THE Jamaican banking sector is still tethered to a paradigm that is not in sync with the adjustments and realignments that have taken place in global economic and financial realities. They certainly are out of line with and are not sustainable by the economic realities as they are being played out in Jamaica in the context of growing unemployment and a still fragile economy. Having grown accustomed and indeed obese on ludicrously high returns on government treasury bills, the banks want to maintain the status quo. Like their counterparts in the USA they have not awakened to the reality that things have changed, that the big executives among them cannot continue to expect the big salaries, bonuses and other perks to which they have become accustomed, and that they need to demonstrate that they do care about the future of the country.

So intent is the banking sector on maintaining the status quo that they do not seem to be aware of the growing anger and resentment in the society against what some would describe as the predatory lending policies that the banks carry out and the usurious fees that are charged for the services they offer. Since the advent of the Jamaica Debt Exchange, the banks, like every other deposit-taking institution, have had to make adjustments with regard to the amount of interest that they get on government treasury bills. At one point these deposits enjoyed upward of 28 per cent. With the JDX these have been adjusted downward to an average of 6 to 8 per cent, depending on the size and duration of the deposit.

The remarkable drop in these rates now means that the banks’ cost on deposits has fallen dramatically. Yet, we have not seen a commensurate reduction in the rates they charge on loans. The banks have rationalised that there cannot be a quick reduction on loan rates because there are other variables of costs that have to be pencilled in, such as staff and that which goes into maintaining their branch networks. Coupled with high interest rates are the ridiculous fees that the banks are charging their customers to do business. These range from ATM fees to those charged on minimum savings balances below $5000. I heard one man complain that he had over $2,000 in a savings account which has now been whittled down to under $1,500 because of the fee of $150 that is taken out of his account monthly. Why this person continues to maintain this account is beyond me. His account will soon be bled to a zero balance and then closed by the bank! It would seem to me prudent that sums of this nature be better saved in a credit union account.

Despite the banks’ attempts to rationalise their high interest policy on loans and fees to boot, they will not be able to temper the rising anger against them. The two major banks will have to employ the best public relations firm available to convince a resentful public why, despite the hard times everybody else is going through, they are still raking in net profits of close to $15 billion between them. And this is at a time when loan demand is falling and their provisioning for non-performing loans has increased. People are beginning to sense that there is something fundamentally flawed with this picture. Why borrow money at 16 to 18 per cent when you are receiving only 6 to 7 per cent on your deposits of $1 million and over? Why should they when they are becoming more cognisant that the conditions in the country since the JDX now exist for more stable and lower interest rates? When they know instinctively that they are being gouged by the banks whose executives prefer to sit in airconditioned offices instead of going out into the heat of the day to earn their bread?

The consumer, whether of furniture, white rum or a product being sold by a bank, must remember at all times that in the end he remains king. For too long he has allowed Jamaican bankers to treat him as a peon instead of revering him as a king. That must end and the sooner the better. It will end when the banks realise that a new day has dawned and like everyone else they have to settle for lesser profit than once obtained. They must make a profit or they will not be in business, but to expect the gargantuan profits of the past, and to gouge “trapped” consumers of their products to do so is not only unethical, but is tantamount to crows picking at a dying body… They must determine ways in which they can contribute to that body being restored to robust health. They may begin by looking at their own cost efficiencies, and this does not necessarily mean laying off workers. It could mean, among other things, asking the critical question as to whether one can be satisfied with a $3 billion net profit as opposed to $8 billion at a time of great austerity in an economy gasping for breath.

There are signs that some colour is coming back into the face of the reluctant patient called the Jamaican economy. As diligent students we have passed the first quarterly IMF assessments. Violent, murderous crimes are trending down and the tourists are still coming despite the global recession in the key marketplaces from where they come. The Net International Reserves are at an attractive, stable level. From a macroeconomic perspective interest rates are trending down despite the banks’ reluctance to become too bullish about this trend. Inflation seems set to remain at single digits this fiscal year. Despite all these positives, the economy is yet to feel the effects of all this good news. The government can only set the parameters in which businesses can thrive, but crucial sectors such as the banking sector must play their part in stimulating growth in the economy. The prudence of economic interdependence demands this. Have our banks realised this?

stead6655@aol.com