The ‘true extent’ of loan default soon revealed

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Central Bank of the Bahamas.

By NEIL HARTNELL

Editor-in-chief of the Tribune

[email protected]

The governor of the Central Bank warned yesterday that the “true scale” of delinquencies on COVID-19 loans will soon turn out to be the last 8.5% of credit balances carried over to exit from these agreements.

John Rolle, unveiling the Central Bank’s analysis of economic performance marked by the 2020 pandemic, said commercial banks saw only a slight decrease in loan delinquencies last year when nearly 2 Billions of dollars in credit – about a third of all that was in progress – was put into payment deferral initiatives.

“As most of these agreements have expired, a greater extent of defaults will become evident in 2021. Until the end of 2020, only 8.5% of loan balances remained in deferral, compared with about two. third of the balances in June 2020. Nonetheless, commercial banks continued to show tolerance towards borrowers facing difficulties, ”he added.

“Again, it is estimated that the financial system will emerge from the pandemic in a stable manner. Banks have more than enough capital to absorb potential losses, while credit unions now enjoy deposit insurance protection and a clearer timeline around which their hotel borrowing members will begin to see their loans. profits recover. “

The Central Bank announced yesterday that delinquencies on commercial bank loans improved in December, with arrears falling from $ 23.2 million (2.9 percent) to $ 773.1 million, although the situation deteriorated over a full year.

“On an annual basis, total private sector arrears increased by $ 86.7 million (12.6 percent), raising the ratio of arrears to total private sector loans by 1.7 percentage points. The result was led by a growth of $ 66.2 million (28.5%) in short-term defaults, with the corresponding ratio being 1.2 percentage points higher, ”he added. .

“Likewise, non-performing exposures increased by $ 20.6 million (4.5%) while the support ratio strengthened by 48 basis points. Disaggregated by loan type, mortgage arrears increased by $ 63 million (14.9%), reflecting an expansion of $ 63.3 million (46.9%) in the short-term category. In contrast, long-term arrears edged down by $ 0.3 million (0.1%).

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