We need banks because: they provide a secure place for the accumulation of savings; they provide the wherewithal (loans) for us to purchase and invest in goods and services which we could not have afforded on our own; and, they facilitate payments, which is important for the functioning of a modern economy.

Bank profits can appear exorbitant if viewed in absolute terms. However, when considered against the large amount of assets which they manage, banks do not make unreasonable profits. In other words, profits must be related to the amount of assets that banks or any other business deploys. Viewed this way, one realizes that other businesses, say in the energy sector have far higher rates of return on their assets and which is fact necessary.

Bank profits (that is, net income after taxes and expenses) are paid to shareholders and are also utilized to upgrade technology, train staff, expand and improve products and services and expand the capital base of the enterprises.

Lending rates reflect the monetary policy rate set by the Central Bank, the risk of the enterprise that is borrowing, the cost of funds and operational costs. If these rates are high, then bank lending rates will be high. Since all of these costs and risks tend to be higher in small developing economies like Trinidad and Tobago then lending rates are relatively higher than in other countries.

Deposit rates reflect liquidity conditions, simply put, that is the amount of money in the banks. If liquidity is high, often because borrowing is weak, then interest rates tend to be lower. If the deposits which banks hold are being used up in a strong demand for loans then deposit rates will rise.