Empowering Credit Unions to Compete with Commercial Banks

As the regulator of Belize’s financial system, the Central Bank of Belize supervises more than six point six billion dollars held by financial institutions. Domestic banks account for more than four point five billion, while credit unions account for one point three billion dollars. The two top domestic banks are Belize Bank Limited which holds more than two billion dollars in assets, and Atlantic Bank Limited which holds more than one point eight billion dollars in assets. The largest credit union is Holy Redeemer Credit Union with seven hundred and thirty seven million dollars in assets. Central Bank Governor Kareem Michael attended the recently held fifty-fourth Annual Monetary Studies Conference hosted by the Bank of Jamaica. During the event, Michael is quoted as saying that Belize is exploring the enactment of new legislation to empower credit unions in the country, granting them increased flexibility to compete with commercial banks. Today, he shared more.

Kareem Michael

Kareem Michael, Governor, Central Bank of Belize

“I think I may have commented that I would group everything from here even Heritage up as too big to fail. Why? Because recall the last presentation I showed interconnectedness and a fire in maybe from that level up does carry through because of the level of interconnectedness all the way back up to the top. But what sort of fire we’re looking at? Would be far greater if those top two caught the coal first.  If I gave you this context that there now these groupings that exist, and on top of that, I showed you interconnecting this with concentration. Then, what do we want to, what is the ideal state that we want to revert to? Competitive behavior, because I do not want to, I don’t see any central bank going tit for tat by implementing again another practice direction. That is not ideal. You will be chasing a ghost. Um, that’s, that’s a slippery slope, to use another adage. We don’t want that. So, why not create competition or not. Why encourage competition? I can’t say create. Why not encourage competition? What sort of customer engages in a credit union? What sort of customer engages in a top tier bank? If we understand those profiles, then why not look towards credit unions to continue to develop and start offering the same services features as a commercial bank. The credit union act is how old? It hasn’t been revised from when? It’s over 50 years. So, if credit unions develop more sophisticated risk practices, risk models, credit risk offices, then credit unions can start to enter into loan markets, which they fully understand, and offer loans which they understand better. That sort of competition helps. So if you raise governance, you thereby raise the range of services, practices, that other institutions within this financial sector may be able then to actively compete with a commercial bank. And even correspondent banking is another key one. Credit unions perform this role in other jurisdictions. Why not here?”