by Rick Lowe

This recent post about banks in The Bahamas becoming more restrictive with their credit requirements, reminded me of the 5 C's of Credit.

When I worked for CIBC, I was taught the 5 C's are:

    1.    C     Capacity (Sufficient cash flow to service the debt)
    2.    C     Character (Integrity)
    3.    C     Credit History (Repaid loans satisfactorily in the past)
    4.    C     Capital (Net Worth)
    5.    C     Collateral (Assets to secure the debt)

I have recently seen "Credit History" in this list replaced with "Conditions" (of the borrower and the overall economy), and this is obviously what is concerning the banks as they try to find the balance of lending to protect their asset base of depositors money.

With most international economists predicting a two year recovery this is the time for everyone to clean up their act where borrowing and saving are concerned.

Depression babies are by nature fiscal conservatives. They grew up in some very hard times. As a friend recently said: "I'm a depression baby and saving for a rainy day is in my DNA."

She is right. And by extension, baby boomers and Generation X'ers have never experienced such a dramatic and quick downturn in economic activity.

The one positive we can hope for from all of this is that we all take a more serious look at our saving and spending habits. For too long we have been following the lead of our political masters who borrow and spend without fear of bankruptcy. I'm sure those people that frequent the "Honourable" halls of Parliament are feeling some twitches in some very private places at this time as they wonder where the government revenue will come from to fulfil the ever increasing responsibility politicians have taken on for the government, and by extension, Bahamian taxpayers.