Flags of the OECS Currency Union

Flags of the OECS Currency Union



The Chairman of the Eastern Caribbean Central Bank Monetary Council, Dr the Honourable Ralph Gonsalves, addressed the citizens and residents of the Eastern Caribbean Currency Union (ECCU) via radio and television last evening on matters pertaining to the banking and financial sector.

The text version of the statement is reproduced below for your information.

Delivered By
Dr The Honourable Ralph E Gonsalves
Chairman, ECCB Monetary Council

(Issued 14 April 2015)

Fellow citizens of the Eastern Caribbean Currency Union, I am very pleased to address you on several important issues, in my capacity as Chairman of the Monetary Council of the Currency Union.
First, let me answer a question: What is the Monetary Council?
The Monetary Council is the highest decision making body of the Eastern Caribbean Central Bank. It consists of the Minister of Finance of each member territory of the Currency Union, all of whom are Heads of Government, at the present time.
The Council meets several times a year to receive the reports and other commentaries from the Governor of the Central Bank and to make decisions accordingly. In our last meeting on February 24, 2015, the Monetary Council made several vital decisions and I wish to take this opportunity to inform you of these decisions. They touch upon our lives and living, our socio-economic well-being.
Preliminarily though, let us reflect briefly on our Currency Union and how well it has served all of us. The Eastern Caribbean Currency Union was created in 1983, with the formal establishment of the Eastern Caribbean Central Bank (ECCB) – a shining example of regional cooperation.


Today, the ECCB is celebrated as a model for small states all over the world. The people of our region have enjoyed a better quality of life, in no small measure, because of the ECCB and the success of the Currency Union. It has stood the test of time and it has served our region well.


Dear citizens and residents of the Currency Union, as times change, all of us must be ready to adapt.


Thirty two years later, since the founding of the Central Bank, our region is slowly recovering from the effects of the Great Recession, that period from 2009-2012, particularly. Of course, the effects of the Recession are still with us. The pain is still here. In that period of the Great Recession and the period immediately thereafter, many of our economies contracted following the global economic and financial meltdown of 2008.


Last year (2014), growth in the ECCU averaged 1.3 per cent up from 1.1 per cent in 2013. This year (2015), we project growth of 2.4 per cent. This is good news. Our regional economy is starting to improve. Notwithstanding this improvement, our economies continue to face challenges to sustainable growth, fiscal and debt sustainability and financial stability. The Monetary Council desires to see faster economic recovery and stronger job creation.
As a consequence, after much reflection, deliberation and careful contemplation, we in the Monetary Council, have made some very important decisions to strengthen our financial system. These decisions were taken at our last meeting in February. I now speak of these important decisions.


Lower Minimum Savings Deposit Rate

After much analysis and discussion, the Monetary Council has decided to lower the minimum deposit rate from 3.0 per cent to 2.0 per cent. The last occasion, this rate was reduced was in 2002 (following the economic downturn attributed to the events of September 11, 2001). At that time, the Monetary Council reduced the rate from 4.0 per cent to 3.0 per cent.


Why have we reduced the rate at this time?

Our banking system has a lot of money – excess liquidity, yet credit to the private sector (new loans) is declining.
Last year, despite the fact that the banks had excess liquidity, credit declined by 4.5 per cent. Declining credit to the private sector makes economic recovery slower. This situation has to change.


At the same time, non-performing loans in the banking system are very high and average 18.8 per cent across the ECCU, largely because of the difficult economic situation in many of our countries. High non-performing loans make our banks less willing to lend and weaken our economies. This situation must change.


In the face of declining profitability or losses, banks have sought to lower operating expenses. This cost reduction effort has led to the closure of several branches in the ECCU and beyond.
As a result of the Monetary Council’s decision to lower the minimum deposit rate, the banks in our Currency Union will have a lower cost profile. Combined with the economic recovery taking place in our economies, we expect to see banks start lending more to the private sector.


There are too many potentially good businesses struggling to secure working capital and struggling to survive. Some of these businesses are paying very high interest rates on loans from our commercial banks. As a consequence of the lower deposit rate, we anticipate a lowering of interest rate spreads. More importantly, we expect to see businesses pay lower interest rates on loans provided by our commercial banks. We are especially keen to see lower interest rates for all export-oriented firms. We would also like to see interest rates on mortgages continue to fall so that more of our people can afford to own a home.


It should be noted that even with this reduction, the rate on savings in our Currency Union remains higher than the rate in Trinidad and Tobago which is 0.2 per cent; Canada – 1.0 per cent; and the USA, less than 1.0 per cent.
Furthermore, the Eastern Caribbean Securities Exchange and the Regional Government Securities Market offer citizens of our Currency Union, higher yielding investment opportunities with higher interest rates.
The new deposit rate will take effect from 1 May 2015.


Stronger Regulatory and Supervisory Framework for Banks

The banking sector is one of the most critical sectors of our economies.
Since 2009, our banks have recorded declines in profitability and performance. Due to the global crisis which led to significant contraction in our domestic economies and increases in non-performing loans, the ECCB intervened in one bank in Antigua and Barbuda and two banks in Anguilla to protect the interests of depositors and creditors and to maintain financial stability.


These experiences led to the Council’s decision to pursue a comprehensive bank resolution strategy aimed at strengthening the resilience of the financial system in our Currency Union.


First and foremost in this strategy is the full protection of all depositors by ECCU Governments.


Second, the Council has approved a new Banking Bill, for passage by Member Governments. This Bill provides for:

  • The issuance and revocation of licences by the Central Bank rather than the respective Ministers of Finance;
  • Pre-emptive measures to deal with problem banks;
  • Appropriate levels of capitalisation for banks and credit institutions; and
  • Clear criteria for the persons who can be appointed as directors and managers of banks.


Third, the Monetary Council, within the framework of the comprehensive resolution strategy, has approved amendments to the 1983 ECCB Agreement Act to strengthen the powers of the Central Bank. These amendments address several deficiencies which were revealed when ECCB intervened in the three banks.


Fourth, the Council approved the drafting of regional foreclosure legislation to allow for more efficient management of collateral by financial institutions.


Fifth, the Council approved an Agreement and draft Bill to establish the Eastern Caribbean Asset Management Corporation. This Corporation will assist with the management of non-performing loans.


Sixth, the Council has approved the establishment of a Deposit Insurance Fund. More details on this positive development will be given as the plans for this fund are further elaborated and finalised.


Ultimately, our strategy will result in a stronger banking sector resulting in greater financial stability and faster economic progress.
The measures that we have taken are to ensure that your deposits are safe.


Extension of Timetable for Debt Target


The Monetary Council has decided to extend the timetable to reduce our Debt/GDP Ratio to 60.0 per cent from 2020 to 2030. Why have we done so?

Attaining this target by 2020, required prudent debt management and continuous economic growth at a level sufficient to meet the target. Unfortunately, there has been little or no growth in the ECCU for most of the past five years.
Furthermore, it ought to be recognised that this target was set before the Great Recession commenced in 2008. Since then, the Eurozone has extended its own timetable to reflect its current reality of little or no growth.


The Eastern Caribbean Currency Union too must adapt to its current reality. As a consequence, the Council has decided to extend the target to 2030. In so doing, Member Governments have resolved to pursue appropriate fiscal consolidation measures. Indeed, most Governments have already so commenced these measures. It is likely some countries will achieve this target before 2030.




In conclusion, we wish to assure all depositors that your deposits are protected.
The Strategy which I have just shared with you will result in a stronger banking sector, which, along with other financial institutions, plays an essential role in facilitating economic growth and development in our region.


Given the significant technical and financial resources required to implement successfully these decisions, we are grateful for the support of several development partners including Canada, the United Kingdom, the United States, the European Union, International Monetary Fund, The World Bank and the Caribbean Development Bank.


The Monetary Council is resolved to do whatever it takes to improve the economic fortunes of our Currency Union. Indeed, we will continue to take deliberate and concrete steps to stimulate economic activity and strengthen our banks as we work assiduously to help secure a better and brighter future for all our citizens and residents.
Working together and with the help of Almighty God, we are bound to succeed.

I thank you.


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