Despite the economic challenges caused by the COVID-19 pandemic, the credit bureau is pushing forward with its rollout and Bahamian credit holders should be able to access their credit reports by the start of the second quarter of 2021, Central Bank Governor John Rolle said yesterday.
The credit bureau – which is considered to be an important and integral step toward an improved credit culture in The Bahamas – was launched in January 2020.
The bureau’s credit information reports will help to reduce uncertainties around the quality of potential borrowers, improving the medium and long-term access to both business and personal credit. The bureau, which was licensed at the end of 2019, is now setting up operations,” Rolle said during the virtual Bahamas Business Outlook.
“Commercial credit reports will start to be generated in a subsequent phase of operations.”
The next initiative on the Central Bank’s agenda is the establishment of a collateral registry for commercial lending.
Rolle said collaboration with the Ministry of Finance has already begun.
“This would establish security against a range of moveable, even intangible assets. The Central Bank will commission the consultancy on the diagnostic study for the registry in the first quarter of this year. This will produce an outline of recommended legal reforms to establish the registry and a set of recommendations on the operational framework for the registry,” he said.
Speaking to the state of the banking and private sectors, Rolle said foreign reserves closed out 2020 above $2 billion, which is the highest end-of-year position on record.
“However, this was simply a matter of timing, as the government still had not fully drawn down its resources for spending. As this happens over the first half of 2021 and as the private sector’s needs stay above tourism inflows, balances will reduce. It is still expected therefore that the economy will exit the pandemic with less reserves than at the start of it,” he said.
“In addition, some net private sector proceeds from Hurricane Dorian still remain to be withdrawn from the reserves, as the rebuilding is still proceeding slower than was expected.”
Despite this, Rolle said continuous attempts to infer the Bahamian dollar was at risk of devaluation remain unfounded.
“The currency is not at such imminent risk. This is because of the level of the reserves, both now and where they should resume their rebuilding. These balances match slightly more than 100 percent of the Central Bank’s core liabilities, compared to the legally mandated floor of 50 percent,” he said.
“The liabilities move in opposite direction to the reserves only when the bank lends to the government. However, there is increased policy discipline in this regard, since the 2020 Central Bank Act has imposed a comprehensive ceiling on how much the bank can lend to the government. When the reserves begin to be drawn down, it is projected to be the case again that the Central Bank’s core liabilities will shrink. It is not in our economic interest to tolerate the inflation, financial instability or erosion of middle-class wealth that would accompany devaluation.
“Moreover, it does not strengthen our international competitiveness, which has to come from outcomes such as increased workforce productivity, education and skills upgrades; and the familiar list of required improvements in the ease of doing business. The medium- and long-term hedge against devaluation, which would escape an extreme fiscal austerity outcome, is still healthier public finances and a transformed culture of increased domestic savings.”