BY THE HON. DR. OMAR DAVIES, MINISTER OF FINANCE AT THE PRESS
CONFERENCE HELD AT THE MINISTRY OF FINANCE AND PLANNING ON FRIDAY,
14 MARCH 1997
have asked members of the media to attend this briefing for two
reasons. First, I want to share with you, a number of initiatives
which are being taken to deal with some of the areas in the
financial sector which are in need of improvement and second, I
want to update you on recent developments at FINSAC (The Financial
Sector Adjustment Company), the Government agency specifically
designed to bolster the financial sector.
doing so, however, I acknowledge that the issue of Century
National Bank is very much at the forefront of people’s minds.
will recall that, at the time of the supplementary estimates’
debate, I stated that once there was a determination on the
ownership of the Jamaica Grande, a scheme of arrangement would be
proposed to the court to allow for an improved payout to CFE
creditors. As you are aware, the court ruled that the shares in
the Jamaica Grande, one of the major assets of the Century group,
was indeed owned by the Century National Bank.
Government is now in a position to approach the court to establish
a scheme of arrangement which would assist the depositors and the
unsecured creditors to maximize the recovery of the balances owed
to them by the CFEs. We shall thereafter be processing the
invitations in order to select the best one.
have taken the decision to go this route because we are anxious to
ensure the highest payouts to CFE’s creditors in the shortest
possible time, and to reduce the short-term demand for public
sector resources. I want to assure depositors that once we receive
the proposals and the best one has beeen selected, it will be
presented to the court which will then order us to convene a
meeting of the creditors. If the creditors approve the scheme of
arrangement, the court will sanction the scheme.
now to FINSAC. That organization is ably represented here today by
its Chairman, Dr. Gladstone Bonnick, who is a well-known Jamaican
public servant. I am sure that there are a lot of questions in
your minds about what FINSAC has been doing since it started
operations. The short answer is... a great deal. The longer and
more detailed answer will be given to you by Dr. Bonnick.
board of highly competent and independent-minded professionals has
been assembled to guide FINSAC’s operations. The members are:
Dr. Bonnick, Chairman
The Governor of the Bank of Jamaica, Mr. Derick Latibeaudiere -
Financial Secretary, the Hon. Shirley Tyndall
The Hon. David Coore, a distinguished Attorney-at-Law and former
Minister of Government
Mr. Wilberne Persaud, Senior Lecturer of Economics at the
University of the West Indies
Trade Unionist, Mr. Lascelles Perry
The Deputy Governor of the Bank of Jamaica with responsibility for
financial institutions supervision, Mrs Audrey Anderson
Mr. Patrick Hylton, Managing Director of Financial Institutions
Mr. Dennis Boothe, Managing Director, FINSAC
Mr. Wayne Whittingham, Company Secretary
is an essential part of the Government’s response to the issues
that have been concerning the financial sector. You will recall
that recently, representatives of some of the major life insurance
companies approached the Government for assistance to strengthen
the insurance industry. These companies are all conglomerates, and
it was Government’s view that if these issues were not
addressed, the entire financial sector would be held back.
although we were initially concerned with certain issues in the
insurance industry, it soon became clear that we would also need
to widen the scope of our attention, to deal with the banking
sector as well, in view of the interlocking nature of the two
was faced with three options:
It could take the position that market forces should be allowed to
take its course and that the issues with which we are grappling
are entirely due to bad management and should therefore be ignored
It could provide liquidity support on a company by company basis
over the short-term.
It could take a comprehensive approach involving financial
assistance, restructuring of companies and introduction of new
management, together with appropriate regulatory legislation.
decision to take a comprehensive approach stemmed from the fact
that historically, Jamaica’s life insurance industry has played
a pivotal role in capital formation. It has served as an
invaluable vehicle for mobilizing long-term savings and
contributing to national economic growth and development, through
significant investments in various productive sectors, and in many
and varied investment instruments.
through its investment of the savings of shareholders,
policyholders and pension funds which it manages on behalf of
hundreds of thousands of clients, the industry holds a special
place in the country’s financial sector. A number of factors
have, however, led to a growing mismatch of assets and
liabilities. Notwithstanding the situation, it is Government’s
policy to do what is necessary to protect the investments of our
is for this reason that the Financial Sector Adjustment Company
was established. FINSAC’s primary objectives were to resolve the
financial challenges which have held back the development of the
banking and insurance companies operating in Jamaica.
was also charged with enhancing the viability and profitability of
the sector by restructuring the conglomerate and firms operating
within it. It should also create a desirable environment for
investors to recapitalize the institutions by keeping the public
sector role to a minimum and of short duration.
should note further that proposals to enhance the prudential and
legal framework to more effectively monitor the financial sector
are presently being developed. The organizations responsible for
carrying out bank supervision and insurance supervision are being
looked at with a view to making them even more effective in the
tasks for which they are responsible.
stated in the supplementary estimates, an amount of $6.3B has been
allocated to capitalize FINSAC, in order that it can carry out its
most important work of stabilizing the financial sector.
wish to state emphatically that the resources which are being made
available to FINSAC are not a hand-out. As Dr. Bonnick will
elaborate, each company will be required to enter into agreement
with FINSAC which sets out prior action for qualification of
assistance and specific conditions tied to disbursement.
will work closely with the regulatory arms of Government - the
Bank of Jamaica, the Superintendent of Insurance and the
Securities Commission - to streamline the operations of the
financial sector, in order to ensure its health.
must also emphasize that some financial institutions are
themselves undertaking, on their own initiative, extensive
financial and managerial restructuring. Several have cut staff,
reorganized systems and sharpened credit management.
some cases, mergers have been or are about to be undertaken. This
is a very encouraging trend, and it is our hope that the sector
itself will maintain vigilance to ensure that it regains and
maintains good health.
now turn to the matter of the Eagle Financial Entities which, as
everyone knows, have been the subject of much speculation over the
past several weeks. Dr. Bonnick, in his remarks, will provide
further details on the matter, but I wish to state at this point,
that after long discussions between representatives of the
Ministry of Finance, FINSAC and the Bank of Jamaica, on the one
hand, and the principal shareholders in the Eagle network, on the
other, an agreement has been reached and signed, whereby FINSAC
will acquire the majority of shares in those entities.
intention is that FINSAC would retain the shares only for as long
as it takes to restore viability to the component entities that
emerge after restructuring. It will, at that time, immediately
sell its shares and cede control to the private sector and/or
members of the public. This could occur as soon as private sector
interests can be identified which have the ability to recapitalize
the various entities.
Government of Jamaica recognizes that, apart from the financial
support which is being provided to the Eagle Financial Entities
through FINSAC, it is important that for the restoration of
confidence, a management team of established excellence be given
responsibility for the restructuring exercise which is necessary.
am pleased to announce that the Government will be entering into
an agreement with the Bank of Nova Scotia (BNS) of Canada to
manage the Eagle Financial Entities and be in charge of the
restructuring programme which will return them to economic
viability in the context of the Government’s explicit guarantee
to depositors, policyholders and pensioners whose pension funds
are managed by the group.
have deliberately chosen BNS Canada, as that entity’s track
record, not only in terms of the performance of its subsidiary in
Jamaica, but worldwide, demonstrates its eminent capability in
financial management. The point to be made here is that all
savers, depositors, policy holders or pensioners will be 100 per
this point, I want to raise the issue of Government’s
involvement in private sector activity, which I know has been
engaging the minds of some people. I want to make it quite clear
that we have not invited ourselves to be a player in this crucial
sector. In every instance, we have either been invited to come in
or, if we did not intervene, it would mean severe hardships for
depositors and policyholders.
can promise you categorically that the first indication we see
that the institutions which have asked for our support are able to
demonstrate that they have rectified the situation which led to
our intervention, we want to make an exit.
is determined to ensure that the financial sector is healthy and
stable. We are committed to working hand in hand with leaders of
the sector to ensure this. We look to the future with a great deal