Ashford W. Meikle, Business Reporter
Wayne Whittingham, acting managing director of the Development Bank of Jamaica (left) and William 'Bill', Clarke, managing director of Scotiabank Jamaica (right).
President of the Bank of Nova Scotia (BNS) William Clarke has blasted the Development Bank of Jamaica (DBJ) for baulking at the $600 million loan fund pledged by Scotiabank for small farmers and small hotels.
But late Friday, DBJ - now led by acting managing director Wayne Whittingham - immediately hit back at the island's largest commercial bank suggesting that if it were to accept the "meagre" terms, it would be a poor business decision.
A day earlier, Thursday, Clarke had declared that BNS might be forced to rethink the offer made in May because of conditions by DBJ that the commercial bank found unpalatable.
"We made the announcement of this loan facility a couple months ago and, unfortunately, it has not been drawn down," said Clarke.
Other purposes
"They seem to have some requirements for the distribution of the funds that we will not meet. We have basically put the Government on notice that if the DBJ does not take up the funds we will have to utilise it for other purposes."
Scotiabank has made $350 million available for soft loans at small hoteliers and $250 million for farmers.
The BNS boss, who was addressing journalists at a press conference on Thursday at Scotiabank's head office in downtown Kingston called to discuss the bank's third quarter results - Scotiabank reported net profit of $1.68 billion to July 31, an increase of 17.6 per cent over Q3 2005 - accused the DBJ of playing hardball in its attempts to earn a spread on the funds.
"They said they wanted a spread, I'd rather not say what that spread is," said Clarke before insisting, in a no-nonsense manner that, "Suffice it to say we will not provide a spread. We absolutely will not provide one!"
Under the terms of the hotel loan, DBJ would earn zero spread - meaning it would borrow from BNS at 8 per cent and onlend at the same eight per cent.
The funds for farmers are provided at 7.625 per cent for onlending at 7.875 per cent, allowing a spread of 0.125 per cent.
Calling the spread 'meagre and unprofitable', DBJ suggested it was insufficient to cover the small lenders' administrative charges and credit risk.
"Bearing in mind that the PC Banks are autonomous entities and cannot be forced to make such an unprofitable business decision, and adding to that the extremely risky nature of agricultural lending, the situation has become untenable," said the DBJ in a statement.
The state bank also suggested that financial institutions like BNS would never accept similar terms, saying they often request spreads above the three per cent margin allowed by DBJ when it lends through the commercial banks.
Clarke suggested that DBJ was attempting to shift blame for the loan facility's delay to BNS.
DBJ in turn said it has been in discussion with BNS about its concerns, but had 'favourable' discussions with bank executives on August 23 and had been awaiting a formal response from Clarke flowing from that meeting.
"As stated in our numerous letters to BNS, we continue to commend them for their initiative to assist the agricultural and tourism sectors. However, we must express our disappointment in the manner in which the DBJ is being portrayed in the media by BNS," said the agency.
Offer still on table
On Thursday, though he originally said the bank might use the funds for other purposes, Clarke later recanted, saying the offer remained on the table.
"We are not going to withdraw the offer," said the bank president.
"We made the offer in good faith and I think we just need to clear the bureaucracy and get the funds out to people."
The BNS top boss also suggested that the statutory agency needed to be reined in.
"We believe that the Prime Minister and the Minister of Finance should in fact deal with these agencies who have a mind of their own."
- ashford.meikle@gleanerjm.com
