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"A former banker is attributing the collapse of many institutions and personal businesses during the financial sector meltdown of the 1990's to the prolonged high interest rate policy developed by the Government at the time.
Elon Beckford, the former Chairman of the now defunct Horizon Merchant Bank, made the comment when he appeared before the FINSAC Commission of Enquiry being held at the Jamaica Pegasus Hotel in New Kingston on Thursday.
Mr. Beckford told the Enquiry that had the then Government reduced the life span of the policy, more businesses would have survived.
"All of us kept saying this madness could not continue, the interest rates must come down, so both the developer and the institution kept hoping for the signal that would bring down interest rates (but) the rate just went on for far too long. If we had backed off those high interest rates earlier, 12, 18, 24 months earlier, then maybe we would not have this Commission here today," he said.
The Financial Sector Adjustment Company (FINSAC) was set up to resolve the liquidity problems in the economy during the period.
Mr. Beckford explained that his company, like other financial institutions felt the pinch when in 1997, FINSAC, through the Bank of Jamaica (BOJ), took control of Workers Bank, which held most of its accounts.
According to Mr. Beckford, almost immediately, more depositors began withdrawing their money.
He said with Horizon Merchant Bank being primarily a lending agency, many borrowers could not afford the increased interest rates of 50%, which was the entity's response to the Government's own 50% interest rate.
This resulted in a higher default rate on loans.
Mr. Beckford said a meeting with the BOJ yielded no results and the decision was made to approach FINSAC.
He said Horizon proposed the sale of several selected loans in exchange for Government bonds.
However, FINSAC's proposal was for Horizon Merchant Bank and its entities to be merged with Citizens Bank Group, which it already controlled.
Mr. Beckford said Horizon with a low capital base was left with no choice but to accept the deal, which was signed in 1998."
"A former banker is attributing the collapse of many institutions and personal businesses during the financial sector meltdown of the 1990's to the prolonged high interest rate policy developed by the Government at the time.
Elon Beckford, the former Chairman of the now defunct Horizon Merchant Bank, made the comment when he appeared before the FINSAC Commission of Enquiry being held at the Jamaica Pegasus Hotel in New Kingston on Thursday.
Mr. Beckford told the Enquiry that had the then Government reduced the life span of the policy, more businesses would have survived.
"All of us kept saying this madness could not continue, the interest rates must come down, so both the developer and the institution kept hoping for the signal that would bring down interest rates (but) the rate just went on for far too long. If we had backed off those high interest rates earlier, 12, 18, 24 months earlier, then maybe we would not have this Commission here today," he said.
The Financial Sector Adjustment Company (FINSAC) was set up to resolve the liquidity problems in the economy during the period.
Mr. Beckford explained that his company, like other financial institutions felt the pinch when in 1997, FINSAC, through the Bank of Jamaica (BOJ), took control of Workers Bank, which held most of its accounts.
According to Mr. Beckford, almost immediately, more depositors began withdrawing their money.
He said with Horizon Merchant Bank being primarily a lending agency, many borrowers could not afford the increased interest rates of 50%, which was the entity's response to the Government's own 50% interest rate.
This resulted in a higher default rate on loans.
Mr. Beckford said a meeting with the BOJ yielded no results and the decision was made to approach FINSAC.
He said Horizon proposed the sale of several selected loans in exchange for Government bonds.
However, FINSAC's proposal was for Horizon Merchant Bank and its entities to be merged with Citizens Bank Group, which it already controlled.
Mr. Beckford said Horizon with a low capital base was left with no choice but to accept the deal, which was signed in 1998."