Both Sides of The Coin: The Story of The Central Bank of Barbados 1972-2017

46 its authority under Section 35 of the Central Bank Act to introduce minimum reserve requirements for the commercial banks. A letter from the Bank Secretary, Herman Brathwaite, to Permanent Secretary in the Ministry of Finance and Planning, Arthur McCollin, requested that the measure be gazetted on November 6, 1973. A week after Brathwaite’s letter, Governor Blackman wrote to Philip Greaves, the acting minister of finance and planning, advising him to inform the IMF about the Bank’s intention. Accordingly, simultaneously with the issue of the new currency, the Bank introduced the minimum reserve requirement on commercial banks. Two per cent of each bank's total deposits would be held as a non- interest-bearing deposit with the Central Bank and one per cent of their deposits held in Government of Barbados Treasury Bills. The banks were allowed three months to meet the requirement, with holdings to increase by one percentage point during each month. At the same time, accounts were opened for the seven commercial banks which were then in operation. 29 The reserve requirements were intended to direct funds from the private sector to Government, but the banks were cautioned against compromising their lending to the productive sectors. In May 1975, the securities requirement was redefined to include Government of Barbados Debentures. Rediscounting The other major initiative on the monetary policy front also came in December 1973, with the start of the rediscounting scheme. The sugar industry, which was preparing for the 1974 harvest, could not raise working capital at the commercial banks because of the tight liquidity conditions. As a result, the Central Bank provided the commercial banks with the required financing at a discount rate of one per cent below the interest rate on advances to the industry. These advances, which qualified under the Agricultural Aids Act 1973-28, totalled $2.6 million at the end of 1973.