In his 2026 bud­get pre­sen­ta­tion last week Mon­day, Min­is­ter of Fi­nance Dav­en­dranath Tan­coo men­tioned Re­pub­lic Bank and First Cit­i­zens twice.

On the first oc­ca­sion, this is what Mr Tan­coo said:

“For­eign ex­change short­ages re­main a chal­lenge for busi­ness­es, lim­it­ing ac­cess to raw ma­te­ri­als and pro­duc­tion. The un­fair prac­tices at ma­jor com­mer­cial banks and the Ex­im Bank have ex­ac­er­bat­ed these short­ages.

“This ad­min­is­tra­tion will act de­ci­sive­ly to sta­bilise the ex­ter­nal po­si­tion. By restor­ing en­er­gy pro­duc­tion and cre­at­ing an en­abling en­vi­ron­ment for busi­ness and in­vest­ment, we will in­crease for­eign cur­ren­cy in­flow.

“We will en­sure that the pro­duc­tive sec­tors have ac­cess to for­eign ex­change. We have in­stalled new boards at First Cit­i­zens Bank and the Ex­im Bank, and we will move to in­stall a ma­jor­i­ty of di­rec­tors at Re­pub­lic Bank Ltd.”

It is im­por­tant that the read­ers of this com­men­tary pay par­tic­u­lar at­ten­tion to the last two sen­tences of Mr Tan­coo’s quote.

Af­ter mak­ing a case that “the un­fair prac­tices at ma­jor com­mer­cial banks and the Ex­im Bank have ex­ac­er­bat­ed these short­ages,” of for­eign ex­change to small and medi­um-sized busi­ness­peo­ple and in­di­vid­u­als, T&T’s Min­is­ter of Fi­nance im­me­di­ate­ly states that the Gov­ern­ment “will en­sure that the pro­duc­tive sec­tors have ac­cess to for­eign ex­change.”

And, as though he want­ed to make clear HOW the Gov­ern­ment “would ad­dress the un­fair prac­tices at ma­jor com­mer­cial banks,” Mr Tan­coo in­di­cat­ed that his Gov­ern­ment had in­stalled new boards at First Cit­i­zens Bank and the Ex­im Bank, “and we will move to in­stall a ma­jor­i­ty of di­rec­tors at Re­pub­lic Bank Ltd.”

It is note­wor­thy that, with ef­fect on the day af­ter Mr Tan­coo an­nounced that the Gov­ern­ment “will move to in­stall a ma­jor­i­ty of di­rec­tors at Re­pub­lic Bank Ltd”, Re­pub­lic Fi­nan­cial Hold­ings Ltd (RFHL), the par­ent com­pa­ny of T&T-based Re­pub­lic Bank Ltd, ap­point­ed three new di­rec­tors.

In a no­tice from RFHL’s group gen­er­al coun­sel and cor­po­rate sec­re­tary, Kim­ber­ly Erri­ah-Ali is­sued on Oc­to­ber 17, the fi­nan­cial hold­ing com­pa­ny dis­closed that Yash­mid Kara­math, Dr Tim­o­thy Af­fon­so and Nali­ni Bansee had been ap­point­ed to the board of the com­pa­ny with ef­fect from Oc­to­ber 14.

Now, I be­lieve that most peo­ple read­ing the words of the T&T Min­is­ter of Fi­nance, quot­ed above, would con­clude that the man­date of Gov­ern­ment’s ma­jor­i­ty of di­rec­tors on the board of Re­pub­lic Bank—and its ap­point­ment of all of the di­rec­tors of First Cit­i­zens and the Ex­im­bank—would be to re­dress the so-called im­bal­ance in the al­lo­ca­tion of for­eign ex­change to “en­sure that the pro­duc­tive sec­tors have ac­cess to for­eign ex­change”.

Some ques­tions arise:

* Would the new di­rec­tors on the boards of the two state-con­trolled com­mer­cial banks par­tic­i­pate in set­ting new poli­cies for for­eign ex­change al­lo­ca­tion OR would the new di­rec­tors go fur­ther and call up a bank man­ag­er to in­di­cate that client A, B or C should get X amount of for­eign ex­change? The for­mer would be ac­cept­able, the lat­ter would not be;

* Would the pop­u­la­tion of T&T have an is­sue if RFHL skews its for­eign ex­change loan and sale prac­tices to “en­sure that the pro­duc­tive sec­tors have ac­cess to for­eign ex­change?”

If the Gov­ern­ment de­fines pro­duc­tive sec­tors to in­clude all of the man­u­fac­tur­ing com­pa­nies in T&T that need to ac­cess for­eign ex­change be­cause they are re­quired to pay for in­puts for their man­u­fac­tured ex­ports, the pop­u­la­tion would have no prob­lem with that.

But if the de­f­i­n­i­tion of “pro­duc­tive sec­tors” is made to in­clude the hun­dreds of re­tail stores that are now be­ing starved for for­eign ex­change from au­tho­rised deal­ers, that would not be in align­ment with Mr Tan­coo’s pref­er­ences.

Is the im­por­ta­tion of six-year-old for­eign used cars from Japan or Ko­rea in align­ment with en­sur­ing that pro­duc­tive sec­tors have ac­cess to for­eign ex­change?

And what about the large com­pa­nies that both im­port for dis­tri­b­u­tion and for in­puts that are then man­u­fac­tured and sold on the do­mes­tic and for­eign mar­kets? Would those com­pa­nies be dis­ad­van­taged in ac­cess­ing for­eign ex­change?

In my view, Mr Tan­coo’s link­ing of the thorny is­sue of ac­cess to for­eign ex­change with the Gov­ern­ment tak­ing con­trol of the two com­mer­cial banks in which the Gov­ern­ment has a con­trol­ling in­ter­est is prob­lem­at­ic. It is prob­lem­at­ic be­cause the Min­is­ter of Fi­nance made lit­tle ef­fort to de­fine what the Gov­ern­ment con­sid­ers to be the “pro­duc­tive sec­tors” be­yond say­ing that “by restor­ing en­er­gy pro­duc­tion and cre­at­ing an en­abling en­vi­ron­ment for busi­ness and in­vest­ment, we will in­crease for­eign cur­ren­cy in­flow.” If on­ly things were so easy.

The link­age is al­so prob­lem­at­ic be­cause Mr Tan­coo did noth­ing to en­light­en the pub­lic on what the Gov­ern­ment en­vis­ages as the fix for the for­eign ex­change al­lo­ca­tion is­sue, be­yond say­ing that it had in­stalled new boards at First Cit­i­zens Bank and the Ex­im­bank “and we will move to in­stall a ma­jor­i­ty of di­rec­tors at Re­pub­lic Bank Ltd”.

Loans/bonds to fund 10% salary hike?

In his 2026 bud­get pre­sen­ta­tion, the Min­is­ter of Fi­nance al­so hint­ed that the Gov­ern­ment would be lean­ing on the state-con­trolled banks to fund its gen­er­al elec­tion cam­paign promise of a wage hike of at least 10 per cent for em­ploy­ees in the pub­lic sec­tor.

Mr Tan­coo said:

“I turn now to our cam­paign promise to ad­dress the out­stand­ing ne­go­ti­a­tions with the Pub­lic Ser­vice As­so­ci­a­tion (PSA). For far too long, our pub­lic of­fi­cers, the back­bone of our na­tion’s work­force, have been made to car­ry the weight of the for­mer Gov­ern­ment’s ne­glect and in­dif­fer­ence.

“This Gov­ern­ment is tak­ing this bold and his­toric step to re­store jus­tice, dig­ni­ty, and re­spect to the hard-work­ing men and women of the pub­lic ser­vice.

“Af­ter nine long years of stag­na­tion, we are com­mit­ted to fi­nal­ly bring­ing all par­ties back to the bar­gain­ing ta­ble to ad­dress this long-over­due in­jus­tice. On the com­ple­tion of the bar­gain­ing process, we will work with Re­pub­lic, First Cit­i­zens Bank and the Na­tion­al In­sur­ance Board to find a com­pre­hen­sive so­lu­tion to dis­charge this na­tion­al oblig­a­tion...

“In fur­ther­ance of the con­clu­sion of ne­go­ti­a­tions for the Civ­il Ser­vice, Statu­to­ry Au­thor­i­ties and To­ba­go House of As­sem­bly for the pe­ri­ods 2014-2016 and 2017-2019, the Ho­n­ourable Prime Min­is­ter has in­struct­ed me to ad­vise the Chief Per­son­nel Of­fi­cer to sub­mit a re­vised of­fer of 10 per cent.”

T&T’s Fi­nan­cial In­sti­tu­tions Act, at sec­tions 42 to 44, es­tab­lish­es a lim­it on the cred­it ex­po­sure of any li­censed in­sti­tu­tion to a per­son, bor­row­er group or re­lat­ed group in an ag­gre­gate amount that ex­ceeds 25 per cent of its cap­i­tal base.

The ex­cep­tions to the 25 per cent cred­it ex­po­sure lim­it in­clude cred­it that is:

a) Ful­ly guar­an­teed by the Gov­ern­ment of T&T that is ex­plic­it, un­con­di­tion­al, legal­ly en­force­able and ir­rev­o­ca­ble

over the life of the cred­it ex­po­sure in ques­tion;

b) Ful­ly guar­an­teed by a sov­er­eign state, oth­er than the Gov­ern­ment of Trinidad and To­ba­go...

c) Ex­tend­ed di­rect­ly to the Cen­tral Gov­ern­ment of T&T;

d) Ful­ly se­cured at all times by cash in T&T dol­lars or oth­er cur­ren­cies read­i­ly con­vert­ible to T&T dol­lars, de­liv­ered to the li­censee and placed with it in a pledged spe­cial ac­count...

While sec­tion 42 1(c) may ap­pear to give li­censed fi­nan­cial in­sti­tu­tions, such as Re­pub­lic Bank Ltd and First Cit­i­zens the right to lend an un­lim­it­ed amount of mon­ey to the Gov­ern­ment, sec­tion 43 (9), states that the Cen­tral Bank “may re­quire the li­censee to set aside or re­quire that changes be made to the cred­it ex­po­sure, or re­quire the li­censee to lim­it or re­duce the cred­it ex­po­sure.”

I be­lieve that ap­plies even to the Gov­ern­ment.

More­over, the Cen­tral Bank’s 2024 Fi­nan­cial Sta­bil­i­ty Re­port iden­ti­fies sov­er­eign con­cen­tra­tion (lend­ing to the Gov­ern­ment)in the bank­ing and in­sur­ance sec­tors as one of the key risks faced by the do­mes­tic fi­nan­cial sec­tor.

“Com­mer­cial banks and in­sur­ers main­tained sig­nif­i­cant ex­po­sure to do­mes­tic sov­er­eign debt in 2024, large­ly dri­ven by gov­ern­ment bor­row­ing to fi­nance per­sis­tent fis­cal deficits.

“While buffers such as the Her­itage and Sta­bil­i­sa­tion Fund add some re­silience to sta­bil­i­ty against sov­er­eign risk, the re­sults of stress tests re­vealed that the risk re­mains sig­nif­i­cant and its crys­tal­i­sa­tion could low­er cap­i­tal ad­e­qua­cy ra­tios be­low reg­u­la­to­ry thresh­olds in a few fi­nan­cial in­sti­tu­tions, in­clud­ing at least one Do­mes­tic Sys­tem­i­cal­ly Im­por­tant Bank.”

If the Cen­tral Bank’s con­cerns about sov­er­eign con­cen­tra­tion risk are placed along­side the is­sue raised last week in this space, of the Gov­ern­ment propos­ing to bor­row close to $19 bil­lion in the 2026 fi­nan­cial year, then there must be a lim­it be­yond which it would not be pru­dent for the two com­mer­cial banks to ex­tend cred­it to the cur­rent ad­min­is­tra­tion.