The government has guaranteed a
US$20 million credit facility from HSBC Bank Cayman Ltd. to the Cayman Islands
The loan, with a floating rate of
approximately 2.3 per cent, will be used to redeem a $20 million bond, with a
fixed 6.85 per cent rate, from Royal Bank of Scotland that had been secured in
Premier McKeeva Bush told
legislators on Wednesday that the new credit facility would mean savings in
interest for the Development Bank of about $824,000 a year.
He said the Development Bank was
also seeking an additional credit facility of US$5 million to support its
onward lending programme and that the bank was in the process of securing an
offer from a local financial institution.
Asked why HSBC had not simply lent
the additional $5 million, Mr. Bush said it was necessary to do a tendering
Responding to a question from the
Leader of the Opposition, Kurt Tibbetts, on whether the interest savings made
by the bank would be passed on to the Development Bank clients in the form of
local lending interest rates, Mr. Bush said those savings would be passed on to
customers wherever possible.
Mr. Bush said the credit facility
would allow the Cayman Islands Development Bank to compete with local banks on
lending. The bank currently lends mortgages at a rate of 9 per cent interest,
higher than the rate offered by local banks.
“[This] will allow the Development Bank to
once again be more competitive in lending to well qualified customers who right
now are going to commercial banks,” Mr. Bush said.
He added: “On-lending is critical
to the Development Bank’s viability. During these challenging economic times,
the government, through our Development Bank is ready and able to assist the
needs of the people we are elected to serve.
“The Development Bank
plays a crucial role in the Cayman Islands’ economy as it provides
opportunities for those who may not readily quality at local commercial banks
for small business loans, mortgages, or even debt consolidation.”