More cuts for bank rates
Published: Sunday | October 18, 2009
LEFT: Bruce Bowen, president and CEO of Scotia Group Jamaica.
RIGHT: Minna Israel, president of RBTT Jamaica Limited. RBTT will implement a new prime rate on November 1.
Scotiabank Jamaica has again cut its prime lending rate, this time by less than a point, moving it to 19.875 per cent from the 20.5 per cent rate set in August.
The new rates become effective November 1.
"There has been a long-term call by Jamaica for lower rates, so now we are putting our money where our mouth is," said Hugh Miller, who was recently promoted to vice-president of treasury at the bank.
Miller formerly held the position of assistant general manager, treasury and foreign-exchange trading. Another of his colleagues, Wayne Hewitt, has also been given an expanded role in the bank, and is now senior vice-president, corporate and commercial banking.
Miller noted that the primary motivation for the cut was to ensure that Jamaican can access affordable financing.
Looking to boost business
But the Bruce Bowen-led Scotiabank, ranked as one of the biggest commercial banks in Jamaica, may be looking to boost business, given that other banks too are lowering rates, even as its closest rival National Commercial Bank of Jamaica makes strides in the loans market.
In the past year, Scotia Group's loan portfolio has grown by $13 billion to $95 billion at July 2009, but NCB's portfolio, while it still trails at $89 billion at June 2009, grew by $18 billion.
RBTT, the No. 3 bank, in a second rate cut since the summer, will, starting November 1, quote its prime rate at 20.5 per cent, down from 22 per cent at the end of August.
"This is in direct response to the reduction in interest rates by the Bank of Jamaica which has lowered rates five times since the start of this year," stated Minna Israel, president and country head of RBTT Jamaica.
Bank of Jamaica since July has decreased interest rates by a cumulative 4.5 per cent. BOJ now quotes rates on its open market instruments at 12.5 per cent to 17 per cent.
FirstCaribbean Jamaica cut its rate on October 1 by 150 basis points to 20.25 per cent.
NCB has made no adjustment but says its current base lending rate of 21.75 per cent is negotiable, while First Global Bank says its 20.75 per cent rate is under review.
RBTT's Israel said the lower cost of credit should provide affected householders with more expendable income, and should help to stimulate investment and business retooling.
The banks' response to the central bank's signals to reduce lending rates has not, according to business interests, been acted on swiftly enough.
Omar Azan, president of the Jamaica Manufacturers' Association, who has been the most vocal on the issue, says the cost of capital remains a disincentive to productive activity.
Azan and others continue to push for nothing less than single-digit loan rates.
On October 6, Scotiabank introduced a special, but non-revolving $500-million loan window for the productive sector that priced credit at 9.95 per cent.
The JMA president said the banks should make the initiative the start of a trend by following suit.