COVID-19 PANDEMIC AND LOCAL FINANCIAL SECTOR RESIL
As the world grapples with the COVID-19 pandemic, the local financial services sector has taken proactive virus-mitigating measures and initiatives for liquidity provision. These ensure protection of its customers and supports cash flow management to aid business continuity, prevent a credit crunch and protect vulnerable individuals in the country. The financial services sector has highlighted ways customers can reduce the potential transmission of the virus and has established protocols and time-sensitive responses to facilitate remote financial connectivity and credit availability.
The local financial services sector is assisting in the mitigation of risk to its customers of the various financial institutions by advising of readily available alternatives to in-branch visits and cash transactions. The use of financial technology allows for not only greater connectivity in times of required social distancing but provides the necessary platforms for remote access to financial services.
Customers are therefore guided to pay utility bills, make money transfers and query account balances using the following:
- Digital/electronic channels; telebanking, mobile banking and internet banking
- Debit and credit cards at Point-of-Sale (POS) terminals instead of cash
- Automated Teller Machines (ATMs) for cash instead of in-branch visits.
Additionally, the Central Bank of Trinidad and Tobago has reduced the repo rate (the rate at which commercial banks borrow from the Central Bank) and the reserve requirement (the percentage of deposits that the commercial banks are mandated to hold as a reserve). The reduction of the repo rate by 150 basis points from 5% to 3.5%, has triggered reduced prime lending rates by the commercial banks. Reductions in the rates will reduce the cost of accessing loans/credit facilities and aid lending. The new 14% reserve requirement from the previous 17% will also provide the local banking sector with TT$2.6 billion in additional liquidity to support continued cash provision to the public.
Commercial banks are also exploring various time periods for the deferral
of loan payments. This initiative can provide a moratorium for up to six months in some instances on debt repayment (including mortgages) to assist customers with their cash flow.
Further to these concessions, commercial banks will reduce credit card interest and also institute automatic waivers on credit card late fees, overdrawn accounts, late fees on loan repayments and penalties for early withdrawal of certificate of deposit accounts.
Credit unions are exploring reducing the rates of interest for loans. Additionally, web-based lending institution Term Finance announced that
it will repurpose its customer service team and some of its loans officers to provide financial advice to employees who will be affected by COVID-19 market conditions. Deferrals are also being offered to employees whose wages have been adversely affected and a new financial well-being hotline is proposed to provide support to individuals that need financial advice and savings tips.
As local efforts are being made to successfully chart the financial services sector through this unforeseen circumstance, the T&T IFC continues to echo the call for the development of the local FinTech ecosystem. The launch of new payment solutions can increase access to contactless digital payment options, which are being recommended by the World Health Organisation (WHO) to limit the spread of COVID-19. This will provide the momentum necessary for the long-term shift towards a cashless society which will increase the ease of doing business in Trinidad and Tobago.