Governor announces monetary policy adjustment

Acting Governor of the Central Bank of Barbados (CBB), Cleviston Haynes, announced that there would be a change to the current monetary policies at commercial and other banks.

His announcement came during a press conference, which took place at the CBB Headquarters yesterday morning.

“The Central Bank of Barbados announces a further tightening of its monetary policy stance. The policy change would be applied to the Barbados Security Reserve Requirement ratio for commercial banks licensed under Part II of the Financial Institutions Act,” he said.

“It will be implemented in two phases. Effective December 1, 2017, commercial banks would be required to hold 18 per cent of their domestic deposits in stipulated securities and on January 1, 2018, the banks would be required to hold 20 per cent of their deposits in stipulated securities.”

Haynes noted that this would be the second increase for the year and noted that it complimented the fiscal initiatives that were introduced by the Minister of Finance in his financial statement and budgetary proposals that were made earlier this year. He revealed that the cash reserves requirement for commercial banks remained unchanged at five per cent, and the reserves requirements for deposit-taking trusts and finance companies and merchant banks also remained unchanged.

Acknowledging that some commercial banks decided to reduce their holdings of government paper, Haynes believed that it was important for all players to contribute towards helping to restore confidence and growth in the system.

The Acting Governor pointed out that in the past, they would have had very high reserve requirements on banks at one stage, but noted that they were able to reduce those ratios, which existed from 2010 until recently, once the economic conditions of the island changed.

“It is our belief that once we are able to address the economic challenges which we face at present, we will be able, in the future, to bring those rations back down to levels that we consider to be appropriate. But this is a measure that we believe is important at this point of time to contribute towards overall economic stabilisation, which we all aspire to achieve,” he said. (CLF)