Dennise Williams, Staff Reporter
DR. OMAR Davies says there will be no 'Finsac Two' in Jamaica as the country is much more capable of dealing with such situations now.
He was discussing the fallout in the financial sector at the launch of FirstCaribbean's International/Hard Currency Mortgage Product at the Knutsford Court Hotel on Wednesday.
"The bailout from the first Financial Sector Adjustment Company (Finsac) cost the country 40 per cent of gross domestic product," he explained. "The Prime Minister, P.J. Patterson, in his own style said that Finsac was necessary. We wouldn't be here today if not for Finsac."
But the regulatory framework is much stronger now than in the early 1990s, he said. These include the Bank of Jamaica, the Financial Services Commission and the Jamaica Deposit Insurance Corporation.
When the collapse occurred, there was an implicit 100 per cent insurance by the Government, he said. "Everybody expected to get back his or her money."
Now there is a level of self-insurance in the policy framework. "If a problem develops with a deposit taking institution, the JDIC would kick in and return money up to the insured level."
Additionally, there is now a more careful assessment of risk by non-deposit taking financial institutions, he said
Dr. Davies pointed to another benefit of the Finsac experience.
"Since the fallout of the financial sector, there are fewer entities." In the 1990s there were as many as 30 merchant banks, but now, the industry is more streamlined with six commercial banks and five merchant banks along with four investment banks.
"This makes the sector easier to regulate," Dr. Davies said. "Plus the companies are better capitalised. So essentially, the industry will not leave people stranded."
