Rates will drop as portfolios change, banker says

Sabrina Gordon, Business Reporter

Faced with calls for a faster reduction in the interest rates they charge their customers, Jamaican banking-sector spokespersons claim that these are being lowered as quickly as practicable, but say the pace is being dictated by the structure of deposit portfolios.

"Commercial bank base rates have reduced, albeit at a much slower place" than the decline in benchmark rates set by the central bank, explained Courtney Campbell, chief executive officer of GraceKennedy Financial Group, among whose subsidiaries is First Global Bank.

At the same time, there were hints of more job losses in the sector and finance houses' drive for efficiency in the face of declining earnings from risk-free government instruments.

Since the Golding administration's February rescheduling of over J$700 billion of the island's domestic debt - the so-called Jamaica Debt Exchange (JDX) - at lower rates and longer maturities, the Bank of Jamaica (BOJ) has been aggressively cutting its signal rates.

From 10 per cent in February, the BOJ has adjusted rates three times to the current 8.5 per cent.

The pace has not been matched by commercial banks.

"... The reason for that is commercial banks would have looked at their portfolios and made adjustment as to some of the deposits that were on fixed deposit for specific periods of time and those would have had to be broken off," said Campbell, speaking on behalf of the Jamaica Bankers Association (JBA) Wednesday at a business/investment.