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Customers join banks in support of JDX

Published:Tuesday | January 19, 2010 | 12:00 AM

Philip Hamilton, Gleaner Writer

MINNA ISRAEL, president of the Royal Bank of Trinidad and Tobago, says her bank's customers have expressed positive reactions regarding the proposed debt-exchange programme between Government and the financial sector.

These reactions, Israel disclosed yesterday at a Gleaner Editors' Forum, were from investors who use government paper as collateral for other loans.She said customers had reacted favourably to the prospect of their bonds losing significant value.

"People were calling and writing emails to find out how do we bring in our old bonds and what's the procedure for getting the new ones. I was so pleased to see the overall reaction to this initiative," said Israel, who is also president of the Jamaica Bankers' Association.

Israel said customers, while acknowledging the initiative would reduce income earned from interest, admitted it would result in a sustainable sector as well as a future for their children.

Customer's capability

She said her bank had also looked at bonds being used as collateral to determine the customer's capability to service the debt.

National Commercial Bank Group Managing Director Patrick Hylton said while his bank did not see the initiative posing any issues in terms of the reduction in interest rates, it was likely to affect pension funds.

"Of course, it is likely to affect persons who would have invested in those instruments based on a certain income expectation based on their own lifestyle issues. That's an issue everybody faces when there are increased taxes," said Hylton.

Scotiabank CEO Bruce Bowen agreed with Hylton, pointing out that the action would cause a reduction in actuarial reserves.

"Where trustees of a pension fund felt that they had enough security and income in that fund to meet their obligations to pay people's pensions, there will be less assurance tomorrow than there was today, and that's a reality," said Bowen.