Bankers say central bank’s looser lending rules are ‘unlikely’ to have a major impact on consumer lending – Eye Witness News

Nassau, Bahamas — Central bank decision to ease debt service ratios for personal loans from the current 40-45% range to a maximum of 50% is ‘unlikely’ to have a significant impact on consumer finance retail bankers said yesterday. – Prominent executives pointing out that it is not the only criterion banks must consider.

Regulators recently announced they would relax guidelines for domestic banks and credit unions on eligibility criteria for extending credit to the private sector. The move will be seen as “the increased capacity of the domestic economy to sustainably absorb more credit expansion, given the potential for credit growth to stimulate more imports and increase the net use of foreign exchange.” The outlook for FX reserves remains favorable, and the impact on credit growth is expected to be very modest, especially given the continued risks around rising average private sector credit delinquencies. will be

The central bank continues: That is, unless a central bank imposes prescribed regulatory requirements on a particular bank or credit union. This will increase the total debt service ratio from the current 40% to 45%. The gross debt service ratio is calculated as the total monthly principal and interest payments divided by the borrower’s total monthly income. ”

gowon bow fidelity Bank (Bahamas) CEO, said eyewitness news Presentations are welcome, but should be viewed in the proper context.

“From a credit risk management perspective, there have been no major changes. It has helped those who were at their limits and the debt service ratio was an arbitrary limit that prevented them from securing funds,” he said. .

“The debt service rate was really just an artificial benchmark to guide. In the aftermath of the hurricane, these credit limits have been loosened, they eased prudential standards, held banks more accountable, and instead blamed them on artificial benchmarks, they were purely risk management. I don’t think a person’s creditworthiness is going to have much of an impact because it’s not just focused on their debt service ratio. The intention behind it is to say that a person should not be in debt at a level that prevents them from fulfilling their obligations.

“I think the central bank announcement needs to be viewed in its proper context. If you are willing to take into account a number of factors, the debt service ratio is just one of them. We don’t want productivity-enhancing loans, like loans for homeowners or real estate development.

Kenrick Brathwaite, Bank of BahamasThe managing director told Eyewitness News that the central bank’s decision to make such a move, especially in the retail banking sector, was “certainly significant”.

“I don’t know what effect that will have,” said Brathwaite.

“I think there will be an impact, but I don’t know how significant it will be in the retail banking environment. Central banks have always said that the highest proportion of personal lending is based on consolidation. Most of those who get consolidation have already broken the 50% total debt service ratio. This is the largest part of current personal loans. So I don’t know how big an impact this will have on the retail banking environment. Still, the fact that they are doing this bodes well for lenders. ” Bankers say central bank’s looser lending rules are ‘unlikely’ to have a major impact on consumer lending – Eye Witness News

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