Blog: Hold nothing ‘bank’, insure more deposits | Commentary – Jamaica Gleaner

The marginally employed, virtually enslaved majority of the labour force of Jamaica takes insult for injury from local banks better than from their lovers. The love of money is the main root of the evil in both instances and cheating is also how it often manifests itself.

In former years, banks used to fix up themselves ‘sexy’ and parade, with plenty advertising for depositors to ‘look’ them, just as prospective lovers did then more than now, also, to ‘catch’ the other’s eyes or pocket good spending money. The ‘interest’ in being a catch then was high but now it is next to zero.

We are now in the days of entitlement where feigning love no longer presents as seeking romance nor as prostitution but as providing validation of financial fitness and prowess with a constantly rising price to ‘come’ all the way.

There is no free market for the love of money, and this only draws tears instead of tearing anything that passion does, as it was claimed a famous late governor general reasoned.

Banks used to pay competitive interest on deposits that they would lend other customers at higher rates to meet that obligation. The margin of safety was that their capitalisation was regulated rigidly by the Central Bank of Jamaica that set and governed fiduciary ratios of financial institutions and money in official circulation.

Headlines Delivered to Your Inbox

This arrangement worked excellently until the 1970s when a reckless political spirit ran amok in the country, becoming responsible for government becoming the biggest borrower of bank deposits, way ahead of industry and consumer workers. The government’s addiction debt grew alarmingly, while the course was for politicians to gamble with taxpayers’ money and grants received from multilateral benefactors to run the country decently.

EVERYTHING CRASH

Interchanging the roles of Government and Opposition as a contrived two-party oligopoly under proxy or pseudo-constitution, the PNP and JLP polarised and conspired with the media to have self-styled economists engage the people in perpetual distracting conversations about which one added to the national debt more or faster each turn than the other.

By 1997 everything “crash”. The government had permitted banking licences to be issued to friends for political favours which in the main was propping up the economy through subsidiaries or connected companies that ostensibly borrowed or were capitalised by the associated bank to invest short-term deposits in long-term prospects like agriculture, commercial and residential construction, distribution and manufacturing, transportation, among others.

Everyone and everything connected to the financial sector was moved in on by the same government through a nefarious entity known as the Financial Sector Adjustment Company or FINSAC, for which a farcical inquiry into its affairs at abominably high cost to taxpayers was held and the report intentionally not completed and presented through the commissioning Parliament to the people of Jamaica.

Depositors’ money was frozen for years in some instances and interest earned paired down or cancelled. Borrowers’ necks were placed under the guillotine of lawsuits and bankruptcy to force them to pay multiple times more than they believed that they had contracted to initially.

Substantial portions of their expropriated property priced almost as gifts, with concessions like forgiveness of enormous unpaid taxes, was acquired by politicians and party activists, which became a factor in preventing completion and publication of the FINSAC Report.

CONFLICTING MANOEUVRINGS

The aftermath alarming concessionary sale of 75 per cent of the largest bank, NCB, to a Canada-based entity controlled by a Jamaican who later hired the head of FINSAC as its CEO was the most egregious outcome. This has precipitated emasculation of the Central Bank of Jamaica to institute fee banking as the dominant practice and dilute its ability to protect the Jamaican currency from speculators, due to the heavy influence of NCB.

As of December 15, 2022, the average rate on deposits by banks was 0.557 per cent. The overnight lending rate to banks stood at 7.75 per cent to 8.00 per cent, while the 30-day rate was 8.50 per cent to 8.65 per cent.

The BOJ and GOJ are pro bank, as bankers make it their business to be close to people in charge. Consequently, the curious ‘activism’ by PNP MP Fitz Jackson to have legislators rein in the banks was met with staunch resistance from the minister of finance of the ruling JLP. He sat more than a decade on the board of NCB, ending his tenure just very shortly before he was brought into the top ministerial post. No conflict is perceived by him nor the Cabinet.

The BOJ governor resigned or proceeded into retirement just a few months before CEO of Sagicor Bank was appointed to the position.

The stringency of the Banking Act and other similar legislation as it relates to fidelity and character of officers of the banking and financial sector makes these conflicting manoeuvrings quite questionable and confusing. It is not far-fetched to regard them as constituting the abuse of power.

For the sake of the depositors, however, focus must turn to the solution of mandating banks to return to core interest savings and loan banking by capping the ration of income from banking fees, increasing capitalisation and deposit insurance, and generally returning hygienic ethical practices to the business of banking, restoring the firm grip of the Central Bank of Jamaica on the handle of banking regulation.

Failing this, my recommendation to depositors is to hold nothing ‘bank’, entrusting more of their hard-earned saving instead to credit unions, investment, life insurance, the stock market and real estate trusts.

Hylton Dennis is a publisher and a former vice-president of the Press Association of Jamaica. Send feedback to columns@gleanerjm.com and denscriptions@yahoo.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s