Fri | Dec 14, 2018

Hylton Dennis | Banking on bankruptcy

Published:Sunday | September 9, 2018 | 12:00 AM

The major news this past week included the announcement by chairman of the Jamaica Deposit Insurance Corporation (JDIC), John Jackson, that 90% of savings deposits in financial institutions are fully insured. Convinced he was making a great announcement, Jackson was not hesitant to mention the $600,000 cap on insured savings that has been in place for at least a decade, resulting in the high coverage reported.

The figures don't at all speak highly of superlative performance by the JDIC in restoring the confidence of savers lost by Jamaican financial institutions that failed and had to be bailed out at their tax-paying victims expense in the 1990s by the Government, through FINSAC, to pay back only part of the compromised depositors savings.

As if the FINSAC shock was not enough, after these institutions took, especially Jamaican low-wage workers savings, and imprudently lent most of it to Government, secured against excessive taxes and more borrowing overseas, in 2008 and 2014, they damaged the trust further to grant the Government JDX and NDX interest haircuts, purportedly to pass IMF tests.

 

DISHONOURABLE CONDUCT

 

The dishonourable conduct of Jamaica's financial institutions is so cavalier that they have gone even further, since FINSAC, to hedge their 'prosperity' against successfully imposing mercenary account holding and transaction fees that have led to negative net savings for customers, including the 90 per cent fully covered by JDIC. As expected, the Bank of Jamaica (BOJ) and minister of finance are solidly in support of their conduct.

Jamaican workers are disciplined savers. Despite decades of high inflation, and 60% of them earning less than a million dollars annually, they are the largest base of bank savings customers. The banking injustice disqualifies them from borrowing from their pool of savings, except oppressive payday loans tied to salary deductions. Their savings are lent instead to the rich, who entrust custody of their wealth to money managers registered with the Financial Services Commission.

Cooperatives, like credit unions and building societies, are no longer the Jamaican workers' shelter from the banking storm. Their purportedly elected voluntary officers, coming originally from among the ordinary membership but now elevated in social status as business owners and executives, have joined with the paid managers to lobby for the status of credit unions to rise to the level of banks.

After decades of mergers of parish building societies that provided easier access to mortgages for members, one of the resulting two giant societies abandoned the caring ethos, to become a bank, so it too can make super profits for a few.

 

MEGA MERGERS

 

Parish and other credit unions have lost identities in mega mergers, also, disenfranchising their trusting members of lesser means. The mega credit unions have easily agreed, with little consultation, to surrender to BOJ control by their members, in exchange, also, for banking privileges and super profits for few to enjoy. An astute JDIC might have prevented this.

To ensure the Jamaican workers do not resort to reviving the popularity of small community partner savings schemes, and saving under mattresses, because they are deliberately not sufficiently educated to trade securities like stocks successfully, Government imposed stringent money-laundering laws that force them to remain hostages of the exploitative financial institutions.

Government sets no better example, not only by the decades of reckless borrowing, but by also plundering the Jamaican workers' contributions to the National Housing Trust to get affordable mortgages and live better than serfs long before they are old and grey. Hundreds of billions of dollars have been taken from the Trust, without the class-action challenge which I strongly believe would succeed, for nothing to do with housing.

The National Insurance Scheme old-age pension contributions have been stolen and mismanaged also, resulting in paltry payments to beneficiaries. With an ageing population, there will be more paupers than dignified pensioners in Jamaica soon.

This being the case, only a scoundrel would dispute the obvious fact that it is not safe to save in Jamaica. If the reasons stated earlier don't change, it certainly will not be the envisioned ideal place to live, work, raise children and retire by 2030.

- Hylton W. Dennis is a publisher and past vice-president of the Press Association of Jamaica. Email feedback to columns@gleanerjm.com and​ denscriptions@yahoo.com.