By Ashford W. Meikle, Staff ReporterSENATOR THE Honourable Delano Franklyn has called on the private sector to undertake a study to explain the reasons behind the financial sector meltdown in the mid-nineties.
Mr. Franklyn was speaking at the long service and staff achievement awards of the Capital and Credit Financial Group (CCFG) which was held on Friday at the Jamaica Pegasus Hotel in New Kingston. Senator Franklyn, who is also the Minister of State in the Ministry of Foreign Affairs and Foreign Trade, was the guest speaker.
The Capital and Credit Financial Group consists of the merchant bank, Capital and Credit Securities and Capital and Credit Remittance.
Mr. Franklyn acknowledged the divergent views that have attempted to explain the reasons behind the collapse of the Jamaican banking sector almost a decade ago. He cited studies undertaken by Financial Sector Adjustment Company (FINSAC), the World Bank, the Planning Institute of Jamaica and the media. He, however, felt that the time was opportune for the players in the financial sector to engage in a critical study of the industry. The Senator noted that so far the financial sector has not undertaken a "rigorous and analytical research... [of] what really led to the collapse, and could it have been prevented?" He emphasised that "The questions can only be properly answered when the necessary rigorous and analytical research is undertaken."
APPEAL AND ENCOURAGE
The junior minister used the opportunity to appeal and encourage the CCFG to lead the way in such a study. He said, "It would be good if [the] Capital and Credit Financial Group, as one of its contributions to the sector and to Jamaica, commissions a study to unearth what really led to the 'crash' and what are the primary lessons to be learnt from it."
Mr. Franklyn used the awards function as a platform to defend the Government's decision to intervene in the banking sector. He noted that similar financial crises had happened worldwide, in South America, Turkey , Bulgaria, southeast Asia and the Philippines between 1995-2000. The Senator underscored the importance of the Government's decision to establish FINSAC, noting that it was necessary to protect the two million depositors, savers and pensioners who would have been ruined. Admitting that it was a costly affair, he reflected that "It has cost Jamaica over $140 billion or 42 per cent of GDP... although it was one of the costliest in the world, the clear-up was one of the quickest in the world."
He pointed out that the establishment of the Financial Services Commission now meant a more rigorous monitoring of the financial services sector. Jamaica, he said, had one of the tightest regulated sectors in the region.
Mr. Franklyn commended Capital and Credit for its transparency and fiduciary prudence of its management which resulted in the group being unscathed from the collapse of the banking sector. Capital and Credit was one of the few indigenous banks which did not require a bailout from FINSAC. He noted that from as far back as 1997 the group was publishing its financial reports, six years before the group went public. The Senator said, "In my own mind, what made the critical difference was the prudent management decisions which were taken by... Capital and Credit... the big difference was management."
CONTRIBUTED
But the Senator did not reserve his laudation for the management alone; he paid tribute to the staff. He said, "The [success of] the Capital and Credit Financial Group is a direct reflection of the hard work and commitment of the staff... They have contributed... to make the group... solid, safe and secure, mixing performance with integrity."
Senior manager for Stockbroking at Capital and Credit Securities, Iran Pyne, was adjudged Employee of the Year.
The Capital and Credit Financial Group began in 1994 with the establishment of the merchant bank with an asset base of $30 million. At the time it was the smallest of the thirty merchant banks in Jamaica. Today, it is one of the largest and most profitable. Its growth has been phenomenal; for its financial year ending December 31, 2003, it returned a net profit of about $465 million. Its performance this year for the first quarter ending March 31 has been equally spectacular, with a net profit of $275 million, a 312 per cent increase over last year.
The group listed on the Jamaican Stock Exchange in April last year with an IPO price of $5.00. Considered a dark horse, the group's stock price climbed steadily, coming from $5.00 when it first listed to $17.27 at the close of trading on Monday. A 220 per cent increase, it is one of the biggest winners on the JSE so far this year.
