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Banks! Who needs Who?

September 24th, 2018 | Tags: Donald E. de Castro
Donald E. de Castro. Photo: VINO/File
By Donald E. de Castro

Over the past years there have been many discussions about banking services here in The Virgin Islands (VI) and yes there is a lot to be desired, so let us look at some the issues that I have spoken about over the years.

Now that the people of Virgin Gorda are losing banking services, that has brought the banking issue to the forefront once again.

Look at a little history of banking by Virgin Islanders and banking in the VI.

Since there were no banks in the VI, Virgin Islanders did their banking in St Thomas, USVI.

National Bank

At that time there was only the Virgin Islands National Bank (VINB) in St. Thomas and later on The West Indies Bank.

The VINB came to Tortola in 1961 and opened in lower down street in the Norman Fowler Building (now occupied by Richardson Riggins and Dancia Penn & Co.).

Over the years that bank changed ownership and name and is now Banco Popular. The West Indies Bank became the Chase Manhattan that came to Tortola in 1968 and is today, 1ST First Bank.

Barclays, now First Caribbean opened in 1965, Scotia Bank in1967. And in 1980 our own Development bank, now the National Bank of Virgin Islands.

Alien Land Holding License

One of the conditions under which the VINB came to Tortola was that the government lifted the restriction within the Alien Land Holding License in regards to the selling of foreclosed property.

What this meant was that the bank, could sell a foreclosed property to anyone without questions being asked.

And that was a big price we paid to get our first bank in VI as we all know who bought the properties when the banks foreclosed.

Once the banks realized what weak leadership we had it was easy for them to take advantage of the leaders and the wider population. The rest is history.

Next VI Government

What we need is for the next government to put as much time and energy into making laws and regulations for the banks (and telephone companies) as they do for financial services.

 I do know that banking is part of financial services but the regulations here do not benefit the residents.

Among my many concerns that I have, my major one is mortgage payments.

When one is able to negotiate a loan, we all know that for the first years the majority payment of the loan is interest.

Here are my concerns.

  • If your payment is $300.00 per month and $250.00 is interest and $50.00 is against the principal why are you not allowed to pay additional payment against the principal?
  • The answer is yes you can, however, the minimum the banks want is outrageous. One bank wants a minimum of $100.00 when I first investigated this issue.
  • If for some reason, you find a way to pay off the loan there is an early payment penalty. That means that they are charging you a hefty fee for paying off your loan ahead of time.
  • Here is something many of you may or may not know. If you have a savings in a US Bank your deposit is insured up to $100,000.00 within the US and its Territories. Here in VI it is not insured.
  • Do any of the banks, including VP and Bank of Asia have insurance to protect their customers deposits should they go under?

Penalty

My personal opinion is that one should be able to pay a minimum of $25.00 per month against the principal and there should not be a penalty for early payment.

Do the math of a $300.00 loan for thirty years paying an additional $25.00 per month against the principal and you will pay-off the loan early and save on interest.

So, we should all understand why need our own commercial bank.

I have been advocating this from time the National Bank was the Development Bank.

In April 2016 I wrote an article titled, “Time for better banking service in the Virgin Islands.”

Here is a quote from that article: “While many of us can appreciate the service these banks have offered over the years to this Territory, there are those of us who also realized that Virgin Islanders have been taken advantage of in many ways by these banks, with the assistance of present and past governments as they failed to introduce and pass consumer protection legislation to properly regulate the banks.”

Commercial Bank

Once we have made our bank a full commercial bank the Government of the VI, can ask the UK Government to negotiate with the US Federal Government to find a way that our bank may use their Federal Reserve routing system.(Remember in the 1960s the UK negotiated on our behalf for us to use their (US) currency as our legal tender).

 Which would mean that cheques sent to the US would clear just as fast as the two US Virgin Islands banks here in VI Virgin Islands.

Many persons do not understand the interesting situation we have here in the VI in regards to banking. People that have a savings account at any of the two US Banks here in the VI can make deposits and withdrawals anywhere in the US Virgin Islands, Puerto Rico or the US mainland from their account.(I do not believe this service is offered by the other two banks with their branches throughout the Caribbean).

VIP/NDP Failings

In addition, if you have a checking account and you send your checks to the US they are cleared within three days after being deposited in comparison to the unreasonable amount of time that it takes for a cheques to clear here.

It is interesting to note that the legislators of the seventies had the foresight to open a bank but the more educated ones since, did not have the foresight to improve the services.

If the past governments, both VIP and NDP really and honestly had the VI and its people at heart, we would not be facing the banking situation we are facing today.

I am of the opinion that all past legislators were scared to offend the foreign banks by having our own bank compete with them.

So, with the upcoming election let us listen to who will address this issue.

7 Responses to “Banks! Who needs Who?”

  • 123 (24/09/2018, 13:46) Like (6) Dislike (0) Reply
    good read
  • Why (24/09/2018, 22:16) Like (0) Dislike (8) Reply
    This is a blog site and not a news site. Not that this wasn’t interesting but they need to post actually reporting.
  • E. Leonard (24/09/2018, 23:35) Like (3) Dislike (0) Reply
    Mr. DeCastro, thanks for the history lesson on the growth of banking services in the VI. Agree that mortgagor(s) should be allowed to pay down the principal on a mortgage in any amount at any time and there should not be any prepayment penalty on paying off a mortgage. Moreover, making extra payments on principal save the mortgagor (borrower) on interest paid. For example, a $200K, 30-year, 5% home loan would result in the borrower paying approx $187K in interest over 30 years. However, if the borrower makes 13 payments every year vice 12, the loan will be paid off in 26 years instead of 30 years and interest paid will be $154K instead of $187K, saving of $33K.
  • X Customer (25/09/2018, 08:56) Like (2) Dislike (0) Reply

    funny that the ..... based bank here has nothing happen to it with the massive violations it perpetuates
    against cutomers. far beyond what is allowed by law in any of the countries involved including .......
    very strange indeed. and they think they are impressing people.

    • BRAD BOYNES (26/09/2018, 06:46) Like (0) Dislike (0) Reply
      @Customer. I wonder why the institutions names were blocked out ? Hmm. This hiding/secretive society we live in. Some kinda democracy huh!
  • hungry (26/09/2018, 08:35) Like (0) Dislike (0) Reply
    please don't block out the name or national origin of the bank mentioned above. It makes you look guilty
    of something in the matter....
  • Diaspora (26/09/2018, 17:09) Like (0) Dislike (0) Reply
    Banks provide a valuable service to a community. In addition to providing a relative safe place to stash personal savings and demand deposits, they provide loans for business start ups, loans to existing businesses, loans for mortgages and so on. Banks income come primarily from lending out depositors’ deposits at a much higher interest rate than they pay to depositors; the delta between both rates is the bank’s profit. Nonetheless, there must be consumer protection in place to protect customers, eg, for example, if a bank(s) fails, how will depositors be made whole.........etc. Banks operating in the VI shouldn’t mean a win-lose for consumers; government must ensure that consumers are fairly treated.


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