FINSAC: Former NCB exec laments non-co-operation of Finsac

[Karl]

Former NCB exec laments non-co-operation of Finsac
BY PATRICK FOSTER Observer writer fosterp@jamaicaobserver.com
Wednesday, April 20, 2011


FORMER managing director of the National Commercial Bank (NCB) Jeff Cobham yesterday charged that many of the local businesses that failed during the 1990s financial crisis could have been saved if the finance ministry and Financial Sector Adjustment Company (Finsac) had agreed to lower the interest rates being charged on delinquent loans.


"It is my opinion that a number of businesses could have been given a better chance of recovery if lower interest rates were approved," Cobham told commissioners during his testimony at the Finsac enquiry being held at the Jamaica Pegasus Hotel in Kingston.

Former managing director of National Commercial Bank Jeffrey Cobham testifying at the Finsac Commission of Enquiry at the Jamaica Pegasus Hotel in Kingston yesterday. (Photo: JIS)



Former managing director of National Commercial Bank Jeffrey Cobham testifying at the Finsac Commission of Enquiry at the Jamaica Pegasus Hotel in Kingston yesterday. (Photo: JIS)


#slideshowtoggler { FILTER: none !important; ZOOM: normal !important}#slideshowtoggler A { FILTER: none !important; ZOOM: normal !important}#slideshowtoggler IMG { FILTER: none !important; ZOOM: normal !important}

1/1

"We felt the high-interest rate [policy] would go for six months, maybe a year. Nobody anticipated that this would go on for so long," Cobham commented.

He said that many NCB customers, during the period 1994 to 1997, complained about interest rates, which in some cases moved from 25 per cent to 90 per cent.

According Cobham, the bank's loan portfolio at the time was approximately $22 billion with some $13 billion "deemed and considered non-performing".
Finsac acquired NCB's non-performing loan portfolio in 1998, but yesterday Cobham said that the bank would have been in a better position to administer many of those loans if Finsac had agreed to its proposals.
"Even after those debts were sold there was an arrangement with Finsac where the bank collected and passed over funds on a no-fee basis," Cobham revealed.

He said, however, that NCB was not able to make deals with its customers to facilitate repayment of the loans.

According to Cobham, assistance sought from Finsac in working out solutions with debtors was not forthcoming. "NCB, as a collection agency, was not able to make deals [with debtors]," he said.
"We were not given the level of co-operation in terms of our requests," Cobham told the commission.

"The relationship which exits with a debt collector is rather different from that which exists between a banker and its customers," he contended.
Finsac subsequently sold its bad debt portfolio to the overseas-based collection agency, the Jamaica Redevelopment Foundation.

Yesterday, against the background of the accommodations afforded to NCB by the Government, Cobham insisted that the bank was not given special treatment in relation to other commercial banks.

"I think the circumstances differed in the case of each bank," Cobham said in response to queries from commissioners Worrick Bogle and Charles Ross. "It wasn't because of favouritism."

Cobham said that at another commercial bank, for example, with billions of dollars in loans there were cases of missing [customer] files.

"There was never any such occurrence with NCB... such an example of malfeasance, I state categorically that there was none at NCB," Cobham said. "Nothing of that nature was ever found."

Questioned by the commissioners about NCB's foray into non-banking operations, Cobham said that given the bank's success in financial management at the time, the directors felt that they could equally manage other businesses.

"We felt we were able to bring the same level of management to industries, which we knew nothing about," Cobham responded. "At that time we felt we were able to manage those entities."

According to data provided by Cobham, NCB Group made $825 million profit in 1995 and lost some $802 million the following year.
The enquiry continues next Wednesday.



Read more: http://www.jamaicaobserver.com/finsa...#ixzz1KCGafyVP

[Assasin]

Exactly what many of us have been saying. High interest rate for extended period means the death of businesses. I hope you understand it now.

[Karl]

Exactly what many of us have been saying. High interest rate for extended period means the death of businesses. I hope you understand it now.

I hope you saw this -

Cobham said that at another commercial bank, for example, with billions of dollars in loans there were cases of missing [customer] files.

"There was never any such occurrence with NCB... such an example of malfeasance...

- and recognised that it points to there being other factors that lead to the folding (and run-weh of some persons) of the financial institutions and other companies.

[Assasin]

That was all you saw in the whole article? Even with the BIG US Banks in this foreclousure crisis like Bank of America they have missing documents for homeowners etc. but they still manage to make a deal with homeowers or stall fourclousure until they get the documents. They don't change 50% instead.

Explain that to me.

[MdmeX]

KARL, KARL

If your mortgage rate moved from say 8% to 30% NOW, would you be able to meet your payments on your current income for an extended period of time

I know I couldn't.

[Rockman]

With the exception of Courts Furniture(something far more sinister..)and likely a few others,the companies made some mistakes but their fatal mistatake was to have anything to do with Finsac.Finsac failed to meet its objectives,and that is the matter at hand.Were there any success?

[Karl]

KARL, KARL

If your mortgage rate moved from say 8% to 30% NOW, would you be able to meet your payments on your current income for an extended period of time

I know I couldn't.

You would if you changed you income to be able to take care of that increase in monthly payments.

...but you are using an apple to oranges analogy.

[Karl]

That was all you saw in the whole article?

Of course not. ...but it sure as hell is one of the few reports that made an attempt to be balanced.

Even with the BIG US Banks in this foreclousure crisis like Bank of America they have missing documents for homeowners etc. but they still manage to make a deal with homeowers or stall fourclousure until they get the documents. They don't change 50% instead.


Explain that to me.

It is simple. Regardless of whether it was your aim or not what you have above is far from the truth on attempts to resolve a foreclosure.

You have by omission suggested to the person who does not read carefully that what you have written is the truth when it is a fact that the vast majority of persons who default on their mortgages and end up in the foreclouse process lose their homes.

Foreclosure filings were reported on 343,638 properties in September, a 4 percent decrease from the previous month but a 29 percent increase from September 2008. Despite the monthly decrease, September’s total was still the third highest monthly total since the RealtyTrac report began in January 2005, behind only July and August of this year.

“Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,” said James J. Saccacio, chief executive officer of RealtyTrac. “REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties.”

- Realty Trac, 2009

-

As fact foreclosure on properties in default that are in the foreclosure process has a glut of bank owned properties. The banks are often now making deals on sales of homes that are usually in the 15 -20% below the current depressed market values.

Let me state the obvious - Those persons who have lost their homes and are in the process of losing their homes were told "OUT!" No reduction of interest rates or extension of period over which the loan will be armortized.

It is a few who can show ability to repay who have their mortgages come out of lis pendens or forbearance. They earn in a manner that allows repayment.

Many of these FINSAC institutions and persons had no means of repaying what they owed or to propose any sensible alternate repayment course. They wanted for business deals they made the interest rates to be lowered and principal forgiven.

You in the past have spoken of obscene earnings by some of our successful people and entities...so now you want to limit the earnings of persons who invest and properly manage their businesses and on the other hand bail out poorly managed ones?

Sass: You cannot get up - pour millions into a business to build transformers...have no market for what you have built and expect to have the 'pretense for a business' not flop belly up.

Nonsense type expectations. ...and hoping to be rewarded for doing same is madness!

[Gamma]

suh him stay ... come to a conclusion first and den reason backways....

[Assasin]

if FINSAC or Omar was was settling at depressed value I wouldn't have a problem at all. The problem is they were settling for 100% above depressed value.

[Assasin]

Most of the companies who were successful got capital from abroad or deal directly with foriegn exchange. If you had to get money to borrow for operating cost you goose was cooked. There are other businesses who didn't go under but some had to dig into the stached reserves.

[Karl]

Most of the companies who were successful got capital from abroad or deal directly with foriegn exchange. If you had to get money to borrow for operating cost you goose was cooked. There are other businesses who didn't go under but some had to dig into the stached reserves.

Why do you love to make these type general statements?

I would hazard a guess that most Jamaican companies are in the "buying and selling" business, mainly retail trading.

The vast majority would be involved in local "buying and selling". They would not be involved in imports or exports. They would not be involved in accessing local capital and would not be involved in earning foreign exchange.

Companies like Grace Kennedy and Co were engaged in high levels of importation and minimal levels of exports during those years. Yet Grace Kennedy remained consistently profitable during those years.

What was GK's 'secret'?
What prevented those that went under from using similar methods to manage their finances?

[Karl]

How many of our say, large supermarket chains and smaller wholesale and retail operations come on stream during those years?

The Spartan comglomorate was developed during those years?

You had the Cem Products, Zep Products, CERFACT and other wholesale/retail chemical companies coming on stream during those years.

When was the Captain's Bakery started?

When did Cari-Med first see the light of day?

A boom in nightclub entertainment industry?

A whole series of engineering and building development supply companies came on stream. When did TankWeld come on stream?

There was a boom in small guest houses and small hotels.

...I do not remember...but when was the Capital and Credit group born?

...a whole slew of financial institutions came on stream.

Jamaica National Building Society had tremendous outgrowth.

[Assasin]

There was a boom in small guest houses and small hotels.

...I do not remember...but when was the Capital and Credit group born?

...a whole slew of financial institutions came on stream.

Check your facts again. Nuff a dem happen before and later. Most didn't come on stream then.

Grace Kennedy is not even a Jamaican wholly Jamaican and have access to huge foriegn exchange division including export and remittance services. I wouldn't use them. JN also have huge foriegn earner.

Not only retailers were affected. The fact is if you had access to US dollars or huge reserves then devaluation or inflation didn't affect you.

[MdmeX]

You would if you changed you income to be able to take care of that increase in monthly payments.

...but you are using an apple to oranges analogy.

And what if you can't change your income?