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MANAGING DIRECTOR'S REPORT

Fiscal 1999/2000 has been a pivotal year in FINSAC’s brief existence. It was a year in which we set ourselves ambitious targets, all of which we pursued aggressively, and it has been a year of great achievements. We have changed, for the better, the financial sector landscape in Jamaica beyond measure, and have won for our organisation a considerable measure of respect and credibility with the Jamaican public.

This year, one of our major institutional rehabilitation achievements was the completion of the merger of five Jamaican banks into Union Bank. In measuring the enormity of this task, we tend only to count the four banks that technically existed at the start of this process – Citizens Bank, Island Victoria Bank, Eagle Commercial Bank and Workers Bank – forgetting that the Horizon Group had already been merged with Citizens Bank. 

As if that in itself was not challenge enough, we set ourselves an ambitious nine–month timeframe, aiming for a settled new institution by September 1999. When one considers the total systems overhaul to move all the banks to a single Year 2000 compliant system, the usual merger activities of branch and employee rationalisation, and the need to merge the various functional departments, this was a most significant success and achievement for FINSAC. 

Equally, in the insurance sector, fiscal 1999/2000 saw FINSAC achieving an enormous success. Our decision in December 1998 to re–intervene in three major Jamaican insurance companies – Mutual Life, Dyoll Life and Crown Eagle– had been controversial, attracting a lot of criticism. Sadly however, all the analysis showed that Mutual Life, Crown Eagle Life, Dyoll Life and Horizon Life’s continued existence as going concerns was not sustainable, and that we needed to act and act decisively. Consequently, FINSAC made its recommendations to the Minister of Finance and Planning and to the Cabinet. They were approved, and the companies were placed under judicial management. Our actions were initially criticised as being illegal, and many commentators and interest groups predicted that there was no way in which the portfolio combination FINSAC had acquired could be rationalised and divested in under two years. We did it in less than one year. 

The combining of the portfolios was completed in April, and the divestment agreements were in place a few weeks later. Once again, what we achieved was not just a significant undertaking, but we did it in record time. I believe FINSAC’s successes in the banking and insurance sectors have contributed to the growth and resurgence of Jamaica’s financial sector. The sector has been far more profitable than in the previous year, and people’s perception of the sector as a whole, has improved significantly. The willingness of companies like Guardian Life and Barbados Mutual to invest in Jamaica are examples of this growing confidence.

Although less in the public eye, two other areas of FINSAC’s work also achieved great success in fiscal 1999/2000. These areas were our Non–Performing Loans Unit’s operations and the sales of our non–core assets.

The decision to centralise the collections by the various banks of their non–performing loans into a single unit within FINSAC became fully functional in 1999, and it has proved to be extremely effective. Collections to date are in excess of $3 billion, and many loans have been restructured through the process of negotiation, working with our Oversight Committee and through initiatives with the National Development Bank and the National Investment Bank of Jamaica.Similarly, our sales of non–core assets, by which I mean hotels, commercial and residential real estate, have gone very well indeed during the past year, bringing more than $6 billion back into the public purse. 

Again these were areas where we set ourselves ambitious targets. In the event, the targets were not only met, they were exceeded. As FINSAC continues next year in its divestment mode, it will be the sale of our core financial assets including Union Bank and our shareholding in NCB that will be our focus. We also expect to downsize FINSAC itself as our work moves to completion. As we do so, the skills and professional expertise that we have acquired and developed within FINSAC should not be wasted. We are already discussing how some of our staff from the successful FINSAC/Inter–American Development Bank insurance regulatory project can transfer into the new government regulatory body. Others who move on, will I hope, continue to serve this country well, wherever they go. 

FINSAC was established with a 7-year estimated time frame to complete its mandate and mission to build for Jamaica a stable, sound, strong and well-regulated financial sector. At the rate we have been moving and achieving our objectives, we now expect to complete our work in less than five years. Given the context and the size of our undertaking, this will be no mean achievement.

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