Monetary Council reports rapid expansion in ECCU banking system
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| Headquarters of the Eastern Caribbean Central Bank (ECCB). Photo by Erasmus Williams |
BASSETERRE, ST. KITTS, OCTOBER 16TH 2007 (CUOPM) – The St. Kitts-based Eastern Caribbean Central Bank (ECCB) is reporting a rapid expansion in deposits in the sub-regional banking system.
“Consistent with the general buoyancy in economic conditions, total deposits grew by 11.8 percent to $15 billion over the year ended June 2007 compared with an increase of 9.0 percent over the corresponding period of 2006,” said the communiqué issued at the end of the 60th Meeting of the Monetary Council of the Eastern Caribbean Central Bank (EECB).
The statement said that growth in the sub-regional economy during the period was driven largely by significant foreign direct investment inflows, expansions in construction and agriculture and favourable performances in wholesale and retail trade. The ECCB Business Outlook Survey also indicated generally strong business confidence during the period.
“Domestic credit expanded by 20.3 percent to $9.1 billion during the twelve months ended June 2007 compared with the 16 percent growth recorded during the corresponding period of 2006,” said the communiqué.
According to the ECCB Credit Market Conditions Survey, credit to households was primarily for the purchase of consumer durables and mortgages while the increase in demand for business loans was mainly associated with financing fixed investment, inventory and working capital.
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It said that commercial bank liquidity remained above the prudential limits despite the overall decline recorded as at the end of June 2007. This development was however consistent with the strong expansion in domestic credit over the period which commercial banks financed in part by a drawdown of their net foreign assets and borrowing from their head offices.
“Favourable interest rates in the USA and large inflows from tourism related activities contributed to robust growth in the net foreign assets of the Central Bank. There was however a decline in the net foreign asset position of commercial banks reflective of the drawdown to finance the vibrant credit expansion exhibited over the period. Consistent with the increase in the central banks’ net foreign assets, the backing ratio for the domestic currency rose,” said statement, which added there was evidence of a downward trend in the real effective exchange rate (REER) mirroring the slide of the US dollar (to which the EC dollar is pegged) against major world currencies.
“This would have enhanced the attractiveness of the region as a tourist destination,” said the Monetary Council statement.
