Banker says local banks were not inefficient in 1990s

KINGSTON – Former Bankers Association of Jamaica (BAJ) president, Elon Beckford, has denied that inefficiency caused indigenous financial institutions to fail in the 1990s, while the foreign-owned institutions survived the high interest rate regime.

Using his management team at the Horizon Financial Services group then as an example, Mr. Beckford told the FINSAC enquiry Thursday morning March 24, “I challenge any other financial institution to find a more competent and effective group of managers."

He said that the problem is that “it is the outcome which is sometimes used to judge” the capability of the Jamaican institutions. He said that this was bolstered by the view that, the banks which were not taken over by FINSAC were better managed.

“The notion that indigenous institutions were poorly managed…that is clearly not a fair conclusion to arrive at,” Mr. Beckford told the Commission of Enquiry at the Jamaica Pegasus Hotel, New Kingston.

The Commission, comprising accountant Worren Bogle, chairman, investment manager Charles Ross and retired judge Justice Henderson Downer, is reviewing the 1990s financial meltdown, which destroyed a number of financial institutions and businesses, as well as thousands of borrowers.

Thousands of victims of the meltdown still owe hundreds of millions to the Jamaican Redevelopment Foundation (JRF) Inc., a Texan firm, which bought the bad debts in 2002 from the Government-owned Financial Sector Adjustment Company (FINSAC), which was formed to administer those debts.

Mr. Beckford headed the BAJ 1988-1991, and chaired the Horizon group, which also ended up as a victim of the meltdown and a charge of FINSAC, in the 1990s.

He told the Commission that while the foreign owned banks rejected investing in major projects in the real sector, on the basis that their bosses overseas were not interested, indigenous banks were part of the real market in Jamaica and had to invest in the real sector to promote growth and development.

“This was one of the key differences which impacted on our overall operations. We were not privileged to use that as a readily acceptable answer,” Mr. Beckford said.

He said that one of the major “Game Changers” introduced by the BOJ was the New Capital Adequacy Standards, during the period of high interest rates, which required varying levels of capital support in respect of non-performing loans, regardless of the quality of collateral securing the loan.

“This immediately created some new challenges for all the indigenous institutions, especially the newer ones, supervised by the BOJ. The timing was unfortunate and one could conclude that all the implications were not carefully analysed,” Mr. Beckford stated.

The enquiry will resume at the Jamaica Pegasus Hotel, New Kingston on Tuesday, March 29. The following day, Wednesday March 30, one of the most prominent bankers of the period who lost his Eagle group to FINSAC during the 1990s, Dr. Paul Chen Young, is expected to give testimony via closed circuit television.

By BALFORD HENRY, JIS Reporter & Editor