“The banking sector will see increased difficulty around their credit exposure”
NASSAU, BAHAMAS — Central Bank Governor John Rolle said yesterday the country’s credit union sector will require more “delicate” management as it grapples with fallout from the coronavirus pandemic, noting that while it represents a small part of the country’s financial system, its clientele is largely tourism-based.
Rolle, while speaking as a panelist on a Bloomberg-hosted forum on the path to recovery in the Caribbean, noted that although the commercial banking system will see a fair amount of loan losses as a result of the COVID-19 pandemic, it will not be as bad as anticipated.
“The banking sector will see increased difficulty around their credit exposure. A lot of that has not shown up yet,” said Rolle.
“It will not be as bad as we thought it would be, but banks will have to recognize some fair amount of credit losses. Fortunately, they are coming into this already highly capitalized so we’re not concerned that we’re going to see the setbacks that were touted after the recession about a decade ago.”
Turning to the credit union sector, Rolle noted: “Our credit union sector, we have to manage a bit more delicately. Our credit union sector, even though it’s a small part of our financial system, the participation is particularity concentrated on tourism sector workers.
“We anticipate they will also have challenges managing bad debt and other exposures.”
Rolle noted that credit unions, which also fall under the Central Bank’s regulatory remit, have Deposit Insurance Corporation protection now covering their clients.
The Central Bank, in its recently released quarterly economic review for March 2021, noted that while the number of credit union entities, inclusive of the Bahamas Cooperative League Limited, remained at 10, the sector’s balance sheet grew marginally by 1.3 percent to $482.3 million in 2020.
“This was led by a 32.2 percent expansion in long-term financial assets, as well as a 32 percent rise in liquid investments, mainly fixed deposits — both against a 30 percent reduction in cash balances to $22.1 million,” the regulator noted.
“Credit unions also reduced substantially holdings of short-term marketable securities (to $0.1 million from $3.5 million).
“Net loans to members decreased by 4.6 percent to $216.4 million, owing to reductions across almost all loan facilities. Meanwhile, funding resources from primarily members’ deposits increased by 1.4 percent to $416.9 million.”
