Rocky economic times often lead to calls for government to step in and put pressure on banks to provide better customer service, make it easier to take out mortgages and business loans, work with customers who are experiencing financial difficulties, and provide other help to those who may be struggling.

But can government really influence what the banks do? And should it try? Maybe not, according to a panel assembled on Nov. 30 for a forum hosted by Money Matters BVI, the educational arm of the Financial Services Commission.

The session featured representatives from every major bank in the VI responding to audience questions. “They can talk to the banks and they can advise the banks on what they see in the market,” said Sjoerd Koester, general manager of VP Bank.

“But really and truly, the only bank that should work with the government are the national banks.” National banks have a specific purpose, and they can sometimes assist customers by offering terms that commercial banks would not be able to offer, Mr. Koester explained.

A country’s regulator — the Financial Services Commission in the VI — might be able to facilitate such work, he added. “But the government should not really get directly involved in the bank’s management, because you want the banks to manage the risk in a sensible way,” he said. “You don’t want to risk the depositor side of the banking side. You want the banks to still be commercially sound, because if the banks no longer have a business in the BVI, you’ll lose your ability to leverage your money; you lose your ability to safely put your assets away. So it is important that the banks operate independently outside of government influence.”

National banks

Irvin Meade, chief credit officer for the National Bank of the VI, chimed in by offering examples of situations where the bank has partnered with government on initiatives. One example he gave was a programme to offer 100 percent financing on land loans in an effort to support land ownership among young Virgin Islanders.

“For them to have a piece of paradise: That was one of our visions. And that’s why we had certain incentives like that,” he said. However, outside of those special incentives, he said, the national bank is “a full-fledged commercial bank, so we have to be viable, just like the [other] banks.”

Protecting depositors

Even commercial banks don’t make every decision with profit as their primary motive: They also must balance risk, Mr. Koester said.
“I think what is very important to understand is how banks operate,” he said.

“We have people’s money, the depositors’ money, and that money we use to give to borrowers. If the banks take on practices that are either not commercially viable, or commercially aggressive, or just very risky, we might risk the depositor side of the bank.”

To ensure they operate properly, they’re monitored by regulators — and often, in the case of the VI, by head offices and parent banks in the United States and Europe. “In that respect, we’re monitored by a regulator in order to balance that risk,” Ms. Koester explained.