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The changing face of Caribbean finance
By Al Edwards
Friday, June 20, 2008
<span style="font-weight: bold">More than 30 years ago, Jamaica's commercial banking sector was dominated by foreign-owned banks, managed by overseas professionals with locals somewhat marginalised or serving in menial capacities.</span> Fast-forward to today and that has all changed. The landscape has a healthy number of indigenous financial institutions and even the foreign-owned banks have Jamaicans heading the local subsidiaries.
No one better exemplifies this changing paradigm than Minna Israel, a career banker since 1976 and now managing director of RBTT (Jamaica).
Israel... When I entered banking as an accountant trainee in 1976, fresh out of the College of Arts, Science and Technology
Speaking at the Mayberry Investment Forum on Wednesday, she reflected on the changes she has witnessed during her career.
"When I entered banking as an accountant trainee in 1976 fresh out of the College of Arts, Science and Technology (CAST), there were eight commercial banks in Jamaica at the time, all of which were either outright or majority foreign-owned.
"Dating back to 1836, the British Barclays Bank was the first commercial bank in Jamaica, having come here primarily to finance the sugar industry. The other foreign-owned banks in Jamaica from the early days included three large Canadian banks: Bank of Nova Scotia, here since 1889; the Royal Bank of Canada, renamed Royal Bank of Jamaica, here since 1911, and where I first went to work in 1976; the Canadian Imperial Bank of Commerce, in Jamaica since1920 and now operating here as First Caribbean International Bank.
'American banks such as First National City Bank, now operating here as Citibank, and Citizens and Southern Bank, operating here as Jamaica Citizens Bank, came later in 1960 and 1967, respectively."
The RBTT (Jamaica) boss said that in those earlier days, commercial banking services offered just 'plain vanilla' savings and operating current accounts, safekeeping, making loans, establishing credit, and providing letters of credit.
"In those early days, customers went to the banks and very rarely the other way around. Scant attention was paid to financing activities geared to the development of the country in which they were located," declared Israel.
She said that today success in the financial sector is based upon three pillars - 1, Service, 2, Teamwork; leadership and people and 3, Life cycle financial products and services.
By 1985, Royal Bank of Canada, her employer where she became a Special Project Officer, began to withdraw from some countries in the Caribbean. She decided to move to Canada to complete her MBA and get some first world experience. She rejoined Royal Bank of Canada as a Corporate Account Manager in Toronto. In 1991 she returned to Jamaica to begin her 16-year career with Scotiabank
"So my return to Royal Bank of Canada now, via RBTT, represents in fact, the closing of one circle, and the initiation of an exciting new chapter in my professional life, to which I very much look forward."
The lynchpin of Israel's presentation and her explanation for the changing face of Caribbean finance is that Caribbean countries have shifted from an economic policy of import substitution to export promotion. As a result, reforms and policies have been adopted to attract investments and to promote Caribbean destination competitiveness.
"This shift resulted in increased emphasis on open markets, liberalised trading with a retreat from state ownership of productive activities and of the financial services. The state would now place more emphasis on its regulatory functions and on the provision of infrastructure. Privatisation became the key path to the revitalisation of our flagging economies.
"This scenario has had a direct bearing on what has happened in our banks. They were among the first to have been nationalised in the decade of the seventies and they were among the first to be privatised in the 1980s. In Jamaica, we saw NCB privatised by way of the Jamaica Stock Exchange in 1986 and the Workers Savings& Loan Bank in 1993 by way of a private placement."
One of the Caribbean's leading and experienced bankers, Israel noted the significant changes that have taken place over the last two decades.
. Increased customer sophistication and demand
. Banking structure and services have become less dependent on bricks and mortar
. Increase in distribution channels - Internet banking; E-banking; point of sales systems; ATMs
. Emergence of a proactive sales culture with bankers utilizing non-traditional initiatives to attain and maintain top and bottom-line targets.
. DB&G's entry into consumer credit; NCB's establishment of a small and medium-sized firms division; an increase in marketing by BNS of its wealth management services offered by Scotia DBG.
. GraceKennedy diversifying into banking through their purchase of First Global Bank
. Pan Caribbean acquiring a licence for commercial banking
. The increase of financial mergers and acquisitions
. Increased blurring of the lines among financial institutions making it possible for the emergence and dominance of investment houses such as JMMB, Mayberry Investments, Capital & Credit, DB&G and RBTT Securities in lending and money market business.
. Increased competition from building societies and credit unions becoming more like banks, though regulated differently
. The appearance and disappearance of unregulated investment schemes
. Robust monitoring and more targeted regulation from the BOJ, FSC and JSE; resulting in increased tension on Compliance and Risk Management to increase soundness and stability of the sector, and reduce possibility of another meltdown; conformance to international regulations and best practices.
. The effects of globalisation. As banking institutions perform, more international banks are viewing emerging markets as profitable investments, for example, HSBC in Cayman and RBC expanding operations in the Caribbean.
Many view the reappearance of the international banks on the Caribbean scene as crowding out indigenous enterprises. Sagicor's acquisition of Life of Jamaica, RBC taking over RBTT, AIC's acquisition of NCB and Guardian's acquisition of Mutual Life has not gone down well with many. Israel addressed this vexing issue.
"While some people are sensitive to and critical of the acquisition of domestic and regional banks by international banks, I submit that when they purchase the shares, significant resources are freed up for other investments. The challenge is how to utilise these additional resources effectively to expand productive activities, domestically and regionally."
Israel will be a major force on the Caribbean's banking scene of that there is no doubt. Her career continues on the upward trajectory. On Monday RBC completed its US$2.2 billion acquisition of RBTT. RBC's Caribbean retail banking operations now boasts assets of US$13.7billion with 130 branches across the Caribbean serving more than 1.6 million clients with 7,000 employees. It now has a presence in 18 countries and territories across the region. Before Israel went off to head Scotiabank (Bahamas) she was identified as a future head of a leading commercial bank in Jamaica. That has now come to fruition and she will now be competing and challenging some local mainstays.
"The owners of RBTT shares now have enough money to reinvest in productive activities in the region. We now have a stronger, sounder entity and a parent who is the number one commercial bank in Canada. The change in ownership will not affect business or our relationships with our customers. We are now better positioned to serve both them and our employees.
"We have a larger capital base which will make us the number 2 commercial bank in Jamaica this year. There is no company or government we can't bank. We now have an increased lending capacity and an expanded range of products and services coming to you soon. We are on that journey to become the premier financial institution in the region," declared Minna Israel.
By Al Edwards
Friday, June 20, 2008
<span style="font-weight: bold">More than 30 years ago, Jamaica's commercial banking sector was dominated by foreign-owned banks, managed by overseas professionals with locals somewhat marginalised or serving in menial capacities.</span> Fast-forward to today and that has all changed. The landscape has a healthy number of indigenous financial institutions and even the foreign-owned banks have Jamaicans heading the local subsidiaries.
No one better exemplifies this changing paradigm than Minna Israel, a career banker since 1976 and now managing director of RBTT (Jamaica).
Israel... When I entered banking as an accountant trainee in 1976, fresh out of the College of Arts, Science and Technology
Speaking at the Mayberry Investment Forum on Wednesday, she reflected on the changes she has witnessed during her career.
"When I entered banking as an accountant trainee in 1976 fresh out of the College of Arts, Science and Technology (CAST), there were eight commercial banks in Jamaica at the time, all of which were either outright or majority foreign-owned.
"Dating back to 1836, the British Barclays Bank was the first commercial bank in Jamaica, having come here primarily to finance the sugar industry. The other foreign-owned banks in Jamaica from the early days included three large Canadian banks: Bank of Nova Scotia, here since 1889; the Royal Bank of Canada, renamed Royal Bank of Jamaica, here since 1911, and where I first went to work in 1976; the Canadian Imperial Bank of Commerce, in Jamaica since1920 and now operating here as First Caribbean International Bank.
'American banks such as First National City Bank, now operating here as Citibank, and Citizens and Southern Bank, operating here as Jamaica Citizens Bank, came later in 1960 and 1967, respectively."
The RBTT (Jamaica) boss said that in those earlier days, commercial banking services offered just 'plain vanilla' savings and operating current accounts, safekeeping, making loans, establishing credit, and providing letters of credit.
"In those early days, customers went to the banks and very rarely the other way around. Scant attention was paid to financing activities geared to the development of the country in which they were located," declared Israel.
She said that today success in the financial sector is based upon three pillars - 1, Service, 2, Teamwork; leadership and people and 3, Life cycle financial products and services.
By 1985, Royal Bank of Canada, her employer where she became a Special Project Officer, began to withdraw from some countries in the Caribbean. She decided to move to Canada to complete her MBA and get some first world experience. She rejoined Royal Bank of Canada as a Corporate Account Manager in Toronto. In 1991 she returned to Jamaica to begin her 16-year career with Scotiabank
"So my return to Royal Bank of Canada now, via RBTT, represents in fact, the closing of one circle, and the initiation of an exciting new chapter in my professional life, to which I very much look forward."
The lynchpin of Israel's presentation and her explanation for the changing face of Caribbean finance is that Caribbean countries have shifted from an economic policy of import substitution to export promotion. As a result, reforms and policies have been adopted to attract investments and to promote Caribbean destination competitiveness.
"This shift resulted in increased emphasis on open markets, liberalised trading with a retreat from state ownership of productive activities and of the financial services. The state would now place more emphasis on its regulatory functions and on the provision of infrastructure. Privatisation became the key path to the revitalisation of our flagging economies.
"This scenario has had a direct bearing on what has happened in our banks. They were among the first to have been nationalised in the decade of the seventies and they were among the first to be privatised in the 1980s. In Jamaica, we saw NCB privatised by way of the Jamaica Stock Exchange in 1986 and the Workers Savings& Loan Bank in 1993 by way of a private placement."
One of the Caribbean's leading and experienced bankers, Israel noted the significant changes that have taken place over the last two decades.
. Increased customer sophistication and demand
. Banking structure and services have become less dependent on bricks and mortar
. Increase in distribution channels - Internet banking; E-banking; point of sales systems; ATMs
. Emergence of a proactive sales culture with bankers utilizing non-traditional initiatives to attain and maintain top and bottom-line targets.
. DB&G's entry into consumer credit; NCB's establishment of a small and medium-sized firms division; an increase in marketing by BNS of its wealth management services offered by Scotia DBG.
. GraceKennedy diversifying into banking through their purchase of First Global Bank
. Pan Caribbean acquiring a licence for commercial banking
. The increase of financial mergers and acquisitions
. Increased blurring of the lines among financial institutions making it possible for the emergence and dominance of investment houses such as JMMB, Mayberry Investments, Capital & Credit, DB&G and RBTT Securities in lending and money market business.
. Increased competition from building societies and credit unions becoming more like banks, though regulated differently
. The appearance and disappearance of unregulated investment schemes
. Robust monitoring and more targeted regulation from the BOJ, FSC and JSE; resulting in increased tension on Compliance and Risk Management to increase soundness and stability of the sector, and reduce possibility of another meltdown; conformance to international regulations and best practices.
. The effects of globalisation. As banking institutions perform, more international banks are viewing emerging markets as profitable investments, for example, HSBC in Cayman and RBC expanding operations in the Caribbean.
Many view the reappearance of the international banks on the Caribbean scene as crowding out indigenous enterprises. Sagicor's acquisition of Life of Jamaica, RBC taking over RBTT, AIC's acquisition of NCB and Guardian's acquisition of Mutual Life has not gone down well with many. Israel addressed this vexing issue.
"While some people are sensitive to and critical of the acquisition of domestic and regional banks by international banks, I submit that when they purchase the shares, significant resources are freed up for other investments. The challenge is how to utilise these additional resources effectively to expand productive activities, domestically and regionally."
Israel will be a major force on the Caribbean's banking scene of that there is no doubt. Her career continues on the upward trajectory. On Monday RBC completed its US$2.2 billion acquisition of RBTT. RBC's Caribbean retail banking operations now boasts assets of US$13.7billion with 130 branches across the Caribbean serving more than 1.6 million clients with 7,000 employees. It now has a presence in 18 countries and territories across the region. Before Israel went off to head Scotiabank (Bahamas) she was identified as a future head of a leading commercial bank in Jamaica. That has now come to fruition and she will now be competing and challenging some local mainstays.
"The owners of RBTT shares now have enough money to reinvest in productive activities in the region. We now have a stronger, sounder entity and a parent who is the number one commercial bank in Canada. The change in ownership will not affect business or our relationships with our customers. We are now better positioned to serve both them and our employees.
"We have a larger capital base which will make us the number 2 commercial bank in Jamaica this year. There is no company or government we can't bank. We now have an increased lending capacity and an expanded range of products and services coming to you soon. We are on that journey to become the premier financial institution in the region," declared Minna Israel.