Sabrina Gordon, Business Writer

Charles Ross, managing director of Sterling Asset Management, said his company ceased offering foreign exchange loans after the central bank notice. - File

Sterling Asset Management Limited, which introduced foreign currency loans to its customers mid-year, was doing so in breach of the law, but the company has since withdrawn the service after the intervention of the central bank.

"It has caused some loss in business opportunity as there is a significant demand for this service," said Charles Ross, Managing Director of Sterling Asset Management.

The laws do not allow securities dealersto offer foreign exchange loans. That is the purview of commercial banks and other authorised entities.

The Bank of Jamaica, in a press notice Sunday, said it was alerted to the product by a Sunday Business article published June 24.

"Having received the notification from the Bank of Jamaica, which came as a complete shock," Ross said, "the legislation was scrutinised with attorneys and it was recognised that the restriction was not lifted going forward."

Since then the company has written to the Bank of Jamaica advising them that the service was cancelled. "We are not offering loans in foreign currency anymore," said Ross.

In late June, the company announced that it would be introducing the new 'no fee' loan, which allowed clients of Sterling to borrow on a short term basis up to 80 per cent of the principal held in investments.

"We are trying to satisfy our clients needs, thus not offering this service will mean that we stand to face a potential loss because clients will go elsewhere if they can't get it from here," Ross said.

The fledgling product, he told Wednesday Business, was not a significant part of the company's revenue.

No longer relevant

"But the potential existed for it to grow over time," he said.

Sterling began offering the loans late July, saying the business generated in the short period represented five per cent of company revenues.

Securities dealers, through their association, have been lobbying for changes to the Bank of Jamaica Act to have the restriction on foreign currency lending lifted, saying the provision, which was included in the law during the days of foreign exchange controls, were no longer relevant.

"I can't imagine why this provision is still being enforced as we are lending chiefly against the clients own investment - it's cash secured lending," said Ross.

"I don't see what harm can come to the country if a security company lends hard currency against investments."

The dealers plan to take up the matter again once the elections are over and the new administration installed.

Meantime, Ross, himself a past president of the Jamaica Securities Dealers' Association, (JSDA), said the JSDA would be exploring with the authorities how dealers can become authorised foreign exchange lenders.

sabrina.gordon@gleanerjm.com