The Government will not bail out any failed financial institution, Prime Minister Andrew Holness said as the annual Jamaica Stock Exchange capital markets conference got under way Tuesday night.
“The Government will not socialise any debt and we will not socialise the failure of our banks. They need to be prudential and protect their customers,” said Holness going off-script in his address.
“Were we to do that it would send a bad signal to the banks and the investment houses that they can be negligent and expect the coverage of their negligence. That took us into a crisis, which took us decades to get out of, and made the entire country poor,” he said.
The bailout of the failed financial sector in the late 1990s rescued the savings of countless depositors in what some academics called the socialising of debt. It, however, crippled the Government’s ability to spend on activity that would help grow the economy.
Jamaica’s debt levels kept rising up to 2013. At that time, the nation’s debt was one-and-a-half times larger than all the things produced in the island combined. Now it’s just about the size of all things produced, with just a bit to spare on the capital side of the budget.
Holness’ reference to the past crisis that crashed the financial sector comes amid reports of an alleged $3-billion fraud at investment firm Stocks and Securities Limited, which has made international headlines, mainly because one of the persons affected is international sport celebrity Usain Bolt.
As he spoke, Holness seemed to sense a bit of unease among sections of the audience.
“Do not be afraid to clap,” the PM said. “I know I have to deliver some uncomfortable truths, even in this audience. It is not a fully agreed position, but we must learn from our past crisis,” he said.
The JSE Regional Capital Market Conference 2023 will run until Thursday at the Jamaica Pegasus Hotel under the theme ‘Capital Markets Redefined: Achieving the Impossible’.
Its alleged that fraudulent activity at SSL might have spanned 13 years.
Holness said that those responsible would face legal consequences and assured the audience that no hidden hand of the state would obfuscate the findings of the ongoing investigations.
“We have to make sure those who are responsible are held to account. There will be absolutely no political interference or cover. We want to get to the truth of this matter to uncover and expose it and bring those responsible to account and bring justice to the victims. The full force of the law in this matter must be brought to bear. If we do not do that then our free and competitive market will not work,” he said.
The prime minister urged the securities dealers to use the crisis as an opportunity. “We must learn from our past crises and be bold to speak about them. We must not make the same mistakes,” Holness said.
Earlier in his speech, Holness cautioned that the misdeeds of one entity should not be cast on all.
“The recent allegation of fraud has an international dimension to this, which has to be carefully managed. But I am not aware of any cause of contagion,” Holness said.
Chairman of the JSE Julian Mair discarded his prepared speech and instead focused on the SSL crisis during his opening remarks at the conference.
Mair cautiously welcomed the pending changes to the regulatory environment for securities dealers announced Monday by Finance Minister Dr Nigel Clarke that will see investment companies, insurance companies and pension fund managers all falling under the regulatory umbrella of the central bank within two years, while the Financial Services Commission will devolve into a financial consumer watchdog.
Bank of Jamaica Governor Richard Byles was also named the new chairman of Financial Services Commission, effective Monday.
“We look forward to working with the new regulator and we know that they are coming forward to meet with a strong sector,” said Mair.
President of the Jamaica Securities Dealers Association Steven Gooden said the sector must focus on restoring confidence under the new regulatory framework.
steven.jackson@gleanerjm.com
