Bank boss tells bankers - Change is going to come
EXECUTIVE officer of Union Bank, Don Kennedy, said it has been
the inability to follow or the conscious choice not to follow sound
risk management which has resulted in the situation being
experienced by financial institutions today.
"As a banker for many years, I have heard just about all the
jokes associated with banks and bankers who will not lend you an
umbrella when it is raining," Mr. Kennedy said.
"Another way of expressing it is that banks don't lend when you
need the money," he said, noting that many times he has had to
explain to bankers the reality that "we make money when we make
loans, not when we say no."
The Union Bank executive, speaking at a meeting of the Kiwanis Club
of Kingston at the Hilton Kingston Hotel yesterday, said "a
banker finds prudent ways to make a loan if a way exists that does
not put the bank in harm's way."
Describing risk management as a fundamental ingredient of commercial
banking, Mr. Kennedy said those institutions must address the
question of whether they were aware they were lending depositors,
and not investors money.
He said lenders should also question whether they were properly
identifying, documenting and measuring risk, and whether they were
ensuring proper risk management, training of staff and actively
educating the customer on how to present risk which was acceptable.
"In other words, how do I make this loan bankable," he
Mr. Kennedy said the enterprise known as a commercial bank will be
experiencing significant change in the next five years. "This
is going to happen in Jamaica and in every other country," he
said, adding that technology and shrinking profit margins would
dictate the direction and rate of change for commercial banking.
Like the dinosaur, he said, many banks insisted on not changing the
way they delivered services. "Standing in long lines to give a
bank your money so that they can lend it to someone else is making
less sense to depositors every day," he said.
Mr. Kennedy said alternatives for depositors were being created
every day. Among other things, he said legislative practices
designed to protect special types of financial institutions must be
In giving a progress report on the consolidation of the four failed
commercial banks which have been merged into Union Bank, Mr. Kennedy
said that in January they began with 42 branches, and they will
close about 18 of those. There are currently 32 branches and about
1,000 employees, down from nearly 1,500 in January.
The four commercial banks - Citizens, Island Victoria, Eagle and
Workers - are being merged into the Union Bank of Jamaica. The
consolidation is expected to be completed by the end of September
July 21, 1999