The Jamaica Bankers Association (JBA) has recommended that the Government consider lower Jamaican dollar reserve requirements to facilitate further decreases in interest rates.

According to JBA president Nigel Holness, the lowering of the reserve requirement would release much-needed Jamaican dollar liquidity into the lending pool for productive loans, thus having a direct impact on the cost of funds and would allow banks to offer lower interest rates to their customers.

Holness, who is also managing director of CIBC FirstCaribbean International Bank, was responding to calls by Finance Minister Audley Shaw for local banks to offer lower interest rates to their customers.

“Over the past year interest rates have fallen significantly to single digits, including mortgage rates, corporate rates and consumer credit rates,” Holness said in an address at CIBC’s Client Appreciation Reception at the Jamaica Pegasus Hotel in New Kingston last Thursday.

“The minister keeps talking about lower rates. He can certainly assist the sector and help the country in achieving increased growth by encouraging the Bank of Jamaica (BOJ) to lower the cash reserves on Jamaican dollar-prescribed liabilities. This would create the right environment for rates to go even lower,” Holness argued.

“Currently the reserve requirement for Jamaican dollars allows banks to deploy only 74 cents in each dollar, while the remainder of these funds are tied up in reserves, as prescribed by the BOJ. If you want growth, release those funds,” Holness declared.

He said that in the context of Jamaica’s drive to achieve five per cent growth in four years, these are the lowest interest rates he has seen in his 30 years of banking.

“So we are on the correct path towards achieving these objectives — mortgage rates are eight per cent or even lower, corporates are enjoying single-digit rates, SMEs can take advantage of special offers. CIBC FirstCaribbean will continue as it has over the past 90-plus years to support the growth agenda, Mr Shaw,” the JBA president declared.

Last week the Jamaica Manufacturers’ Association supported Shaw’s call, saying that it has long been established that minimising existing impediments, such as high interest rates, is imperative to increasing Jamaica’s competitive advantage as the island seeks to position itself as the place of choice to invest and do business.

“We must come together as the nation’s stakeholders to advance Jamaica’s true potential through meaningful reform,” the JMA said in a statement.

The group also joined Shaw in beseeching the Development Bank of Jamaica (DBJ) and financial institutions to play their role in advancing the nation’s objectives by actively reducing the mark-up they currently employ to no more than one per cent and three per cent respectively.

The organisation said that banks should also make more effort to inform potential borrowers that these special loans are available.

Additionally, it said it believes that the DBJ should make funds available to the manufacturing industry at below five per cent, as is the current arrangement for other key industries.

Meanwhile, Holness, in his address last Thursday, thanked customers at the reception for their business and for helping the bank to have“a good year, even in the midst of some challenging times”.

He also pointed out that the bank was recently hailed by International Finance Magazine for having the Best Credit Card offering in the Caribbean and the Best Mobile App in the Caribbean. In addition, the bank won an award for the North American Port Deal of the year at the U Global Awards.