laid-off amid branch closures and RBC’s digital drive, Mrs Butler-Turner said: “Their customer service leaves a lot to be desired.... To my way of thinking, it’s totally illogical that you are cutting the human resources factor and cutting out what little incentive existed for savers.
“What really, really bothers is this is the bank my grandfather, Sir Milo Butler, fought for Bahamians to work in during the 1960s. As a child this was the only bank we went to, the main branch in Bay Street. It has featured significantly, been there for eons of years, and he agitated for it to be Bahamianised.
“RBC has been with us for over 100 years since 1908, and is historically the bank that Bahamians went to. They’ve done well in The Bahamas, and to turn around and withdraw any type of incentive for savers is a real slap in the face. It’s not even a percentage of a percent.”
Banking and financial services industry reaction was mixed, with some suggesting RBC’s move was another step in a long-term strategy to exit The Bahamas and other Caribbean territories that it remains in.
Others, speaking on condition of anonymity, pointed out that if RBC was charging service fees without paying any interest then effectively “you’re charging depositors/savers to take their money. And, while questioning whether the other Canadian banks, CIBC and Scotiabank, will follow suit, they added that not all depositors will get 0 percent.
“Philosophically, the Canadian banks have been 80 percent of the profit from 20 percent of the customers, let’s cater to that 20 percent,” one banker speculated. “I believe they will have a dual rate system where regular customers get regular rates. That’s the business you don’t want.”
Suggesting that none of the Bahamian-owned banks, namely Commonwealth Bank, Bank of The Bahamas and Fidelity Bank (Bahamas), will follow RBC’s lead, the banker said the trio had started to see an increase in business from customers switching from the Canadian-owned banks.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, said the BISX-listed institution had kept deposit rates at 2 percent and was offering higher for persons willing to place their money for the long-term. He added that RBC’s decision could not be divorced from the low interest, difficult to find qualified borrowers environment, while pointing out that US rates were equally low.
RBC’s move to lower deposit rates from a percentage of 1 percent to zero is thus not a massive leap. However, it may provide ammunition for the newly-elected Davis administration’s bid to licence as many as three Bahamian-owned commercial banks as pledged in its election manifesto.
Comments
licks2 2 years, 6 months ago
Ah-who dat? These people een serious aye? Somebody taking us for azzes them!! Ya mean they "wan use ya money ta make money" and don't want to "gee ya a lil bit er wha they make" from ya money???
Hahahahahahahaha. . .CB here come plenty more accounts them!! This ger be long!!
FrustratedBusinessman 2 years, 6 months ago
Fees for Commonwealth are simply too high. One reason that I don't do much banking with them.
ThisIsOurs 2 years, 6 months ago
I think they want the poor people gone as the article suggests. Theyre a bother to them. If they get rid of poor people there'd be none of those pesky lines. The question fot Royal Bank is, when you treat the black masses this way, what will the rich minority do as you openly discriminate against people who look just like them? I don't have the answer to the question. They may just do the I straight dance, but if Loretta Butler is representative, RBC might have a problem on their hands
Dawes 2 years, 6 months ago
It happens in a lot of countries. Effectively if you are not in debt to the bank (say Credit Cards) and do not have a large amount of funds in your bank account (say you have it at $500), then you cost more to them then they make. So as with elsewhere they try and encourage you to leave.
FrustratedBusinessman 2 years, 6 months ago
'She added that “the saddest thing about this is that this is the Government’s primary bank”'
This is the only reason that I still bank with them, simply too many important organizations use them.
RBC is the worst bank that I have ever dealt with. Horrid customer service and just constantly spit in your face as a client. Good riddance if they ever leave here.
SP 2 years, 6 months ago
This bank didn't "just" get lousy overnight & the other Canadian banks are running close seconds for lousyness. Their customer service has been horrendous for many years. I moved all my accounts from RBC years ago.
However, it is not fair to simply totally blame the Canadian banks for raping Bahamians. The government is equally at fault for this situation for allowing the banks to get away with PIRACY in our country for decades!
It would be a very simple matter for the government to mandate the Canadian banks to only implement the same regulations on Bahamians as they impose in Canada.
Lousy, corrupt, governance is the real culprit that allows Canadian banks to dry screw us mercilessly without vaseline or KY-jelly!
Bahamians should be angry with the government, not the banks, that only can do what they are allowed to do by our lousy, good-for-nothing governments!!!
Greentea 2 years, 6 months ago
To remove interest rates from savings and term deposits cancels the need to have these accounts. The bank must know this and they also know that sheeple Bahamians won't even do a bank run and get their money out. But I suggest you go and go quickly. Move ya munny! That this is the government's bank does not bode well for the Bahamas. Time to say bye to RBC in the Bahamas. Time to say bye to the pegged dollar too?
tribanon 2 years, 6 months ago
RBC is simply telling all of us what they already know only too well: The Bahamian dollar is on the verge of becoming worthless for all intents and purposes.
jackbnimble 2 years, 6 months ago
Bahamian are just waking up to this bank's foolishness. I ditched my account several years ago when they started charging a $5 monthly fee just to maintain a savings account. Then they started charging persons with non-RBC accounts $10 to cash their customers" cheques never mind that the customer was already being charged a fee to maintain the chequing account. Everything with this bank is take, take, take. What kills me is the long lines of Bahamians that que up everyday to continue banking with them. When are we gonna wake up? Guess we still have sockets for punishment.
John 2 years, 6 months ago
But I made several posts about this. RBC brought their interest rates on fixed deposits to zero since 2008. Or was that just for selected accounts. And on top of that they silently increased their interest rates on an overdraft facility (cash secured) from 6.5 percent to nine percent. So they are not giving their clients the 3-4 percent interest on their term deposits and charging a whopping 9 percent on a cash secured term deposit. So the client is, in effect paying RBC 12 percent interest which is 7 or O points above the prime rate. And they give a million reasons for doing this. So the best thing to do maybe is to pull your deposits out of RBC. They already closing branches left, right and center because the average Bahamians can no longer afford their services.
ohdrap4 2 years, 6 months ago
Funny Scotia is doing the same thing. And has been for a number of years. But it never made headlines because they did not put a sign on the door.
Which just says something about RBC, who keeps their clients humiliated lined up in the sun to get their own money.
Yep. Commonwealth Bank is too expensive.
tribanon 2 years, 6 months ago
Most Bahamians either don't realize or fail to understand that the enormous profits made by these Canadian banks remain a huge perennial drain on our country's foreign currency reserves.
By keeping the interest rates they pay on customers' deposits near or at zero, and by charging much higher rates of interest on all the various types of credit facilities they offer to their borrowering customers, e.g. loans, overdrafts, credit cards, etc., these Canadian banks continue to earn abundantly healthy net interest margins in even the worst of times.
Tack on the outrageous add-on fees of every kind they charge their customers and its easy to understand why the Bahamas operations of these Canadian banks remain so highly profitable.
But the parent headquarters of each of these banks in Canada has no desire whatsoever to let their enormous profits denominated in Bahamian dollars remain in Bahamian dollars and accumulate here in The Bahamas. The holding entities domiciled in Canada that own the Canadian banks are therefore constantly pressuring our Ministry of Finance and Central Bank for permission to periodically convert their Bahamian dollar denominated profits into hard foreign currencies, like the US dollar or Canadian dollar, that can be repatriated to Canada by way of dividend or other similar distribution payments. The currency conversions for this purpose are done using our country's scarce foreign currency reserves that are now funded in great part from the increases in our national debt by way of very costly foreign currency denominated borrowings.
Make no mistake about it, the greedy cartel of Canadian banks operating in The Bahamas have for many decades now quite literally been sucking the life blood out of our country in more ways than you might fully understand or appreciate.
tribanon 2 years, 6 months ago
We have in recent times been increasing the foreign currency denominated component of our country's total national debt in order to, among other things, acquire the foreign currency 'reserves' necessary to facilitate the conversion and repatriation back to Canada of the Bahamian dollar profits earned by the Canadian banks from their Bahamas operations.
You therefore can't help but wonder how many very senior officials in the Ministry of Finance and at the Central Bank involved in the approval process for the conversion and repatriation of accumulated profits denominated in Bahamian dollars enjoy generous interest rate and fee concessions in most if not all aspects of their banking relationship with one or more of these Canadian banks.
One thing is for sure, senior executives employed in Canada by the upstream holding entities of these Canadian banks long ago learned how to play the 'back scratching game' in order to get whatever approvals they want and need from senior officials in our Ministry of Finance and at our Central Bank.
Socrates 2 years, 6 months ago
This is what you get in an economy that is devoid of competition.. plenty banks but no competition. No different from lawyers, real estate association, etc. Each group colluding within its members to fix the cost of everything.. The bottom line is we need more ways to get returns beside the bank and we have to break up the cartels.
delisaduncanson 2 years, 6 months ago
This is a highly irresponsible statemen to make.
When we don't know ask. Better to call up someone in The Central Bank and ask for advice before making such a statement.
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