Expect more changes in regulatory control

Profits from local  commercial banks are rolling out fast and furious. It’s Republic declaring $600M, First Citizens Bank (FCB) waving its flag with $300M and Scotia shouting about its  $200M. It must be the competition that’s driving those financial institutions. Inspite of such fierce competition, however, the leadership in the banking sector is pretty much together when it comes to development of the sector. And therein lies the raison d’etre for the Bankers Association of Trinidad and Tobago (BATT.) It is probably the smallest, but the most powerful business organisation in the country, with a membership of just six – all Chief Executive Officers of the nation’s commercial banks, with the chairman being changed every two years. Current chairman is Larry Howai, CEO of First Citizens Bank (FCB.) Howai said in an effort to make the sector more competitive and more transparent he expects to see increase in the level of regulatory control and believed Government would engineer a lot of changes in the coming year in relation to financial services and financial sector reform.

“Banks are changing, in a way evolving over time. We are operating in the region, we’re doing cross border transactions. There’s the need for cross border supervision. There are issues around capital adequacy. That in banking jargon is making sure you have sufficient capital to support the risks you take on as a financial institution. “The first thing really,” added Howai, “is to ensure that as part of the process for financial sector reform, the banks are able to participate actively in that process to make sure that at the end of the day we have a product that is meaningful in terms of achieving the objectives for all stakeholders as part of that process,” he said. The stakeholders, he added, are the government, the consumers and the banks. Howai is of the view though that  one had to be careful not to over-regulate the banking sector. “One doesn’t want to be over regulated and, of course, one always tries to minimise the negative effect of disciplinary action.”

“It would be nice if the world was designed in such a way that you didn’t need the discipline to get the work done, but we know it is different and we recognise from a policy point of view the importance of regulations in our life.” Because of this, financial sector reform would be high on the association’s agenda next year in terms of monitoring what was happening. The second issue, according to Howai, is the FTAA and CSME, since it dovetails into financial sector reform. There is a Caricom Trade Sector and they are looking at legislation which they would want to introduce uniformly throughout the region and again that “is something we need to be a part of and we need to inform and help and guide the various governments in terms of developing that uniform structure in the whole of Caricom.”

Howai said there was need to be mindful of the impact of FTAA  and what the introduction of different types of competition would bring as well as the likely effect that it would have on the business of the local financial institutions. “These are some of the issues we’ve to pay attention to,” he said, adding, “they are not the mundane types of things that customers deal with on a daily basis, but it’s certainly something we need to look at in terms of strategically positioning the local financial sector to continue to play a dominant role in the region in the years to come.” In a recent interview with Business Day, Howai emphasised that BATT was “good and valuable to the financial sector.” 

One of the ways in which the association benefits the sector is in training. As Howai pointed out, “It allows us to coordinate properly, the work of the Institute of Banking and Finance (IBAF).” Training is an expensive proposition, but the banks through BATT, are now able to set up courses at IBAF that are accessible to them all at reduced costs. While each bank would have its own specific training for their internal processes, something like economics or monetary policy are general topics and can be done under a single umbrella, thus eliminating duplication of resources. “So there is a facilitating mechanism which reduces the cost overall, but provides us with the service that we all need. It’s vibrant, it’s always challenging to keep everybody focused, but we’re all committed to it,” said Howai.