The boss of banking

THIS YEAR the Central Bank of TT (CBTT) is observing its 60th anniversary and its well-known Central Bank Museum is celebrating 20 years of existence. As a small island developing state (SIDS), a stable banking system in TT was crucial in 20th century and essential for survival in the 21st century.

From its inception, the CBTT’s early governors, John Pierce (1964-1966), Dr Alexander McLeod (1966-1969) and Victor Bruce (1969-1984) and those in the post-1984 era, including Ewart Williams and Winston Dookeran, helped guide our banking sector and ensured economic stability.

Few citizens are aware of the roles and significance of the CBTT. We know the role of the Bank in issuing new banknotes. However, this is only one of its many responsibilities. The Central Bank Act was passed in December 1964, and its purpose was “to maintain, influence and regulate the volume and conditions of supply of credit and currency in the best interest of the economic life of the country.”

During the early 1970s, the research department of the CBTT, produced a staff paper which mentioned two of the institution’s vital roles, “The Central Bank also contributes to the creation of financial assets through its extension of credit to the central government.” Indeed, the Central Bank has to ensure its monetary policy is in tandem with the government’s economic policy. The second role is that, “Central Bank lending to the government is generally effected through the purchase of government securities such as bonds, the proceeds of which go initially to create government deposits …” Additionally, the CBTT has to monitor foreign borrowing and also any increases in bank credit that is being offered to the private businesses.

In July 1978, in the Senate, legislation was introduced to amend the Central Bank Act, 1964. The subsequent debate on two bills- Central Bank (Amendment) Bill and the Banking (Amendment) Bill reflected the important role of the CBTT. The minister in the Ministry of Finance, senator Mervyn de Souza, said the first amendment was to give “Central Bank the power to control and direct the interest structure so as to further the economic and social objectives of the country.” The second bill was control of the operation of finance houses that were being spreading across T&T. The minister said that branches of foreign banks had a “far superior position” over local banks. He said that with the Banking Amendment Act, “… branches of foreign banks will have to bring into Trinidad a certain sum of money which will be deemed to be an ascribed capital … we will then use that ascribed capital plus any reserves which the branch builds up in Trinidad to determine their deposit capability and their lending capability.”

In 1993, there was some uncertainty when the TT dollar was floated. This marked an end of exchange controls and the CBTT helped in this transition.

In the 21st century, the CBTT is not only focused on financial operations but has an admirable track record in its outreach among schools and the public. For instance, it is the venue for the annual Eric Williams Memorial Lecture Series. And, in May 2014, under the leadership of governor Jwala Rambarran (2012-2015), the bank held its inaugural Dr Rudranath Capildeo Legacy Lecture and an accompanying exhibition titled – From Lion House to Legend. Most of the public are aware of the Central Bank’s auditorium. It was opened in 1986 and underwent refurbishing in 2009. Since its inception, the auditorium has been graced with the presence of international and local artistes. And, the popular venue has showcased numerous dramatic productions by memorable names as Richard Ragoobarsingh, Baggasse Company and Raymond Choo Kong.

Dr Alvin Hilaire, (the current governor of the Central Bank), has maintained the solid foundation that past governors helped build. Dr Hilaire has also lent support to noteworthy ventures. For instance, he participated in two International Men’s Day events hosted by the Bankers Association of TT (BATT) in 2018 and 2019 at the Hyatt in Port of Spain.

In retrospect, our monetary policy cannot be theoretical or impractical. It has to be tailored and in sync with the needs of the citizens. The CBTT has weathered recent storms of criticisms regarding the flows of foreign exchange (forex). Nonetheless, the Bank has remained steadfast. Amidst the turmoil in global markets and economic instability, the CBTT has ensured that TT can boast of considerable stability and economic independence. Yes, there have been periods of uncertainty, but this indigenous financial institution has remained our stable boss of banking.