By Jeffrey B. Butler
At the expense of we the Caribbean people, their clients, and small businesses throughout the region, CIBC, Canada’s fifth largest banking institution, is using deplorable tactics to reduce losses and/or build profits. With regional losses of some US$21.8 million for fiscal year 2013, and US$199 million for the six months ending April 30, 2014, in the Caribbean, one would presume that the bank would want to work closer with their long time good clients here. Instead, CIBC is kicking us when we are down by making unreasonable demands during this economical slow period. We intend to bring this atrocious behaviour to light, and we implore media to get involved.
In 2006, CIBC bought the 44 percent Barclays Bank share of their combined First Caribbean International Bank (FCIB) venture. The capital cost was US$988.7 million. Management must have thought this was an earnings accretive acquisition. Now, however, CIBC is apparently trying to get a return of capital, not simply a return on capital, from their recently impoverished clients in the seventeen countries they serve in the Caribbean.
With poor service that many of us believe to be abusive, and the ridiculous demands for insurance, appraisals and securities, the bank is making it virtually impossible for many business clients here to stay in business during tough times. CIBC inflates the interest rate based on what they perceive to be their risk factor. In one documented instance, the CIBC/FCIB is holding a debenture over assets and a personal guarantee that is in excess of US$5.0 million, on a loan note balance of just US$875,000. Where is the risk involved? Moreover, North American and European clients throughout the Caribbean seem to get a much better interest rate than those of us, black or white, who have been born and raised here by families that have settled here for generations.
When the US housing market collapsed in 2007 creating the beginning of the US recession, Canadian Banks immediately reduced the prime lending rate in Canada to 1.5%, being at that time 1.0% over the Canadian Central Bank rate of 0.5%. Here in the Caribbean, however, nothing changed. CIBC continued to charge its best clients a usurious rate of between 7.5% and 13.0%. Why?
The Government of Canada has given all Canadian Banks operating in the Caribbean a basically tax-free status on income from this region, so their shareholders love the huge profits from their Caribbean operations over these past many years.
In recent years, however, simultaneous with the decline in tourism and direct foreign investments throughout the Caribbean, the CIBC, in particular, has tightened its reins. Now they are choking the life out of the very same loyal clients who built the businesses that helped make that bank successful and wealthy in throughout the Caribbean the first place.
My personal experience and observation after being a loyal customer for over 36 years is that CIBC does not see very far into the future. For the Caribbean, they have a zero-tolerance “Special Loans” mentality. In other words, we are permanently on notice. I know that customers such as myself, and thousands like me, given the opportunity, would readily move on to other financial institutions if those other foreign banks too would not pile on us when things got slow for a temporary business cycle. Some countries such as Jamaica, Barbados, Bahamas, Trinidad, Cayman and a few others do have locally owned as well as European-based banks, so we should not allow these abusive Canadian banks, particularly CIBC, to treat us like second-class citizens in our own country. We should be taking action.
In my view, shared by my associates in several countries I do business with in the region, the CIBC has literally cut off its nose here; but, despite its locally declining profits and market share, they recently opened a new multi-million dollar office in Barbados. People throughout the Caribbean are having difficulties making loan payments, yet their bank believes it prudent to open new branches. Why?
As a prominent businessperson in Freeport Bahamas on Grand Bahama Island from a well-known family who settled this country hundreds of years ago, I can assure you that Canadian banks, especially CIBC, have little to no understanding of our local markets, culture or business needs. For example, CIBC in my city cannot make a decision locally on any account for any reason. All applications, every request, and all services must first go to Nassau, then from Nassau to Barbados, and then in a great many instances from Barbados to Toronto, which is over 1,300 miles away. Did you know that Toronto is just 1,000 miles away? Did you know we have very good bankers here, just a mile or two from my business? Moreover, this paper shuffling bureaucracy works the same way back via
Barbados to Freeport. How can a loan officer in Barbados or Toronto know anything about an on-going business operation in Freeport? It was never like this in the nineteen eighties and nineties when the Banks were making huge profits based on local decisions.
It seems to me that CIBC can continuously make new policies, and change banking agreements and whatever, without any consideration for the client. They can cancel an agreed overdraft, and without notice, they can take monies from the client’s account for insurance or appraisals or legal fees. What are we to do? One example is that for 35 years, CIBC immediately honored all cheques regardless if drawn on Royal Bank, Scotia, Montreal, or Commonwealth Bank accounts. Not now. At CIBC, if it is not their cheque being deposited in their bank, they hold it for five working days, although the cheque clears in two working days. Why? Is the reason not that the decision-maker is 1,300 miles away and has almost zero knowledge of us in Freeport? We are certainly not alone. This same problem exists throughout the Caribbean.
Governments in Commonwealth countries such as Jamaica, Barbados, Cayman and The Bahamas require a cheque guarantee issued by CIBC before accepting company cheques payable to their Government’s Public Treasury. CIBC prepares that guarantee document, signs it with the account owner, and then sends it to the Government as assurance of payment in a given amount by the business issuing the cheque. Nevertheless, apparently CIBC feels they do not have to honour their own document because they do return cheques to the Government while waiting five unnecessary days for our deposits to clear their bank.
How does a Canadian bank get away with so much thoughtlessness in the Caribbean? Have our Governments not legislated banking rules and regulations or do they simply allow these banking giants to rape and pillage as they see fit?I personally know several well-established Bahamian companies with well over US$6.0 million dollars in solid assets like inventory, furniture, buildings, and land but with temporary cash flow problems. Due to the US recession, felt throughout the Caribbean but particularly in Bahamas, these companies have formally requested the bank to help them through four slow months in the summer, outside the busy tourist season, by taking interest only on loans and extending
the principal. While this policy would definitely help boost their client’s cash flow, the bank would lose nothing. Actually, the bank would make more profit. However, CIBC managers in Nassau would not even consider this idea. A flat “No, not at this time” is their response. In fact, the bank then says to the client that if you have cash flow issues, we will have to increase your interest rate by 0.5%. Thanks CIBC.
If these Canadian Banks, especially CIBC, are concerned about their growing loses throughout the Caribbean, they should take a good look at how they are abusing their long-term clients. Solutions for these clients would pay much better in the long run over the bank’s existing policy of tightening the screw and forcing many, normally sound, businesses to declare bankruptcy; wasting time and money in the courts. Doing so, in fact builds hostility throughout the community. Bankers need to remember that while they are protecting their rich shareholders in Canada they are putting thousands of honest, hard-working family people out on the street here. They do not understand or appreciate that we do not have the same unemployment and other social support benefits in the Caribbean as people enjoy in Canada. In the Caribbean, during the bad times, people live hand to mouth.
Bankers in Canada need to understand that we businesspersons in the Caribbean had absolutely no hand in the collapse of the North American bank system and subsequent economic downturn. Those problems were caused directly by the very irresponsible banks that are keeping us dangling by threads. We here in the Caribbean also had no hand in the tragedy of 9/11, but, cash flow wise, we are suffering for it more than North Americans are. We are also victims of other elements far beyond our control or influence, such as devastating hurricanes.
We all realize that the current economic downturn is a part of an on-going cycle and that one day, soon we hope, the Caribbean will once again flourish. However, if, as and when the business cycle recovers, Caribbean businesspersons and our customers will remember the Canadian banks, like CIBC, that chose to step on us and kick us during trying times instead of working with us towards a better future for all of us. We will remember.
I truly believe that every person from the Caribbean or a descendant of the Islands of the Caribbean has a moral obligation to protest. Our brothers and sisters throughout the Caribbean should protest the abuse by the major Canadian banks by closing their accounts in the Caribbean and in Canada and moving to a Caribbean-owned bank or any bank with a cooperative and helpful reputation.
We have in Ontario alone, home of the Canadian banks, many thousands of Jamaicans, Bajans, Trinys, Bahamians and others that can and should make a difference by closing and moving their bank accounts as soon as possible. There are, we know, many good banks in Canada like TD Canada Trust and the National Bank of Canada that do not go to the Caribbean to steal from its people. The same applies to all our brothers and sisters throughout the Caribbean: close your account and find a good locally-owned bank.
Send CIBC and the other major Canadian banks that operate here a message to be heard loud and clear in their management offices, their boardrooms and by their shareholders: STOP ABUSING THE PEOPLES OF THE CARIBBEAN.
Jeffrey B. Butler