The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce’s chief executive yesterday backed the Central Bank’s decision to end the seven-month relaxation of lending guidelines post-Hurricane Matthew.

Edison Sumner told Tribune Business that “the timing is right”, given that the Central Bank had to balance aiding storm recovery with discipline in monetary and fiscal policy.

Unveiling the reinstatement of its commercial bank lending guidelines, the Central Bank announced yesterday: “In October 2016, the Central Bank of the Bahamas announced the temporary relaxation of lending guidelines to domestic banks to facilitate access by households and businesses to credit for relief purposes in the aftermath of Hurricane Matthew.

“The Central Bank wishes to advise that as of today’s date this accommodation officially comes to an end, and the previous guidelines governing equity requirements and debt service ratios has been fully reinstated for all credit facilities.”

Within a week of Matthew’s early October passage through the Bahamas, the Central Bank informed commercial banks that it was relaxing both borrower debt servicing ratios and equity contributions to better facilitate access to much-needed credit in the storm’s aftermath.

The 15 per cent equity (downpayment) contribution that the Central Bank recommends all borrowers make, prior to receiving a loan, was waived entirely over those seven months.

And the maximum debt service ratio recommended by the Central Bank was increased by at least 10 percentage points - from 40-45 per cent to 55 per cent.

This has now come to an end, and Mr Sumner acknowledged that the Central Bank’s swift action had enabled homeowners and businesses to recover more quickly from the devastation inflicted by Hurricane Matthew.

“Those conditions were reasonable to give persons impacted by the hurricane the opportunity to get repairs done, and get their lives back in order,” the Chamber chief executive told Tribune Business.

Mr Sumner said the Central Bank’s policy action had worked “in tandem” with the Government’s post-Matthew exigency order, which had allowed businesses to sell products at discounted prices to storm-hit persons via VAT and Customs duty exemptions. Border taxes paid on pre-existing inventories were also recoverable.

The Chamber chief suggested that the end to the Central Bank’s lending relaxation could have been “better co-ordinated” with the exigency order, which still has two months to run.

However, Mr Sumner acknowledged that the Central Bank was likely seeking to “tighten up on fiscal discipline in the country”, given the expanded deficit, as well as ensure responsible lending in the absence of a Credit Bureau.