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Financial system under more stress
Article Published: Saturday, September 11th, 2010
Audley Shaw
The country’s financial system is coming under more stress because of the Jamaica Debt Exchange Initiative (JDX), the artificial revaluation of the currency and the declining economy, which have all impacted negatively on consumer and investor confidence. If the current situation continues for another two quarters many financial institutions may have to draw down on the US$950 million line provided under the agreement with the International Monetary fund (IMF) or cut staff.
This would seriously undermine the credibility and the premature nature of the recent requests by Bank of Jamaica Governor Brian Wynter and Finance Minister Audley Shaw that the money be diverted for under purposes because the sector would not need it.
Data released by the central bank on the prudential indicators for the financial system, which includes commercial banks, merchant banks and building societies, confirm that the pressure is building on the system. For example, the assets of the financial system climbed by 0.1 per cent to $769.6 billion in June of 2010, compared with $768.5 billion in June of 2009 and $693.1 billion in June of 2008. This was a decrease of 13 per cent in real terms when adjusted for the inflation rate of almost 13 per cent during the period.
Meanwhile, the total gross loans and advances of the system fell by 2.5 per cent to $343.8 billion in June of this year from $352.7 billion in June of 2009, but up from the $293.8 billion recorded in June of 2008.
This was however a decrease of 15 per cent when adjusted for inflation during the period. The loan to assets ratio fell to 43.6 per cent from 45.2 per cent last year but marginally higher than the 41.8 per cent recorded during the year 2008.
The loan to deposit ratio of the system also fell from 74.89 per cent in June of last year to 69.9 per cent in June of this year, which was the same level in June of 2008, on the back of the lack of business confidence, which is being generated by the weak aggregate demand. The central bank data also indicated non-performing loans three months and over jumped by 70.3 per cent $20.4 billion, in June of this year, up from $14.6 billion in June of 2009 and $7.4 billion in 2008. The provisions for these loans amounted to 4.2 per cent of gross loans this year, up from 3.0 per cent in 2009 and 2.4 per cent in 2008.
Turning to the deposit side, the central bank pointed out that the total amount of money deposited with the financial system as at the end of June this year grew by 5.3 per cent in nominal terms to $496.6 billion, from $471.5 billion in 2009 and $425.8 billion in 2008. This was however a decline of about 7 per cent in real terms.
Article Published: Saturday, September 11th, 2010
Audley Shaw
The country’s financial system is coming under more stress because of the Jamaica Debt Exchange Initiative (JDX), the artificial revaluation of the currency and the declining economy, which have all impacted negatively on consumer and investor confidence. If the current situation continues for another two quarters many financial institutions may have to draw down on the US$950 million line provided under the agreement with the International Monetary fund (IMF) or cut staff.
This would seriously undermine the credibility and the premature nature of the recent requests by Bank of Jamaica Governor Brian Wynter and Finance Minister Audley Shaw that the money be diverted for under purposes because the sector would not need it.
Data released by the central bank on the prudential indicators for the financial system, which includes commercial banks, merchant banks and building societies, confirm that the pressure is building on the system. For example, the assets of the financial system climbed by 0.1 per cent to $769.6 billion in June of 2010, compared with $768.5 billion in June of 2009 and $693.1 billion in June of 2008. This was a decrease of 13 per cent in real terms when adjusted for the inflation rate of almost 13 per cent during the period.
Meanwhile, the total gross loans and advances of the system fell by 2.5 per cent to $343.8 billion in June of this year from $352.7 billion in June of 2009, but up from the $293.8 billion recorded in June of 2008.
This was however a decrease of 15 per cent when adjusted for inflation during the period. The loan to assets ratio fell to 43.6 per cent from 45.2 per cent last year but marginally higher than the 41.8 per cent recorded during the year 2008.
The loan to deposit ratio of the system also fell from 74.89 per cent in June of last year to 69.9 per cent in June of this year, which was the same level in June of 2008, on the back of the lack of business confidence, which is being generated by the weak aggregate demand. The central bank data also indicated non-performing loans three months and over jumped by 70.3 per cent $20.4 billion, in June of this year, up from $14.6 billion in June of 2009 and $7.4 billion in 2008. The provisions for these loans amounted to 4.2 per cent of gross loans this year, up from 3.0 per cent in 2009 and 2.4 per cent in 2008.
Turning to the deposit side, the central bank pointed out that the total amount of money deposited with the financial system as at the end of June this year grew by 5.3 per cent in nominal terms to $496.6 billion, from $471.5 billion in 2009 and $425.8 billion in 2008. This was however a decline of about 7 per cent in real terms.
I don't know who is more serious, you or Lazie!
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