With financial uncertainty looming for many in the face of a slowing economy due to coronavirus (COVID-19) prevention measures, President of the Clearing Banks Association (CBA) LaSonya Missick said local banks are committed to helping their clients through challenging times.
Fears of business closures, job losses and service suspensions are mounting as governments around the world implement drastic measures to limit the spread of the contagious and deadly virus, including closing borders and schools and asking businesses to voluntarily close temporarily.
Asked if local banks are considering any measures to help customers that may find it difficult to keep up with loan payments in the event the economy slows and jobs are put at risk, Missick said, “If persons are experiencing financial difficulties, they are encouraged to contact their banks to see what options might be available to them.”
Last week The Central Bank of The Bahamas emphasized that “The domestic banking system is mobilized to provide the forbearance and accommodation for households that might encounter interim challenges, if their earnings are disrupted; maintaining that while a strain of this nature could aggravate the debt repayment challenges, local banks remain strongly capitalized to tolerate increased stress to their credit portfolios.”
However, Missick said consumers should be wise regarding borrowing to get through this economically challenging time.
“A consumer’s decision to borrow will have to be based on their individual capacity to manage their debt servicing thresholds. There are some sectors that will be more directly impacted due to COVID-19 and the need to reduce or defer borrowing will be contingent upon a person’s capacity to repay their debts within the time frame specified,” she said in an email response to Guardian Business.
“Borrowing is typically driven by consumer confidence and their ability to repay the debt. We anticipate that there will continue to be a need to borrow for homeownership, auto financing and other purposes.”
As for how she believes an outbreak of COVID-19 will impact interest rates on loans in the medium to long term, Missick said, “The decision to adjust interest rates is a complex undertaking when operating in an exchange control environment. Any consideration of rate reduction should be assessed in tandem with the inflows and outflows of foreign exchange in the market. The expertise would reside with our regulators to govern this, to ensure that there is minimal risk to the value of our currency or fall-off in foreign investments.”