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contd.... Within FINSAC itself, significant organisational change took place during the period. As the nature of the work to be done changed over time, FINSAC adapted to these changes by effecting changes to personnel. Surplus positions were removed from its organisational structure and staff levels were reduced to meet the changed environment. FINSAC has, therefore, become a leaner and even more efficient organisation. A process of constant evaluation of the organisation ensures that it is responsive to change, to enable efficiency in administrative costs and overall output. FINSAC Notes A major project and milestone for FINSAC arose from the decision by the Ministry of Finance to replace and redeem all FINSAC promissory notes held by active entities. This conversion was a significant step, representing the success of the Government in raising the funding required to service the debt it was now directly assuming. Some of the cash was raised by loans from multilateral lending institutions, i.e. the Inter-American Development Bank, the World Bank and the Caribbean Development Bank, while some has come directly from the proceeds of divestment. This step is also is in keeping with the model initially developed for the resolution of the crisis. FINSAC promissory notes, while interest bearing, did not pay interest in cash. Instead, interest was paid in the form of further promissory notes. As a result of this conversion, institutions would now hold Government of Jamaica debt instruments, which earned interest payable in cash. The conversion would immediately benefit intervened institutions which, while solvent, had operated under liquidity constraints, largely due to the fact that they were not earning cash on the stock of FINSAC promissory notes they held. While this enhanced prudent cash management skills, it was recognised that it was not a sustainable approach to rehabilitation, and this conversion had been programmed to occur towards the end of FINSAC’s lifetime. FINSAC, therefore, devoted a great deal of effort in ensuring that reconciliation of the stock of notes held by these entities was carried out to ensure correct balances, and in retrieving and verifying the notes. This exercise was completed in the year and all Local Registered Stock required have been issued to former FINSAC note holders. FINSAC Related Entities FINSAC also has responsibility for not only its own accounting operations, but also those of its related entities, as well as all institutions inherited through the intervention exercise. Although these institutions are not carrying on business, their accounting records require substantial effort to ensure that they are brought up to date, in preparation for their liquidation, and significant progress was made during the period. Monitoring Activities FINSAC continued to monitor the liquidation of various intervened entities whose deposit liabilities had been transferred to other institutions and were no longer doing business, e.g., Fidelity Finance Merchant Bank Limited, Caribbean Trust & Merchant Bank Limited and Inter-Continental Merchant Bank Limited. Additionally, in the last financial year, a major project was undertaken by FINSAC, utilising the services of PricewaterhouseCoopers and its affiliated firm, Duke Corporation, to put in train the process of liquidation of all dormant financial entities, and their subsidiaries. This project covered the Eagle financial entities, Jamaica Mutual Life Assurance Society and its subsidiaries and the Union Bank legacy institutions, e.g., Island Victoria Bank, Workers Savings and Loan Bank etc. The work was divided into two phases, the first being a fact finding and analysis phase, with the second being the implementation phase. During the past fiscal year, the first phase was completed and work started on the second phase. Already, steps have been taken to remove a number of non-trading companies from the register of companies, while resolutions are being prepared for the liquidation of several more. FINSAC’s FUTURE FINSAC met significant targets in the past financial year, and has largely completed its mission to restructure and rehabilitate the Jamaican financial sector. With all majority interests in the financial sector institutions now divested, FINSAC will now focus on implementing its plan to deal with the resolution of all residual issues arising from its programme of intervention in the financial sector, as well as completing its exit from the sector. For the coming year, FINSAC’s focus will be on the following key areas:
While FINSAC’s intervening work is at an end, great care must be taken to ensure that in winding down, it does so in an orderly manner, to enable the preservation of records and data for posterity. In addition, the affairs of many of the intervened entities need to be formally wound up and all residual issues resolved. Financial Institutions Services Limited (FIS), an affiliated entity of FINSAC will play a key role in assuming most of FINSAC’s responsibilities in the coming fiscal year as part of the transition exercise. The programme of transferring FINSAC’s residual responsibilities to FIS intensified in the year, with the transfer of all FINSAC staff to FIS in November 2001. In addition, where possible, real estate and other assets acquired through real estate/debt swaps or through other transactions, were registered in the name of FIS. The coming fiscal year will, therefore, see FIS playing a more dynamic role as FINSAC recedes into the background, having accomplished its mission. |
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