“The banking sector will experience increased difficulties around its credit exposure”

NASSAU, BAHAMAS – Central Bank Governor John Rolle said yesterday that the country’s credit union sector will require more ‘delicate’ management as it grapples with the fallout from the coronavirus pandemic, noting that although it represents a small part of the country’s financial system, its clientele is largely tourism oriented.

Rolle, while speaking as a panelist at a Bloomberg forum on the road to recovery in the Caribbean, noted that while the commercial banking system will experience a fair amount of loan losses due to the COVID-19 pandemic, it won’t be as bad as expected.

“The banking sector will experience increased difficulties around its credit exposure. A lot of that hasn’t manifested yet, ”Rolle said.

“It won’t be as bad as we thought, but the banks will have to recognize a certain amount of credit losses. Fortunately, they are entering this already heavily capitalized sector, so we are not afraid to see the setbacks heralded after the recession about a decade ago. “

Regarding the credit union sector, Rolle noted, “Our credit union sector, we need to manage a little more gently. Our credit union sector, although it is a small part of our financial system, participation is particularly concentrated on workers in the tourism sector.

“We anticipate that they will also have difficulty dealing with bad debts and other exposures.”

Rolle noted that credit unions, which also fall under the regulatory jurisdiction of the Central Bank, now enjoy the protection of the Deposit Insurance Company which now covers their customers.

The Central Bank, in its recently released quarterly economic review for March 2021, noted that while the number of credit union entities, including the Bahamas Cooperative League Limited, remained at 10, the sector’s balance sheet increased slightly by 1.3% to $ 482.3 million in 2020.

“This was led by a 32.2% increase in long-term financial assets, as well as a 32% increase in liquid investments, mainly term deposits, both against a 30% reduction in cash balances. to $ 22.1 million, “the regulator noted.

“Credit unions have also significantly reduced their holdings of short-term marketable securities (to $ 0.1 million from $ 3.5 million).

“Net lending to members decreased 4.6% to $ 216.4 million, due to reductions in almost all lending facilities. Meanwhile, funding resources mainly from members’ deposits increased 1.4% to $ 416.9 million.