The Gleaner - June 30,
FINSAC pumps $2.2b more
into Union Bank
THE FINANCIAL Sector Adjustment Company (FINSAC) has pumped in
another $2.2 billion to shore up the capital base of the new Union Bank of
Jamaica, the merger of four failed local banks.
Union chairman Dennis Morrison, Q.C., said yesterday the new capital, in
the form of more FINSAC bonds, should be enough to recapitalise the new
bank and meet stricter Bank of Jamaica (BoJ) regulations.
Yesterday marked the last hurdle in the introduction of the new bank when
Citizens Bank shareholders, several reluctantly, agreed to change the name
of the first Jamaican-owned bank to Union Bank of Jamaica Limited at the
Citizens Bank Annual General Meeting (AGM).
The accounts for 1997 and 1998 were also presented at the AGM. The
operations of Workers, Island Victoria and Eagle Commercial Bank have
already been transferred to Citizens which, as of yesterday, officially
became Union Bank.
The news of more FINSAC aid to help restructure the combined operations
was expected as the cost of combining four ailing operations and meeting
BoJ regulations became clearer.
At yesterday's meeting shareholders agreed to issue FINSAC another 1.485
billion ordinary shares at $1.90 per share. Although more than $2.8
billion in new shares were authorised for FINSAC, the Government
restructuring company will only take up $2.2 billion at present with the
remaining shares left unauthorised.
In May 1997, FINSAC acquired 60.2 per cent of the ordinary shares of
Citizens from Life of Jamaica. This had risen to a controlling interest of
84.2 per cent at the end of December 1998. The latest increase in
authorised share capital pushes FINSAC's holding in the newly-named Union
Bank to 99 per cent.
As part of the assistance to Citizens, which has subsumed a range of other
operations including the failed Horizon Group, FINSAC has given the bank
almost $6.4 billion of bonds as at the end of December 1998. Much of this
quasi-government paper was in return for taking on board the liabilities
of the Horizon Group and others. FINSAC also owes Citizens Bank interest
on the bonds of about $1.4 billion.
Two weeks ago, the Financial Gleaner revealed the total amount of
securities outstanding by FINSAC stood at almost $93 million at the end of
May 1999. A week before it reported Citizens had posted a $986 million net
loss in 1998, after provisions totalling $488 million. Citizens also
chalked up a $132 million net loss in the first three months to the end of
At yesterday's AGM, auditor PriceWaterhouseCoopers was also replaced by
Deloitte & Touche as FINSAC moved to reconcile the production of
accounts of the entities under its control.
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