(CMC) – Trinidad’s Finance Minister Colm Imbert says he was not involved in a recent decision by Republic Bank, the country’s largest commercial bank, to reduce credit card limits from US$10,000 to US$5,000 amid the nation’s US currency issues.
Imbert said he has noted a lot of “uninformed and speculative commentary” in the public domain regarding the cut as well as “an unfounded belief that this move by the bank was done on the Minister’s instructions”.
“It is necessary to clear the air on this issue. Firstly, it must be made clear that the Minister of Finance was not involved in any way in this matter, and as a rule, the Minister of Finance does not interfere with the day-to-day operations and internal decisions of our commercial banks.
“It must also be understood that Trinidad and Tobago has an open economy with a free market system, and further, foreign exchange controls were largely abolished in 1993, when the currency was floated,” Imbert said.
Last week, in an email sent to its customers, Republic Bank said that it was cutting in half the maximum US dollar spending limit per billing cycle on its credit cards effective September 21 this year.
“This change includes all transactions conducted outside of Trinidad and Tobago as well as all international online transactions, including transactions where the chosen billing currency is TT dollar.
“These online transactions will be included in your US$5,000 billing cycle limit. All local TT-dollar transactions conducted online or at merchants remain unaffected,’ the bank said, adding that the limit on its pre-paid VTM card would be adjusted downwards effective October 1, 2023.
The maximum VTM card balance will be reduced from US$5,000 to US$3,000 while online VTM loads would be reduced from US$1,000 to US$500, said the bank, which operates throughout the region from the Cayman Islands in the north to Suriname in the south and in Ghana.
In his statement, Imbert said tinkering with the system to achieve short term results must therefore be avoided, although this is not to say that interventions should not be made by the government when required, just that care and caution is required in any such intervention
“In this case, Republic Bank made this decision to cut credit card limits by 50 per cent on its own without any discussion with the Minister of Finance. Upon investigation, the bank advised that its credit card sales had reached an unsustainable level in September 2023, and it had no choice but to reduce the limits on credit cards to stay within its own approved guidelines for what is referred to in the industry as a “short position”.
Imbert said upon being informed of this decision of Republic Bank,” after the fact,” it was determined by the Ministry of Finance that the sales by all banks of foreign exchange using credit cards in Trinidad and Tobago (overseas transactions) had in fact reached close to US$ 6 million a day in September 2023, “with Republic Bank being responsible for a significant percentage of these sales.
“It is noteworthy that at the rate of credit card usage that has been recorded up to the end of August 2023, it is estimated that credit card sales using foreign exchange will reach US$ 2 billion in 2023, which is 45 per cent higher than the pre-COVID level of US$1.38 billion in credit card sales using foreign exchange in 2019.”
Imbert said that as a first step to alleviate the situation, he requested the Central Bank of Trinidad and Tobago (CBTT) inject a further US$50 million into the banking system, on a one-off basis, in addition to the usual fortnightly injection, which was done on Wednesday September 19, 2023.
He said he also met with the Trinidad and Tobago Chamber of Commerce and the Banker’s Association last week to discuss the situation with credit cards, and foreign exchange generally, and in particular, ways and means of making foreign exchange available to local Small and Medium Enterprises (SMEs) to purchase materials and supplies from their overseas suppliers.