Banks claim to help, as gov’t plans review of rates
(CNS): Government will continue to press local banks to reduce interest rates, and it has accepted a motion by McKeeva Bush MP (WBW) to look at creating a local interest rate-setting body and allow the government-funded Cayman Islands Development Bank to accept deposits. But the local retail banks have defended their refusal to delay or lower interest rates, saying they are helping clients, which is reflected in the low home loan delinquency levels.
The private member’s motion, brought by Bush and supported by Chris Saunders (BTW), was debated in parliament Thursday. Most MPs agreed that government must do something to deal with the hikes in interest rates that, in some cases, have led to mortgage payments doubling over the last year.
Premier Wayne Panton was not in full agreement with Bush’s motion, but he accepted the proposal, acknowledging the “unenviable situation” in this jurisdiction navigating the problem of inflation and the decision by local banks to follow the US Federal Reserve as it raises rates to take the heat out of the US economy.
He said that the ten rate increases in just over a year had created a real problem and an “absolute challenge” for many people, but the government would continue to do what it could to help and support people who were struggling. But he argued that the issues relating to bank rates were complex and there wasn’t an easy fix. Trying to legislate a rate cut would have repercussions, he warned.
Panton noted that the Law Reform Commission was still working on new legislation that would offer more protection to those with home loans.
However, the motion goes much further, calling on the government to continue pressing the banks to cut rates, pause future hikes and review how the whole system works. When the vote was taken, the motion was supported by all the members present.
Bush argued that the banks here did not need to follow US rates and accused them of cartel-like practices. He said he wanted to see CIMA become the interest rate-setting body, even though the premier said this would be too costly for the authority.
Bush said the government was spending millions on consultants for an EIA for the East-West Arterial when it didn’t need to, and it should be spending money where it is needed. He said that many families were really struggling to pay the significant increase in their mortgages while having to deal with increased CUC bills, higher-than-ever insurance premiums, gas for the car and the high cost of living.
He said that many people believe that the members of parliament are not doing enough to help them. “That’s not just one or two people; it’s a widespread feeling across this country. People just cannot take any more. The whole cost of living is destroying families.”
In the wake of the debate, the Cayman Islands Bankers’ Association issued a statement claiming the local banks were trusted stakeholders with a vested interest in the success of the Cayman Islands and its people and had contributed to the high standard of living here. CIBA stated that the banks were “seeking to help customers with sound advice, support and solutions” through the interest rate increases.
“Banks have proactively responded by offering a variety of fixed-rate loan options, often below the Prime Rate, thus providing the opportunity of stability and predictability for borrowers,” CIBA said, noting that more people had taken fixed-rate loans over the last year as many customers have chosen to mitigate their risk.
However, the premier said that the majority of local mortgages are not fixed and remain impacted by rate hikes. He noted, too, that only those with a very good credit rating and are not struggling to meet their financial obligations and needs tend to get the favourable rates, not those who need them the most.
Nevertheless, CIBA said the banks had all worked closely with customers experiencing financial difficulty, exploring possible solutions and loan restructuring to provide support during challenging times. “As a result of ongoing dialogue and support of customers, delinquency levels to date remain low and stable across the country,” CIBA said.
However, the premier revealed that the Credit Union is dealing with a growing portfolio of defaulting loans.
CIBA justified the banks’ decision to remain in line with the Federal Reserve’s rates, saying that this position helps mitigate potential imbalances in the financial system and ensures consistency and continued stability throughout market cycles.
“Any change to the current rate setting convention could create an imbalance between funding costs and borrowing rates,” CIBA said. “Such an imbalance could potentially result in banks deploying capital elsewhere and as a consequence, access to credit locally could tighten.”
See the full CIBA statement and the debate in parliament on CIGTV below.
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Category: Banking & money, Business, Politics
Good. Now Will Government please KEEP the two condos it has acquired by default at Grape Tree Condos?! Do not auction them off.
These can be used by visiting consultants or for settling in new staff temporarily. Or for new Governor Residence.
Also. Thanks Minister Ebanks and the other MPs for the recent debate on these Financial Relief measures proposed by MP Bush.
Especially so to keep pressing the Class A and B banks to help their host country more!
However, the gas companies, insurance companies and supermarkets were not in the list but they need to cut their rates too!!
Offer local Bonds too. Raise govt cash for CAL or Education and give locals a chance to own shares.
No wonder 10:14 you’re looking to for Govt to help you everywhere to save money holding the mindset investing in CAL could be your windfall to ease financial pressures 🙄
Why would a Wayne Panton support this ? Who is really in charge here ?
A Wayne Panton has two choices at this stage of the game.
1. Support the crack pot ideas of those he chose to surround himself with.
2. No longer be Premier
For love of self, he continues to choose #1 every time.
#whatcommunity
#whatcountry
If you borrow more than you can afford – as caymanians so often do- then you deserve to lose your house if you can’t pay it back. Banks are businesses and not charities to sustain Caymanian’s rich lifestyle.
But my bobos have a new Kia suv and a Dodge Ram!
Typical Caymanian problem…. Borrow more than you can afford with no regard to the fact that interest rates are variable and were inevitably going to rise having been at historically low rates for quite a while …. Then blame everyone else and try and get a ‘freebie’. All instead of acting responsibly and not living beyond one’s means.
Another debate that begs the question, who really is the premier of the Cayman Islands?
SO this all related to having a fixed dollar regime in place. Banks do not arbitrarily set the local interest rates. They is determined by market forces. I could go into how the Cayman property market is artificially inflated, ie. PR points requirements, and self bailouts with pensions, however that does not address the basic issue of interest rates in the Cayman Islands. Our politicians are very limited in their knowledge and abilities so I happy to explain.
Basically it comes down to the adage you can not have your cake and eat it too.
The Trilemma, also known as the Impossible Trinity or the Mundell-Fleming Trilemma, is an economic concept that describes the relationship between three key policy goals in international economics: exchange rate stability, monetary policy autonomy, and financial market openness.
The Trilemma suggests that it is impossible for a country to achieve all three goals simultaneously; it can only choose two out of the three. Here’s a closer look at each component:
Exchange Rate Stability: This goal refers to the desire to maintain a stable exchange rate for a country’s currency. A stable exchange rate can be beneficial for promoting trade, attracting foreign investment, and reducing uncertainty in international transactions. Cayman has benefited.
Monetary Policy Autonomy: Monetary policy autonomy means that a country has the ability to set and control its own interest rates and implement independent monetary policies to achieve domestic economic objectives. This allows a country to respond to its unique economic conditions, such as inflation or unemployment, without being constrained by the policies of other countries. See, this is our 3rd point we cannot get.
Financial Market Openness: Financial market openness refers to the degree to which a country allows the free flow of capital across its borders. Open financial markets enable foreign investment, facilitate capital mobility, and promote global financial integration. Cayman has benefited.
According to the Trilemma, a country can only prioritize two out of these three goals, while the third will be compromised. Here are the possible combinations:
If a country aims for exchange rate stability and monetary policy autonomy, it must restrict the free flow of capital and impose capital controls. This is often seen in countries that fix their exchange rates or use a currency peg. Not our situation.
If a country seeks exchange rate stability and financial market openness, it must sacrifice monetary policy autonomy. In this scenario, the country’s monetary policy is influenced by external factors, such as capital inflows or outflows. This is us.
If a country desires monetary policy autonomy and financial market openness, it must accept that exchange rates will be subject to fluctuations. This is common in countries with floating exchange rates where market forces determine the value of the currency. Not us.
The Trilemma illustrates the inherent trade-offs that countries face when formulating their economic policies. It highlights the challenges of maintaining a balance between exchange rate stability, monetary policy autonomy, and financial market openness, and the difficulties in achieving all three simultaneously.
Here are some potential outcomes of changing currency regimes.
Advantages of Abandoning the Fixed Rate Regime for Monetary Autonomy:
Independent Monetary Policy: With monetary autonomy, your country can set and adjust interest rates and implement monetary measures tailored to its domestic economic conditions. This flexibility allows for better responsiveness to inflation, unemployment, and other economic challenges.
Economic Stability: The ability to independently conduct monetary policy can contribute to greater economic stability. Your country can adopt policies that align with its specific goals, such as managing inflation, promoting growth, or stabilizing financial markets.
Enhanced Policy Tools: Abandoning the fixed rate regime provides access to a broader range of policy tools. This includes the ability to use exchange rate adjustments as a tool for promoting competitiveness and adjusting to external shocks.
Reduced Vulnerability to External Factors: Monetary autonomy reduces reliance on external factors, such as the policies of the currency to which the fixed rate was pegged. This can make your country more resilient to global economic changes and external shocks.
Disadvantages of Abandoning the Fixed Rate Regime for Monetary Autonomy:
Exchange Rate Volatility: Moving away from a fixed rate regime introduces exchange rate volatility. The value of the currency will fluctuate based on market forces, which can affect trade competitiveness, import costs, and the value of external debt denominated in foreign currency.
Uncertainty and Investor Confidence: Transitioning from a fixed rate regime to a floating exchange rate may create uncertainty in the financial markets. Investors and businesses may require time to adjust and reassess their strategies, potentially impacting investor confidence and capital flows in the short term.
Trade Implications: Exchange rate volatility can affect the competitiveness of exports and imports, potentially influencing trade balances. It is important to carefully manage the transition to mitigate potential disruptions in trade flows.
Financial Market Adjustments: The shift to a floating exchange rate may require adjustments in the financial market infrastructure, risk management practices, and hedging strategies. Financial institutions and market participants will need to adapt to the new environment.
So, buyer beware and Good luck.
TL:DR?
Take a look at Cayman National Intermin Report for March 31 2023 their total income of $54.7mil has increased by 59% compared to prior year most of that profit is from Interest income from mortgages. The report also states that the performance represents an increase of 186% on the same period a year ago
That Trinidad bank made a good move to buy them out.
A simple fix would be to allow the banks to raise the rates for new loans as they currently do, but for existing loans any increases should be delayed or restricted
If someone wants to make use of the new scheme to pay off the mortgage from their pension, or to pay 50K towards their mortgage – but their mortgage interest rate has been locked – and as per the terms of that, the person can only pay 10% of their balance principal in each one year during the locking period. If they pay more than 10% in a year, then they have to pay penalty of 3 months’ interest. Can the government intervene and do something so such people do not have to pay the penalty for paying up?
This is a stupid motion, but the fact remains your local banks are truly awful. With online banking there is no reason to have a Cayman bank account. If you want a mortgage, however, prepare to be screwed. If McKeeva sets the rates, there won’t be any new mortgages anyway and the old ones will be flushed out asap.
As usual. Mac has stepped in at a time that benefits…Mac.
Go away Mac, after all these years of witnessing your self serving stunts, no one vcaresxwhat you say.
Fear not…
Our resident financial genius Mac, who demonstrated his skills at First Cayman Bank…is coming to the rescue..!
Create a national reserve bank to control interest rates set fairer laws and regulations for homeowners and businesses alike CIBA is just a money racket and a cartel like CIREBA & CUC,they work hand in hand to hike interest rates while driving up the cost of living. Wake up Cayman before all we’ve worked hard for is gone, few politicians are honest and care about you. Its time we invest in a Sovereign Fund and start paying a 10% income tax, this madness can’t continue.
We already pay 22% consumption tax on top of import fees, tailgating, etc. We good.
You must be a politician
Maybe check who we are really paying so much to: Customs. Import duty is the problem. They charge import duty on everything. Shipment rates in United States: tax it. Consolidation fees: tax it. Our government is worse than Uncle Sam.
simple math guys…you cant have cost of living going through the roof and salaries renaining the same…but knowing politicians..they probably give themselves a raise! lol….ZZZZ
Everyone should just go to their bank and ask to take out their money – watch what happens.
they don’t have it. The banking industry is a scam, a ponzi scheme. Fractional reserve banking is a cancer on global health. And getting worse, with no cure for the greed it has spawned.
At least they all have lovely buildings and their top execs live in lovely homes.
Totally out of control, daylight robbery, in plain sight.
Go on, go and demand your money. You wont all get it. They will limit withdrawals and then stop withdrawals.
Its not there.
Yes, yes, yes, we all know that. Its not sitting in a giant Scrooge McDuck safe. Thats the point of giving it to the bank. They invest it in someone else’s mortgage and the interest that person pays on their loan pays the interest on my savings account.
Now, if you want to rail about the difference in interest charged vs paid, that’s another story.
The whole deck of cards isn’t too far from collapsing.
A welfare state
From time.
This is just stupid on so many levels and never going to happen but a percentage of the population will lap it up and give credit to the Teflon Don for ‘looking out for them.’
from the folks who just doubled the price of the most basic second hand affordable car…….zzzzzzzzzzzz
just another step towards a situation where cig will subsidize caymanian mortgages and expats will will have to pay for it indirectly.
the average caymanian cannot afford to live in cayman…..let that sink in.
Because their multi generational Caymanian elected politicians would far rather blame outsiders than reduce the duties and charges that directly increase the cost of living for ordinary Caymanians. To say nothing of the simplistic policies like making property ownership a critical element of getting PR, or giving developers concessions that reduce the government purse, none of which benefit ordinarily Caymanians. Or building a private jet facility for the super rixh paid for by ordinary travellers. Gave it people. They are either corrupt or monumentally stupid. I am not sure which is worse, but the bottom line is the economy is strong but ordinary Caymanians are suffering, whilst an elite is not. Same with the expats – the top flights are living the life, the blue collar expat is practically a slave. But all of it – all of it – is down to the people we elect. They are either crooked, self interested or not up to the task, or some combination of the 3.
If you really want to help:
1. Cut the ridiculous bank charges on just about every transaction.
2. Increase the interest rate on those who have savings, it’s criminal how savers are penalised
The banks do not for the most part do not increase their deposit rates when they inccease their loan rates as there is always a time lag, more profit gouging.
I smell some foreclosure bargains coming through the pipeline. Can’t wait!
Not if the government plans to i interfere in the market. They need to continue to prop up their paper gains on Cayman property.
Doing more harm to first time buyers who can pick up property after people over extended themselves and felt rates would be zero forever.
What’s next? A motion to shorten hurricane season?
Only for locals.
Motion to make cooler temps please
Try Bermuda. Racist as hell but I hear their public transport is top notch.
“..we expect BoE’s [Bank of England’s] policy rate to peak at 4.75% and for monetary policy to remain tight over the coming years, which will weigh on consumption and investment,”
“We expect very weak growth in key advanced economies in particular, including mild recessions in the US, UK, and Germany, and stagnant economic activity in France and Italy,”
(Moody’s Investor Service report)
Why again, is it that banks here are charging 3% over US prime, and then calling it “Prime”? It’s actually “Prime + 3”, and then they add an additional amount based on your credit rating!
That is country risk premium. It is normal.
No, you are wrong. Cayman’s prime rate is exactly equal to the US prime rate, and moves in lock step.
You are getting confused with the US Fed Funds rates, which is 3% less than US primate rate (in other words, US prime rate is set at 3% about US Fed Funds rate.
aren’t people’s mortgages have fixed rates?
Only smart people.
… has accepted a motion by McKeeva Bush MP (WBW) to look at creating a local interest rate-setting body…
more inept “bodies” is being added …
‘But he argued that the issues relating to bank rates were complex and there wasn’t an easy fix.’
So why are our esteemed group even contemplating discussing this 🤷🏻♀️
Astonishing that Govt Ministers are listening to an MP about revising banking practises when the MP as a director was largely responsible for the collapse of Cayman First Bank.
Bread and circuses
Our national hero McKeeva is at it again. They will get a lot of political mileage out of this.
Things the Cayman Islands Govt can NOT control (although nice politicking McKeeva) :
1) International interest rates
Things the Cayman Islands Govt CAN control:
1) Duty rates charged on imports
2) Fuel surcharges on electricity rates
Put your money where your mouth is CIG! Quit trying to buy votes by saying you want to help and can’t because the bank won’t lower rates. You had a record year for revenue in 2022. Lower duty rates on food and gasoline. And lower the fuel surcharge that CUC charges.
What is the correlation between the international interest rates and the Cayman Banks lending rate. In the US the bank borrow funds from the Federal Reserve to lend but thats not the situation in Cayman. The banks here are required to maintain high Capital Adequacy rates which manages their lending practices depending on their deposits. The raise in interest rates internationally just allows them to basically print money at the cost of borrowers.
Not the situation in Cayman? You honestly believe that all the mortgages and commercial loans in Cayman are financed by Cayman depositors funds? From 75000 local residents lol. And even if they were, the banks are meant to do what? Lend money locally at a lower rate than they could lend it internationally? You understand the concept of opportunity cost? Trying to control private sector banks lending rates will end with, at best a reduction or elimination of local lending. At worst a complete retreat from domestic retail banking by the foreign owned banks – look at how many Caribbean countries they have retreated from in recent years because the compliance costs and country risks were not worth it – leaving us with all those Cayman owned banks. Except there arent any anymore.
McBeater still calling the shots!
And Waynecito following!!!
I shudder when I hear certain politicians getting involved in banking systems. Yes borrowing interest rates are high, fees charges on having a chequing account are high and numerous but believe me when I say ” there isn’t a thing that these politicians” can do about it. It is very scary when the two bringing the motion have had a not too favourable tract record in their banking career.
desperate attempt by Bush and Flanders to save their political careers. its over guys go home.
it’s THE GOVERNMENT overspending that causes “high cost of living”
Say you dont know anything about global economics without saying it
At the very least pass legislation to require term deposits interest rates to go up in line with banks Lightning fast mortgage rate hikes. Butterfield’s term deposit rate is currently at a pathetic 1%. Shameful! Term Deposits should be at around 4% interest right now!
Agreed. Help our seniors. They may still have a small mortgage but may also have some savings. Or may have paid off the mortgage and are now living off lifetime savings. With inflation so high and no interest on savings, the banks are robbing us!
I’m not sure how my bank is helping me. They have a raft of charges. I’m basically penalized for using my debit or credit card, despite this often removing the need for a person to do anything. They passed on the mortgage interest rate within milliseconds, yet my ‘savings account’ loses me money due to the charges and the low interest gained.
I hate the fact that banks here congratulate themselves on a job well done, when they’re actually garbage, and only thrive because they’re all equally terrible.
Big Mack Daddy to the rescue! It behooves me to say He looks so handsome in that photo!
Pucker up and kiss somebody!
Why don’t they tighten the spread the banks get on converting at no risk between USD/KYD.
It is extortionate and a continued windfall for the banks on island.
Cut the spread in half from 2 cents to 1 cent and it would make a difference for everyone.
Never been a better time to buy bitcoin folks.
President Xi and other powerful leaders soon crush this pyramid scheme of make believe money
Surely you’re speaking of Xi crushing USD and not Bitcoin? Bitcoin will never die as long as the internet exists.
Just try to use it for purchasing anything genius. Doesn’t work.
Crypto Leaders Call For Infusion Of 20 Million Dopes To Stabilize Market
BOSTON—Stressing that the move would help keep digital currencies liquid through the coming year, crypto leaders called for an infusion of 20 million dopes Thursday to stabilize the market. “We’re calling for millions of bozos to be infused into the crypto market to stave off collapse and assure investors their money is safe,” said Circle CEO Jeremy Allaire, who along with other industry leaders stressed that a significant investment of chumps was urgently needed to lend confidence to exchanges of top currencies such as Bitcoin, Ethereum, and Tether. “Of course, we’re also hoping to eventually offset risk by diversifying into galoots, simpletons, and outright morons. But the important thing now is to get many, many more idiots confused enough to believe they have any chance in hell of making money off this grift.” Allaire noted that if a diverse range of dumbasses was not available, he was also considering propping up the industry by minting a single billionaire numbskull.
-The Onion
Tell me you know nothing about money and currency without telling me you know nothing about money and currency.
LOL. the fact you think that bitcoin is make believe money but somehow some pretty colours on a piece of paper, backed by nothing, is ‘real’ money?
I won’t even spend time to type out anything else because you can search online or maybe read ‘The bitcoin standard’. A great book.
In the end, whether bitcoin becomes the global currency of the world or something else, it won’t change the fact that the criticisms of the current monetary systems are legit and the entire way in which money operates WILL change. Whether we are correct about what replaces it is a different argument.
Ponzi scheme. They come and go, but this one has fooled even the wealthy, and when it fails, which all Ponzi schemes do, it will crash economies.
First Cayman Bank ring any bells?
The only way they can regulate interest rates is to float the dollar.
That worked out well for Jamacia.
I’m dumping my $CI tomorrow.
People don’t be fooled by this bill and the pension withdrawal scheme. These guys are only thinking of today and have no foresight on the future. King Charles please save us!!
Pension withdrawal today – trekking to NAU tomorrow! One foot forward and two backward.
Damn banks too lie. I asked about refinancing my remaining $150k which is down from $400k initially and they told me that it wasn’t worth the effort and to keep paying my payment which is now $2800 per month. I told them my income had dropped severely due to loss of my job and that my income is now basically $3000 and they still told me to keep paying it, so I’m left to live on $200/month. Thank God I know how to hustle and make a little extra in the side now and then doing odd jobs.
How to say you are a Civil Servant without saying you are a Civil Servant.
Wayne actually got up and said ” if they lower the interest rates the savings rate would go down also” What rock is he living under, the savings rates are still in the zero’s, yes zero’s! Wayne you have no clue sorry to say Buddy, you seem to be in a unending daze. To even say that im meannnnn….Gosh!
Perhaps the govt could put a stop to taxing every little transaction the average Joe makes with banking.
When banks were getting free money from the federal reserve at zero percent, did they give us loans at 2% here in the Cayman Islands?
All of our class A license holders are foreign-owned banks. They don’t care about the feelings of Cayman consumers or government. We are their prey, and they can charge whatever they please. USD denominated mortgage rates should be pegged to USD Prime. Period. If banks give on mortgages, they’ll take it back on credit card interest- already close to 20% That’s what predatory banks do in the absence of consumer-centric regulation. The low-regulation industry was set up this way by our own banking heroes of Barclays, CNB, Caledonian, Eurobank and First Cayman…
no one should carry cc debt!
Yet nowhere can we find out what the current Cayman Islands Mortgage Rate is. Is it 8%…8.5%,,,10.5%????
Most banks do Prime+ lending, somewhere between 0 and 1% over Prime, so all you need to know is the spread and the Prime rate to get your ‘mortgage rate’. Current Prime is 8.25%, so depending on your deposit/income/risk you are going to be paying 8.25% to 9.25%.
Pretending to do something when you very well know nothing will come of it. But hey, you want to show you are representing the people to get votes. All symbolic. Banks will not now to political pressure.
Performative populist bullshit
Is it just me? Or does that last statement by CIBA come across a little threatening?
What banks offer fixed rates?
Why do borrowers dont get fixed rate loans?
As renters, can we expect relief too from rental increases due to interest rate increases the owners are making us pay for? We also use petrol and electricity.