Cedric Stephens | Upholding financial inefficiencies

Changing the status quo is hard work. Perseverance, especially in the face of obstacles, and commitment to the mission are two of the things that bring about change. These were two of the takeaways from Erica Virtue’s article in the April 14 edition of The Sunday Gleaner, ‘Fitz Jackson: A crusader for the rights of Jamaicans to get fair banking service’. Jackson is a seven-term member of parliament for South St Catherine.

Miss Virtue wrote that the opposition legislator “has patiently and relentlessly advocated for changes to the ways in which commercial banks treat customers”. He was incensed that it had to take a resolution, ‘adopted by bipartisan support in Parliament, for the Bank of Jamaica (BOJ) to finally issue operating standards for commercial banks to ease customers’ distress in using automated teller machines”. The BOJ supervises commercial banks and other deposit-taking institutions.

The former statement, if true, does not augur well for the future for policyholders of insurance companies and customers of securities dealers, non-deposit taking institutions (non-DTIs), who now fall under the BOJ’s supervisory authority in the wake of the Stocks & Securities Limited (SSL) mess and the recent moves to adopt the so-called ‘twin-peaks’ regulatory model. Under this arrangement, the central bank, BOJ, will be responsible for the stability of the financial system, while the Financial Services Commission (FSC) , the former non-DTI regulator, will assume responsibility for market conduct and consumer protection of the financial system (DTIs and non-DTIs), as a division of the BOJ.

MP Jackson performed many duties when his party formed the government. One of his roles was junior minister of finance and the public service. The central bank and the FSC were then agencies of that ministry. Perhaps because of his insider knowledge of the financial system and his role as a member of parliament, Mr Jackson “repeatedly slapped the BOJ and the financial sector, stoutly calling for better customer service and the removal or reduction of user fees”.

He criticised private sector firms for inefficiency in his interview with Miss Virtue. “The private sector boasts about its ability to be more efficient but how efficient are they with providing service? They curse government workers and the public sector and tell them how inefficient they are but look how long it takes to do transactions in the banks? They have the gall to talk about inefficiency! They have the gall to talk about modernisation! They do not have the moral authority because in their own operations they do not demonstrate efficiency,” he said.

There are inefficient entities in the public and private sectors. I often write about poor customer service in the insurance industry. Travellers along Duke Street, Kingston see scores of persons assembled in front of a commercial bank and two government offices as early as 8.30 a.m. seeking police reports and other documents.

None of the officials who head these institutions appear to recognise that this reflects poorly on them, and suggests inefficiency and a lack of care for customers. They seem ignorant of how similar gatherings outside the Consular Section of the United States Embassy in Kingston created a poor image for a ‘first-world’ country that was the subject of harsh criticism. Is it unacceptable when the foreigners seem to be ‘dissing’ us but okay when were are doing the same thing to our citizens?

There are also examples of excellent customer service. Like the telephone operator at a government entity in Kingston 7. She invariably answers the telephone on the first ring. And like the employees at the National Health Fund who I wrote about in the past. There are also service providers at the Kingston 8 post office who consistently greet customers with a welcome smile and are beyond helpful. And there is a barista who always remembers your order and hands you a steaming container of coffee the way you like it within minutes of your entering his shop.

The seven-term lawmaker did not offer any reasons for the ineffectiveness of local financial sector regulators. Why, for example, did the proposed regime of standards for ATMs take such a long time to be developed? The provision of an efficient system of ATMs is only one part of the service that customers expect from their banks. When will the other service standards or best practices be introduced? What were the reasons the insurance industry was allowed to ignore the market conduct standards that were designed to protect consumers and were rolled out by the FSC? What were the lessons that the FSC learned from the SSL débâcle, and what actions have been taken to prevent a recurrence?

In the April 14 article, the MP Jackson appears not to have recognised the changes that are now taking place in the island’s financial services regulatory structure that were discussed in preceding paragraphs. Most of the commercial banks are now members of financial groups. These groups own and operate other financial institutions like (life and non-life) insurance companies. NCB Financial Group, for example, owns controlling interest in the Guardian Group, which, in turn, is the parent of Guardian Life and Guardian General. The Sagicor Group owns Sagicor Life Jamaica and Advantage General Insurance, among other financial services entities. The Scotia Group owns Bank of Nova Scotia Jamaica, Scotia Life Insurance and Scotia Jamaica Insurance Agency. Are the non-banking entities inoculated against poor customer service?

The changes in the regulatory structure that are currently under way reflect the adjustments that are occurring in the marketplace. Regulation of these financial businesses has become even more complex. My February 23, 2018 article, ‘The nexus between bank fees and creditor life insurance’, explains why.

Jamaica’s banking and insurance companies, like those in other countries, are connected. They operate solely to make money for shareholders and executives, whatever the cost to consumers. Their actions have shown that they cannot be trusted to supervise themselves. They need strong and independent regulators to protect the public from their worst impulses. My third takeaway from the article was that these ideas were not discussed in the interview with the MP for South St Catherine, despite the recent regulatory failures in relation to SSL. What a shame!

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com