SSB funds to form part of bank’s pool
“We intend to accept deposits and turn this into a full-scale bank…”
Minister of Energy, Science and Technology, and Public Utilities Joy Grant will head the new National Bank of Belize, which Prime Minister Dean Barrow said today will be established to force commercial banks to revisit their interest rate, but which will also serve as a vehicle through which the Government will supply an initial $20 million for residential mortgages at a rate of 6.5%.
“This is a wonderful idea whose time has come…” said Barrow, adding that, “We mean to take it to the limit where this thing is concerned… We expect to be giving people a better return on their deposits than the commercial banks are doing.”
The motto of the proposed new national bank, said Barrow, is “…of the people, for the people,” and the mission, he added, is, principally, to make residential mortgages and other consumer loans available to lower and middle-income persons, and particularly to public officers and teachers, at cheaper rates than are being offered at this time.
Public servants and teachers have been lobbying for a cost of living adjustment. However, Barrow has hinged the raise on whether a commercial oil find is declared in the coming months. Although there are indications from Maranco (which has been exploring for oil in northern Belize) that there is commercial oil available, they have run into technical problems and so the extent of the oil-producing capability of the field won’t be known for weeks. Barrow reaffirmed his commitment to teachers and public officers today, while announcing the new financing scheme on the horizon.
The Prime Minister also signaled that Social Security funds will be moved from the commercial banks, where they are paid a low rate of interest, to the new national bank. He did not indicate what the savings rate would be.
“I’ve already spoken about the need to use some of that capital that, for example, SSB has tied up with the commercial banks getting little or nothing,” said Barrow, adding that the national bank will be able to give the SSB a better rate.
The whole idea is to put downward pressure on the lending rates of the commercial banks, the Prime Minister explained.
The interest rate spread has been going in the wrong direction, said Barrow. He quoted rates for 2009 and 2013, which indicate that the spread between the lending rate and the savings rate has increased from 7.69% to 9.38%.
Already, said Barrow, Scotiabank has adjusted with advertisements that it will lend at 6.99%.
“We intend to accept deposits and turn this into a full-scale bank,” Barrow said, adding that Government is directly intervening in the financial sector to positively impact rates.
The managing director of the National Bank of Belize will be Jose Marin, former president of Provident Bank in Belize. Board members will include Deputy Financial Secretary — Marion Palacio, president of the National Trade Union Congress of Belize — Dylan Reneau, and John Mencias — GOB’s point-person for Venezuela’s Petrocaribe Initiative.
The first $20 million for lending will come from funds obtained under the Petrocaribe fuel initiative, for which GOB pays 1% interest.
This new program, Barrow said, adds to the mix and the scope of what the government is trying to do, in expanding Belize’s homeowner base.
The mortgage guarantee which Government has pledged for new homeowners will not apply to those borrowing from the national bank, Barrow clarified. Barrow said that the guarantee is for those borrowers who will go to the commercial banks, for whom Government is still prepared to put up the 10% guarantee for those transactions not exceeding $100,000.
Barrow pointed to almost $90 million in mortgage and education loans which his administration has written off.
The new national bank will be housed at the former premises of the Small Farmers Business Bank in Belmopan which the government has acquired. Barrow announced that $4.5 million in principal and $2.4 million in interest for loans held by 700 persons, who had borrowed from the Small Farmers Business Bank, will be written off.
He said that staff will be recruited for the bank, among them an officer to monitor the construction of new homes to ensure that borrowers get value for money, and that building standards and the scope of work is adhered to.