The decision by Royal Bank of Canada (RBC) to lower its interest rate to zero percent on savings accounts and term deposits drew ire throughout the community earlier this week, however The Central Bank of The Bahamas (CBOB), which regulates financial institutions, said yesterday that apart from reiterating its commitment to develop a government savings bond it will not comment on business decisions made by banks.
Citing market conditions, RBC Royal Bank in a statement issued Wednesday evening said it, like all financial institutions, “periodically makes amendments to the products we offer and adjusts them according to various internal and external factors.”
It added, “On October 1, we changed our interest rates on savings accounts and term deposits to zero 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.”
Throughout traditional and social media, Bahamians expressed frustration about the notice. In response, the Central Bank said the domestic banking system remains highly liquid, with deposits further increased during the pandemic. It noted, however, that bank lending to the private sector is still curtailed as a result of less favorable conditions created by the pandemic and medium-term efforts to reduce structurally high rates of non-performing loans, which predated the pandemic.
“Interest rate changes are an incentive for depositors to shift funds to higher yielding placements within the banking system. As well, the adjustments must incentivize more consideration of alternative investments in both the public and private sectors. This includes the market for treasury bills and government bonds and support for near-term private sector fund raising efforts though local capital markets. There similarly remains scope to expand the medium-term use of domestic capital markets to finance productive private sector activities, which fall outside of the business models of commercial banks,” a statement issued by the bank noted.
“For its part, the Central Bank is actively committed, with the Ministry of Finance, to develop a government savings bond scheme that would allow more households to accumulate investments, at an affordable pace in safe government debt instruments. This project is targeted to conclude in 2022. Meanwhile, the collateral registry project, on which the Central Bank is also working with the Ministry of Finance, is at an advanced stage in the diagnostic process. Once implemented, it will help to expand private lending through non-bank channels.”
RBC maintained in its statement that it has been a good corporate citizen in The Bahamas for more than 100 years and values the business of all of its clients in The Bahamas and around the world.