Should Jamaica adopt an international currency

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
so u still blame the banks for their demise?

[/ QUOTE ]

when you hear stories like a man come to the bank to borrow mmoney so him put up a building worth 10 million...di bank len him 20 million
a who fah fault dat?

at the time there were little or no gvernment regulation around banking..so they were playin fast an loose.

they might have gotten away with it but a bit of panic set in with depositors ( i remeber a fren did warn my father to tek his money out of century about a month before di collapse)



btw...how did BNS being canadian save them?

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
so u still blame the banks for their demise?

[/ QUOTE ]

[ QUOTE ]
Diagnostic reviews of troubled institutions in 1997 unearthed several factors contributing to the sector's turmoil:

· Absence of or failure to comply with proper internal control procedures.

The troubled banks showed a high incidence of fraud and irregularities

indicating weaker controls.

· Poor risk management and inadequate portfolio diversification

This resulted in (1) a high ratio of bad loans and (2) poor portfolio diversification

as evidenced by unacceptably high exposure to single borrowers and/or single

industries. To further compound the situation, where portfolio diversification

occurred, it was into areas where they had no competencies.

· High and increasing levels of non-performing assets

Due to inadequate investment assessment and monitoring there were

increasing levels of non-performing assets. In not matching the maturity of

assets to liabilities banks became vulnerable to movement in asset prices, interest

rates and exchange rates. For example, banks used short-term deposits to

invest in long-term investments like real estate.

· High operating costs.

The troubled institutions were inefficient, requiring large spreads between

lending and deposit rates. Jamaican spreads rose from 1992-1994 levels of

14%-15% to 21% -22% in 1995-97 compared to spreads of 7%-8%

in Barbados, Guyana, and Trinidad and Tobago during 1992-1997.



Owners and operators of local banks have maintained that larger spreads

are needed to compensate for the higher reserve requirements which

averaged about 48% of deposit liabilities compared to half this percentage

in Guyana and Trinidad and 39% in Barbados during 1993-1997.



The larger spreads pushed up interest rates and in some instances, no

doubt compounded customers' indebtedness and inability to pay, thereby

contributing to bad debts. The high spreads continue with a recent World Bank

study of 132 countries ranking Jamaica's interest rate spread of 19.1% in

1998 as the seventh highest in the world.

Poor quality of management and strategic planning

Domestic Banks had negative Return on Assets compared with positive, although slightly declining, ROAs of 2% - 3.5% in the case of foreign banks in Jamaica.

Failure to exercise due diligence and care.

Financial institutions operated without sound corporate governance practices

and with limited involvement of their Boards of Directors.

Unusually high appetite for risk.

Most local financial sector entrepreneurs have been cited as being too quick to

risk depositors’ funds, too competitive with each other to exhibit the trappings of

success, hence the 'edifice complex' and too prone to bend prudential norms and

regulations.

A high incidence of connected party lending

For example, when depositors began to withdraw funds placed in lump sum,

interest-sensitive policies, insurance companies tapped into their affiliated banks

for funds to meet withdrawal demands, thus weakening the banks, when the

insurance companies were unable to repay these loan.



Breach of fiduciary duty and fraud.

Several files have been turned over to the Director of Public Prosecution

indicating forensic evidence of fraud and breach of fiduciary duty, among other

crimes.

Macro Level Contributory Factors

At the macro level, overview sector studies have shown regulatory weakness among the important contributory factors to the crises.

With the move away from direct controls to a system of rules and supervision in the early nineties, the three main statutes governing the financial sector were amended in 1992. These were the Bank of Jamaica Act, the Banking Act, and Financial Institutions Act

The Bank of Jamaica (BOJ) Act was amended to make monetary policy more effective, regulate the management of foreign exchange and to give statutory recognition to the BOJ's Department of Bank Inspection.

However, while the legislation was timely, institutional strengthening at the supervisory agencies was not yet in place. By 1997 new legislation was put in place to stem the imprudent practices the financial sector crises had unearthed and to provide stiffer penalties for infringements.

Consequently, the situation had already become a crisis, and the deterioration could not be stemmed. The deposit insurance which would have placed a cap on sums recovered and lessened the cost of FINSAC intervention to taxpayers, did not come on stream until 1998, by which time all indigenous banks had failed or were in severe difficulties.

The Banking Act and the Financial Institutions Act provided for stricter licensing of banks, minimum levels of capital, stricter prudential controls, provisioning for loan losses, strengthening of supervision and regulation and mechanisms for identifying and punishing the culpable in troubled institutions. The amendments also enhanced the power of the Minister of Finance to intervene in troubled institutions.


[/ QUOTE ] source

[niceniss]

Re: Should Jamaica adopt an international currency

u took that from finsac's website [img]/forums/images/graemlins/smirk.gif[/img]

finsac was created by the govt after the banking sector crashed. do u honestly think that finsac would paint a true picture?

[Tuff Gong]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
so u still blame the banks for their demise?

[/ QUOTE ]

[ QUOTE ]
Diagnostic reviews of troubled institutions in 1997 unearthed several factors contributing to the sector's turmoil:

· Absence of or failure to comply with proper internal control procedures.

The troubled banks showed a high incidence of fraud and irregularities

indicating weaker controls.

· Poor risk management and inadequate portfolio diversification

This resulted in (1) a high ratio of bad loans and (2) poor portfolio diversification

as evidenced by unacceptably high exposure to single borrowers and/or single

industries. To further compound the situation, where portfolio diversification

occurred, it was into areas where they had no competencies.

· High and increasing levels of non-performing assets

Due to inadequate investment assessment and monitoring there were

increasing levels of non-performing assets. In not matching the maturity of

assets to liabilities banks became vulnerable to movement in asset prices, interest

rates and exchange rates. For example, banks used short-term deposits to

invest in long-term investments like real estate.

· High operating costs.

The troubled institutions were inefficient, requiring large spreads between

lending and deposit rates. Jamaican spreads rose from 1992-1994 levels of

14%-15% to 21% -22% in 1995-97 compared to spreads of 7%-8%

in Barbados, Guyana, and Trinidad and Tobago during 1992-1997.



Owners and operators of local banks have maintained that larger spreads

are needed to compensate for the higher reserve requirements which

averaged about 48% of deposit liabilities compared to half this percentage

in Guyana and Trinidad and 39% in Barbados during 1993-1997.



The larger spreads pushed up interest rates and in some instances, no

doubt compounded customers' indebtedness and inability to pay, thereby

contributing to bad debts. The high spreads continue with a recent World Bank

study of 132 countries ranking Jamaica's interest rate spread of 19.1% in

1998 as the seventh highest in the world.

Poor quality of management and strategic planning

Domestic Banks had negative Return on Assets compared with positive, although slightly declining, ROAs of 2% - 3.5% in the case of foreign banks in Jamaica.

Failure to exercise due diligence and care.

Financial institutions operated without sound corporate governance practices

and with limited involvement of their Boards of Directors.

Unusually high appetite for risk.

Most local financial sector entrepreneurs have been cited as being too quick to

risk depositors’ funds, too competitive with each other to exhibit the trappings of

success, hence the 'edifice complex' and too prone to bend prudential norms and

regulations.

A high incidence of connected party lending

For example, when depositors began to withdraw funds placed in lump sum,

interest-sensitive policies, insurance companies tapped into their affiliated banks

for funds to meet withdrawal demands, thus weakening the banks, when the

insurance companies were unable to repay these loan.



Breach of fiduciary duty and fraud.

Several files have been turned over to the Director of Public Prosecution

indicating forensic evidence of fraud and breach of fiduciary duty, among other

crimes.

Macro Level Contributory Factors

At the macro level, overview sector studies have shown regulatory weakness among the important contributory factors to the crises.

With the move away from direct controls to a system of rules and supervision in the early nineties, the three main statutes governing the financial sector were amended in 1992. These were the Bank of Jamaica Act, the Banking Act, and Financial Institutions Act

The Bank of Jamaica (BOJ) Act was amended to make monetary policy more effective, regulate the management of foreign exchange and to give statutory recognition to the BOJ's Department of Bank Inspection.

However, while the legislation was timely, institutional strengthening at the supervisory agencies was not yet in place. By 1997 new legislation was put in place to stem the imprudent practices the financial sector crises had unearthed and to provide stiffer penalties for infringements.

Consequently, the situation had already become a crisis, and the deterioration could not be stemmed. The deposit insurance which would have placed a cap on sums recovered and lessened the cost of FINSAC intervention to taxpayers, did not come on stream until 1998, by which time all indigenous banks had failed or were in severe difficulties.

The Banking Act and the Financial Institutions Act provided for stricter licensing of banks, minimum levels of capital, stricter prudential controls, provisioning for loan losses, strengthening of supervision and regulation and mechanisms for identifying and punishing the culpable in troubled institutions. The amendments also enhanced the power of the Minister of Finance to intervene in troubled institutions.


[/ QUOTE ] source

[/ QUOTE ]

So you are going to use FINSAC's drivel when the GOJ has barred any efforts to study and analyze the events leading up to the collapse.

In any case Dr. Clueless in case we did not get it the first time did again in subsequent elections. He went on another spending spree for the 2002 Elections, admitted it after the elections and to carrect it taxed the Jamaican people to the tune of Ja15Mil

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
u took that from finsac's website [img]/forums/images/graemlins/smirk.gif[/img]

finsac was created by the govt after the banking sector crashed. do u honestly think that finsac would paint a true picture?

[/ QUOTE ] [img]/forums/images/graemlins/704555_dwl.gif[/img] [img]/forums/images/graemlins/704555_dwl.gif[/img]

yuh good [img]/forums/images/graemlins/704555_dwl.gif[/img]


so what part of what they claim is inaccurate?

[Tuff Gong]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
u took that from finsac's website [img]/forums/images/graemlins/smirk.gif[/img]

finsac was created by the govt after the banking sector crashed. do u honestly think that finsac would paint a true picture?

[/ QUOTE ] [img]/forums/images/graemlins/704555_dwl.gif[/img] [img]/forums/images/graemlins/704555_dwl.gif[/img]

yuh good [img]/forums/images/graemlins/704555_dwl.gif[/img]


so what part of what they claim is inaccurate?

[/ QUOTE ]

It is not inaccurate it is the shading of the truth and the over emphasis on the banks failures that is glaringly evident. The GOJ encouraged the Banks to get into speculative and unsafe deals. Remember a number of the institutions that failed were under its own remit.

What does it say about Dr. Clueless, PJoke's and by extension the GOJ's role in the whole affair?

[niceniss]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
u took that from finsac's website [img]/forums/images/graemlins/smirk.gif[/img]

finsac was created by the govt after the banking sector crashed. do u honestly think that finsac would paint a true picture?

[/ QUOTE ] [img]/forums/images/graemlins/704555_dwl.gif[/img] [img]/forums/images/graemlins/704555_dwl.gif[/img]

yuh good [img]/forums/images/graemlins/704555_dwl.gif[/img]


so what part of what they claim is inaccurate?

[/ QUOTE ]

It is not inaccurate it is the shading of the truth and the over emphasis on the banks failures that is glaringly evident. The GOJ encouraged the Banks to get into speculative and unsafe deals. Remember a number of the institutions that failed were under its own remit.

What does it say about Dr. Clueless, PJoke's and by extension the GOJ's role in the whole affair?

[/ QUOTE ]

and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[/ QUOTE ]

so when dem did borrow di money dem nevah know what di payments were? so in your mind the dead beat borrowers hold no blame...is di goverment fault?

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
What does it say about Dr. Clueless, PJoke's and by extension the GOJ's role in the whole affair?


[/ QUOTE ]

that the liberalization though timely was no properly regulated which allowed the institutions to overextend.


btw...i can find no info on the excess liquidity being due to governement printing/spending

[niceniss]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[/ QUOTE ]

so when dem did borrow di money dem nevah know what di payments were? so in your mind the dead beat borrowers hold no blame...is di goverment fault?

[/ QUOTE ]

of course they knew what the payments were-- until they were no longer...

if u go borrow money fi sumpn whey might not be for investment purposes, eg 100 gran fi surgery, and di bank give u a rate whey u pay 2 gran a mont, all of a sudden rates sky rocket and u find u haffi pay 26 gran instead, how would u manage that?

the banks had most of their clients facing those issues.

[niceniss]

Re: Should Jamaica adopt an international currency

[ QUOTE ]

btw...i can find no info on the excess liquidity being due to governement printing/spending

[/ QUOTE ]

not everyting deh pon di intanet, call di gleaner or perkins online or whichever local media for the period where the printing occurred.

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[/ QUOTE ]

so when dem did borrow di money dem nevah know what di payments were? so in your mind the dead beat borrowers hold no blame...is di goverment fault?

[/ QUOTE ]

of course they knew what the payments were-- until they were no longer...

if u go borrow money fi sumpn whey might not be for investment purposes, eg 100 gran fi surgery, and di bank give u a rate whey u pay 2 gran a mont, all of a sudden rates sky rocket and u find u haffi pay 26 gran instead, how would u manage that?

the banks had most of their clients facing those issues.

[/ QUOTE ]

was that actually the case?

were the majority of NPLs on the variable rate type? maybe my famly did lucky becaue dem did borrow a fixed rate dem tine deh

check this anaysis:

web page

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]

btw...i can find no info on the excess liquidity being due to governement printing/spending

[/ QUOTE ]

not everyting deh pon di intanet, call di gleaner or perkins online or whichever local media for the period where the printing occurred.

[/ QUOTE ]

so yuh mean a big story like this wasnt carried in the gleaner....only perkins did know bout it? .and none of the post crisis anaylsis picked it up either?

[Tuff Gong]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[/ QUOTE ]
so when dem did borrow di money dem nevah know what di payments were? so in your mind the dead beat borrowers hold no blame...is di goverment fault?

[/ QUOTE ]

Again RichD I am very surprise at you we watched the whole thing unfold. Interests rates went up so far, so fast that no one could afford to repay them.

Dr. Davies himself raided the bank claiming that the bank was making too much money and overnight he jacked up the fees. So while claiming that the bankers were irresponsible the GOJ was allowed and to this day is still allowed to be irresponsible.
FINSAC itself is being irresponsible in how it has managed the assets under it. It has sold off a number of assets and yet it is running huge debts.

Some banks were bailed out and others were allowed to drown in smaller debts than the ones that were bailed out.
Now the GOJ is raiding the NIS and NHT, just wait for FINSAC II.

[RichD]

Re: Should Jamaica adopt an international currency

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
and even those unsafe ventures alone didnt sink them all. it's the loans that simply could not be repaid because of the high interest rates for most of the banks' clients. [img]/forums/images/graemlins/smirk.gif[/img]

[/ QUOTE ]
so when dem did borrow di money dem nevah know what di payments were? so in your mind the dead beat borrowers hold no blame...is di goverment fault?

[/ QUOTE ]

Again RichD I am very surprise at you we watched the whole thing unfold. Interests rates went up so far, so fast that no one could afford to repay them.



[/ QUOTE ]

some were able to afford them...there are many business that thrived during that period.


as costly as FINSAC was the absence fo FINSAC would have been worse.