Minimum interest rate payable on savings accounts reduced

The minimum interest rate commercial banks can pay on savings deposit in the East Caribbean Currency Union (ECCU) has been reduced even further.

At the 81st meeting of the Monetary Council of the Eastern Caribbean Central Bank (ECCB), held on February 24 in St Kitts and Nevis, a decision was taken to reduce the minimum savings deposit rate from 3.0 per cent to 2.0 per cent.{{more}} The previous adjustment was in September, 2002, when the rate was reduced from 4.0 per cent to 3.0 per cent.

The communique of the meeting, however, said that the Central Bank’s discount rate was maintained at 6.5 per cent.

It was underscored at the meeting, which was chaired by Prime Minister of St Vincent and the Grenadines Dr Ralph Gonsalves, that the implementation of measures to mitigate credit risk deficiencies and promote the continued stability of the system was imperative. Council therefore agreed to the implementation of a comprehensive and integrated strategy to maintain the safety, soundness and sustainability of the ECCU banking sector, including legislative and regulatory reforms.

Therefore, amendments to the ECCB Agreement, the Banking Bill and the Eastern Caribbean Asset Management Corporation (ECAMC) Agreement and Bill will be passed by March 27, 2015 and legislation for foreclosure and deposit insurance will be drafted by May 31, 2015.

With respect to fiscal coordination and debt management, Council agreed to recommend to member governments to extend the timeline for achieving fiscal and debt targets to 2030, given the ongoing challenges faced by member countries and to implement suitable fiscal consolidation measures and secure and build the requisite technical and administrative skills to implement the reforms.

At the meeting, Council was informed that money conditions were assessed to have eased in 2014 relative to 2013, while credit conditions were assessed to have tightened. Additionally, domestic credit was estimated to have contracted by 4.5 per cent during 2014, after a 3.7 per cent decline in 2013. Overall, credit to the private sector was estimated to have decreased by 1.8 per cent during 2014, in contrast to an increase of 2.0 per cent in 2013.

Real GDP growth in the ECCU for 2014 was estimated at 1.7 per cent, compared with 1.1 per cent in 2013, and developments on the Regional Government Securities Market (RGSM), which continued to grow in importance as a source of credit, indicated a general easing of credit terms for the member governments.

Near term outlook and prospects indicated that the aggregate ECCU economy was forecast to increase to 2.4 per cent in 2015 and 2.5 per cent in 2016.

The meeting was attended by: Dr The Honourable Ralph Gonsalves, Prime Minister and Minister for Finance, St Vincent and the Grenadines (Chair); Honourable Hubert Hughes, Chief Minister and Minister of Finance, Anguilla; Honourable Gaston Browne, Prime Minister and Minister of Finance, Antigua and Barbuda; Honourable Roosevelt Skerrit, Prime Minister and Minister of Finance, Commonwealth of Dominica; Dr the Right Honourable Keith Mitchell, Prime Minister and Minister of Finance, Grenada; Honourable Donaldson Romeo, Premier and Minister of Finance, Montserrat; Dr the Honourable Timothy Harris, Prime Minister and Minister of Finance, St Kitts and Nevis; Honourable Dr Kenny D Anthony, Prime Minister and Minister of Finance, Saint Lucia.

The next meeting of the Council has been scheduled for July 24, 2015 in Anguilla, following the handing-over ceremony for the change in chairmanship of the Council.