Beckford says high bank rates caused some loans to go bad

Former head of the defunct Horizon Merchant Bank, Elon Beckford, who was recalled to testify Wednesday, admitted that his bank's high lending rates contributed to the demise of businesses in the 1990s, including developers whose loans were, eventually, sold to the Jamaican Redevelopment Foundation Inc (JRF) as bad debt.

"If we knew these rates would have continued, we would not have made those loans," Beckford confessed to the enquiry, under cross-examination by attorney for JRF, Gavin Goffe.

Goffe, who provided Bank of Jamaica figures showing the average lending rate for the merchant banks moving from 70 per cent in March 1994 and 44 per cent in March 1998, asked the commission to take a careful look at what really accounted for the housing developers, who borrowed from Horizon, having so much difficulty in repaying; as well as the concentration of developers at that bank.

He suggested that part of the difficulty faced by the Horizon Merchant Bank debtors was that Horizon was not willing to risk a "fairly thin" profit base, by keeping interest rates low.

banking decisions

But Beckford responded that the bank only made prudent banking decisions. He said interest rates remained high because of the prevailing conditions, but there were reductions subsequently.

Asked by Goffe whether, in retrospect, he would have done anything differently, Beckford reacted, "The only thing we would have done differently would be to reduce the concentration (of developers)".

In his initial appearance at the enquiry on March 24, Beckford told the commission that the intervention by the Bank of Jamaica in the sector in 1995 was a "game changer".

He said that it was the considered opinion of the financial institutions then that the Government's high interest rate policy was not sustainable. But, he said that the institutions were of the view that the policymakers, being fully aware of the long-term implications, would not have maintained the high interest rate policy for any prolonged period.

Beckford's testimony ended much sooner than anticipated, because former Solicitor General Michael Hylton QC, who has also represented former Finance Minister Dr Omar Davies at the enquiry, was not there as expected to question the banker.

Dave Garcia, the attorney for former FINSAC head, Patrick Hylton, told the commissioners that Michael Hylton had informed him that he only learnt of Beckford's appearance on Tuesday night, and was not in a position to attend Wednesday's sitting. Hylton had requested Beckford's return to the stand.

Beckford told the commissioners that he had postponed several appointments in order to return to the witness stand, after being subpoenaed by the commission, and was not sure he would be able to attend again this month.

- JIS