Wednesday, February 17, 2010
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Central Bank eyeing liquidity legislation By Inderia Saunders ~ Guardian Business Reporter ~ inderia@nasguard.com The Central Bank is mulling over implementing legislation that would give it more control over liquidity, a senior officer at the bank has revealed, with the move seen as one to encourage greater inter-bank cooperation. According to Kevin Demeritte, it would solve a lot of the liquidity issues among banks. "The Central Bank is keenly aware that liquidity can be concentrated to one or two banks, while one bank is constantly short of liquidity," the senior research officer told members of the financial world at a Bahamas Institute of Chartered Accountants (BICA) seminar yesterday. "The Central Bank is now trying to encourage the development of the inter-bank market... and lending to other banks." He is quick to note, however, that any decision on the matter is just in the early stages and it's a mere consideration at this point, with issues already identified around such a legislation. Liquidity is the amount of money banks have to lend out at any given period and Demeritte points out that historically some banks are known to have more liquidity because of their contracts than others. The issue of who gets what would have to be ironed out. "Who is going to end up paying interest rates on that, we can't justify using a bank without paying interest rates on it," he added. "So certainly that's a consideration, but there's a lot of others [like] how soon banks will have access to those funds if they make those funds available for distribution." Added to that, Demeritte said there were market conditions that may have the perception of fair play being absent. "I've run my business in a prudent careful manner and I have developed a certain amount of flexibility within my operations," he noted, "is it fair that I should support somebody who I think didn't do as good a job as they could. "So it's a market issue."
Friday February 05, 2010 |
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