Fi­nance Min­is­ter Colm Im­bert on Wednesday un­veiled a num­ber of changes to the cur­rent bank­ing sys­tems to help stim­u­late bor­row­ing and a stag­nat­ed econ­o­my dur­ing the pe­ri­od the coun­try will be slowed down while try­ing to curb the spread of the COVID-19 virus.

In a bid to in­ject more mon­ey in­to the sys­tem, the com­mer­cial banks are ex­pect­ed to drop their prime lend­ing rates by as much as 30 per cent and pro­vide a mora­to­ri­um on mort­gages and loans.

Speak­ing dur­ing a press con­fer­ence af­ter a spe­cial meet­ing by Cab­i­net, Im­bert an­nounced that the Cen­tral Bank is now of­fer­ing com­mer­cial banks in­cen­tives to mo­ti­vate bor­row­ing and to use the “Skip a Pay­ment” ini­tia­tive to de­fer pay­ments on loans and mort­gages for one month in the first in­stance.

“As we see how this pan­dem­ic evolves, it would be on a rolling month­ly ba­sis. We’re start­ing with one month, all penal­ties on non-pay­ments would be waived,” said Im­bert, who is part of a fi­nance com­mit­tee, set up to look at mea­sures dur­ing the COVID-19 re­sponse pe­ri­od.

Im­bert said banks are re­quired by the Cen­tral Bank to de­posit a per­cent­age of the de­posits made by their clients, so if a bank has $1 bil­lion in de­posits it nor­mal­ly de­posit­ed 17 per cent of that fig­ure. How­ev­er, he said the re­duc­tion in the re­serve rate from 17 per cent to 14 per cent now means that banks en­joy more liq­uid­i­ty.

“What that means im­me­di­ate­ly is that banks have more cash avail­able to them,” Im­bert said.

“And lend­ing rates are im­me­di­ate­ly af­fect­ed by liq­uid­i­ty.”

Lend­ing rates, he said, should al­so im­me­di­ate­ly be low­ered.

The re­duc­tion of the re­po rate, which is the rate by which the Cen­tral Bank lends mon­ey to the com­mer­cial banks, has al­so been re­duced from five per cent to 3.5 per cent.

“The re­po rate has a pro­found ef­fect on all in­ter­est rates. The Cen­tral Bank, very quick­ly, with­in a two-hour pe­ri­od, moved the re­po rate down­wards. A 30 per cent re­duc­tion,” Im­bert said.

“What the banks have told us so far is that they will im­me­di­ate­ly re­duce the lend­ing rates by the same amount, but we ex­pect more of them be­cause al­though the re­po rate is 5 per cent, the prime lend­ing rate is, which is the rate at which the bank will lend to an or­di­nary cus­tomer, is 9 1/4 per cent, so that the prime lend­ing rate is al­most twice the lend­ing rate.

“We al­so ex­pect the prime lend­ing rate to go down by 30 per cent.”

The Cen­tral Bank al­so di­rect­ed the com­mer­cial banks to re­duce the gap be­tween de­posit rates and lend­ing rates.

“Right now the typ­i­cal de­posit rate is one per cent, one and a half or two per cent but a lend­ing rate is nine per cent,” he said.

Im­bert said the re­duc­tion in that gap will “ease up” peo­ple in the bank­ing sys­tem. He said the banks would al­so re­duce in­ter­est rates on cred­it cards by ten per­cent­age points.

“Right now the in­ter­est rate on cred­it cards is 24 per cent, 25 per cent. They’ve agreed to re­duce that rate by 10 per­cent­age points. For ex­am­ple, if your cred­it card rate is 24 per cent, it would be re­duced to 14 per cent,” Im­bert said.

Small busi­ness will al­so ben­e­fit from this in­cen­tive.

“Per­sons who have lim­its of $25,000 and less, that rate goes down to ten per cent, again to ease up small busi­ness that may wish to use cred­it cards to get cash at this point in time,” he said.

The banks have al­so been asked to in­crease the lim­it on cred­it cards to en­cour­age peo­ple to use cred­it cards to get cash.

“At this point in time we are seek­ing the in­ter­est rate on loans in cred­it unions re­duced from 12 per cent per year and we are seek­ing to get that down to six per cent or less,” he said.

Im­bert said the plan was to tar­get every­one with fi­nan­cial oblig­a­tions at the end of the month.

He said there is a plan go­ing for­ward to meet with the mon­ey lenders, such as Is­land Fi­nance and Uni­com­er, which owns Courts.

“They lend mon­ey to peo­ple to buy house­hold ef­fects, ap­pli­ances and so on,” he said.

Im­bert said that, by law, mon­ey lenders can im­pose an in­ter­est rate of as much as 24 per cent.

“So we are look­ing at that,” he said.

Im­bert’s Fi­nance Com­mit­tee team in­clud­ed Prime Min­is­ter Dr Kei­th Row­ley as team lead, Pub­lic Util­i­ties Min­is­ter, Robert Le Hunte and Min­is­ter of Pub­lic Ad­min­is­tra­tion Allyson West.