My Thoughts on Technology and Jamaica: JDX and Banks - Money, Money, Money in a Rich Man's World

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Tuesday, July 27, 2010

JDX and Banks - Money, Money, Money in a Rich Man's World

“Bankers come from a special school; their schooling says to protect their investors' money.”

Lok Jack at the Arthur Lok Jack Graduate School of Business's “An Evening with Lok Jack” forum

The recent news of NCB (National Commercial Bank) lowering of their base lending rates by three (3) percentage points from 20.75% to 17.75% as stated on Prime Time News, aired Thursday July 25th 2010, Television Jamaica and confirmed in the article “NCB cuts as loan portfolio declines”, published Sunday July25 2010, The Sunday Gleaner.

This appears as a direct response to the impassioned pleas bordering on threats of Senator Audley Shaw, Minister of Finance as stated in the article “Come on, commercial Banks!”, published Friday, July 16, 2010, BY PAT ROXBOROUGH-WRIGHT, The Jamaica Observer is a trend that hopefully other of the Big Three (3) Banks, namely BNS (Bank of Nova Scotia) and RBTT (Royal Bank of Trinidad and Tobago) will follow.



This is especially true after they had all given their assent to the JDX (Jamaica Debt Exchange) which the same Senator Audley Shaw, Minister of Finance, had declared a success as stated in the article “JDX ends at 99 per cent; Minister says thanks”, published Thursday, February 25, 2010, The Jamaica Observer. It seems that like the Big Three (3) Telecom Providers and coming of MNP (Mobile Number Portability) and the Big Three (3) Broadcasters and DSO (Digital Switch over), the Big Three (3) Banks only move when their investors [Directors, Depositors] money is in danger.

Despite not being able to achieve the Energy Sector Liberalization so much desired by the Private Sector and being championed by Senator Phillip Paulwell, Opposition Senator on Telecoms and ICT due to the Jamaica Public Service Company’s (JPS Co.) exclusive ten (10) year contract to supply power to Jamaica as stated in the article “Follow my Blueprint - Paulwell pushed for breakup of JPS Monopoly”, published Friday April 30 2010, Mark Titus, Business Reporter, The Jamaica Gleaner, there are options.

All of these options, however, points to Distributed Alternative Energy Power on the part of the Government of Jamaica and Venture Capitalists and increasing the efficiency of Energy Usage of the Private Sector Companies as it relates to Electricity and Motor Vehicle fuel.

This of course was a follow-on after a well played stroke by the Minister who also made calls for both MNP (Mobile Number Portability) and Liberalization of the Energy Sector as stated in the article “Paulwell calls for number portability”, published, Wednesday April 21, 2010, Daraine Luton, Senior Staff Reporter, The Jamaica Gleaner and called for a divide in Parliament in an attempt to force Senator James Robertson, Minister of Mining and Energy to declare the progress on the Liberalization of the Energy Sector.

Senator James Robertson, Minister of Mining and Energy, declared was in the process of being changed as stated in the article “Government, Opposition wrangle over energy”,  published Saturday April 3, 2010, The Jamaica Gleaner.

However, all of these options require money. The Banks, Credit Unions and other lending institutions are the only local source of funding, as Jamaica does not fall under the watchful eye of Venture Capitalists, owing to our high salary levels and strengthening Jamaican Dollar which make the country increasingly unattractive for foreign investment.

Not to mention the reported spike in the murder rate now that the State of Emergency has abated as stated in the article “State of Emergency 2?”, published Sunday July 25th 2010 by Gary Spaulding, The Sunday Gleaner. Which everyone, despite the loss of their personal freedoms, agree worked and both the Private Sector as stated in the article “Army, police regret end of State of Emergency”, published Sunday July 25th 2010, by Alesia Edwards, The Jamaica Observer

Even expatriated Jamaicans were upset as stated in the article “US J'cans upset over end of State of Emergency”, published Sunday July 25th 2010, By Harold Bailey, Sunday, The Jamaica Observer.  

This is the result of a lack of a bi-partisan agreement to pursue the Crime Strategy to its zenith in a bid to give the police more powers to route out the criminals and gangs as was evident on Prime Time News, aired Wednesday July 21st 2010, Television Jamaica and now confirmed in the article “PNP discus lost ground on State of Emergency”, published Sunday July 25th 2010, The Jamaica Observer.

Even production for export to earn foreign exchange requires borrowing from the Local Big Three (3) Banks for investment and expansion which most companies are currently doing as stated in the article “Small businesses post JA$96 billion sales decline – Firms borrowing more and commerce worsens”, published Sunday June 2010 by Avia Collinder, Business Writer, The Sunday Gleaner. Even with the intention to export as suggested by the Jamaica Exporters Association(JEA) president Titus Evans in the article “JDX makes exporting more attractive”, published Wednesday, April 21, 2010, The Jamaica Observer.

Thus we are in a pickle. Interest rates, inflation rates are down and are thus good bell weathers for investment but crime is slowly on the rise, thanks to the non-extension of the State of Emergency, but in order to have growth, the Energy Sector Liberalization must proceed.

But even if Energy Sector Liberalization were to occur, the interest rate spreads by the Banks are too high to encourage Private Sector, for as Lok Jack states in the article  “Lok Jack defends Banks' conservative lending”, published Friday, July 16, 2010 BY ARETHA WELCH, The Jamaica Observer:  “Bankers come from a special school, their schooling says to protect their investors' money.” Like John Public said, a pickle.

Thus the reduction of the NCB (National Commercial Bank) base lending rates by three (3) percentage points from 20.75% to 17.75% as stated on Prime Time News, aired Thursday July 25th 2010, Television Jamaica and confirmed in the article “NCB cuts as loan portfolio declines”, published Sunday July25 2010, The Sunday Gleaner, is promising. This is a trend set to increase as reports abound of an increasingly stable interest rate spread that the Governor of the Bank of Jamaica, Mr. Brian Wynter is lowering on a monthly basis into single digit territory.

The Bank of Jamaica appears to be confident, signaling further rate cuts in the coming months to enter into and stay in single digit territory as stated in the article “Interest Rate cut signal Bank of Jamaica optimism” published Sunday June 2010 by Sabrina Gordon, The Sunday Gleaner.

All that is needed being a CBD (Credit Bureau Database) as being urgently requested by the Governor of the Bank of Jamaica, Mr. Brian Wynter as stated in the article “Credit rating bureau needed quickly - Wynter”, published Friday January 22 2010, The  Daily Observer, by Alicia Roache, The Jamaica Observer.

The Commercial Banks, namely RBTT (Royal Bank of Trinidad and Tobago), BNS (Bank of Nova Scotia) and the NCB (National Commercial Bank) seem reluctant to lower their interest rate spreads, as the losses incurred due to the JDX possibly still hurt and they are at least trying to ride out the difference between their rates to make up for the short term losses due to the surrender of their short term (read 30-day, 90-day, 180-day) Government of Jamaica Bond instruments, as those days are over for them as well, as it is back to the traditional business of Banks – loans and borrowing.

This last bit about the Credit Bureau may be what is heavily weighing on the minds of the Big Three (3) Banks, as the Credit Reporting Bill is yet to be ratified in Parliament, coming as it does on Prime Minister Bruce Golding’s introduction of a Cyber Crime Bill to make online transactions more secure as stated in the article “Move to Tackle CyberCrime - Hacker got Golding”, published Sunday  February 14, 2010 by Philip Hamilton, Gleaner Writer, The Jamaica Gleaner.

Increased Taxation and Financial Transaction Security by the introduction of a Cashless Society via these two Acts of law would allow the Government of Jamaica to literally modernize Jamaica overnight is coming, thus explaining the giddy excitement among the Big Three (3) Banks of late, as Debit and Credit Card adoption would surely come, reducing the money loop to merely a inter-bank or intra-bank Monetary Transfers. A Cashless Society, in effect akin to the much beloved United States of America – and a sure attraction for the greedy money-loving investors.

Credit and Debit Cards, however, are easy marks and popular targets for online hackers as well as unscrupulous merchants who utilize skimmers to steal Debit and Credit Card information, as Credit Cards often have no PIN numbers.

Thus it would seem the security features being implemented by the Bank of Nova Scotia involving JPS customers who exercise the option to use the internet to pay their bills (voluntarily?) keying in their the credit card numbers on SSL (Secure Script Layer) websites as stated in the article “As fraud grows, privacy erodes”, published Sunday March 21st 2010 by Avia Collinder, Business Reporter, The Sunday Gleaner, and storing them in the Bank’s Database will not work.

This is especially true if the Database Server is not an Oracle DB Database housed on a Sun Solaris Server running a Linux Distribution Operating System with access terminals also running a Linux Distribution with Open Source Firewalls and Authentication (Login and Password) and Biometric and Machine ID Verification (fingerprints, retina scans of assigned users and MAC addresses of Ethernet Modems and Computer Name or Motherboard ID) Security protocols for all Laptops for Database Administrators, Computer Terminals and Servers

Also the Servers and Computer Terminals connected over a private Network are very vulnerable to outside intrusions, both in terms of hackers remotely accessing their Servers, Laptops for Database Administrators and Computer Terminals or accessing the computer being used by the Credit Card holder over the internet via scam websites, key logging software and other “phishing” techniques. Thus Microsoft software is not an option, as it is notoriously hacker friendly – which of course one assumes to be information that the Network and Database Administrators at BNS are well aware.

The same level of security required for the Credit Bureau Databases (CBD) is also required for the Credit and Debit Card Transactions over the Internet as well as via mobile Phones, deserving of a separate article on security. Worse, Telecom Provider’s Networks are not secure as German security expert Karsten Nohl indicated at a Hackers convention press conference in German that he had decrypted the A5/1 codebook, which uses a 64-bit encryption key, as stated in the article Q&A: Researchers Karsten Nohl on Mobile eavesdropping”, published January 1, 2010 4:00 AM PST author Elinor Mills, InSecurity Complex – CNET News.

For the layperson, this means that conversations on Telecoms Providers networks that still use the A5/1 codebook are not only intercept able but decodable. Decryption was possible years ago with the right gear, but this equipment was specialized and required security clearance and registration and was very expensive. With this breakthrough, thanks to the Open Source Community, GSM Mobile conversations can no longer be considered private and confidential, as now embassies and politicians will soon realize that persons with laptops and the right off-the-shelf gear can intercept their conversations as far as a kilometer away.

Once the Bill is ratified and the Credit Bureau Database (CBD) is set-up with Servers and Workstations and Laptops running a Linux Distribution, preferably NOT connected to the Internet with Authentication (Login and Password) and Biometric and Machine ID Verification (fingerprints, retina scans of assigned users and MAC addresses of Ethernet Modems and Computer Name or Motherboard ID) would have to be set up in a manner akin to the United States of America.

Except with more control to police the prevalent of bad debt and reduce internal and external hacking threats to the Banks, Credit Unions and other financial lending agencies which would thus see a revival of their Debit and Credit Card business as stated in the article “Banks hold rates, eye bad debt in credit-card revamp”, published Sunday July 18 2010 by Avia Collinder, Business Writer, The Jamaica Gleaner.

This is in light of recently advertised attempts to introduce Mobile Internet Banking via Mobile Smart phones in an attempt to reduce the cost of banking as well as to introduce these modern services that customer are showing an increasing level of interest not only in online purchases as stated in the article “E-Commerce growth boosts business for Customers”, published Friday June 25th 2010 by Avia Collinder, Business Writer, The Jamaica Gleaner.  

Most of their e-commerce banking being done via the mobile smart phones as stated in the article “Customer spur bank competition online”, published Friday, June 25, 2010 By Alicia Roache, The Jamaica Observer.

Were the Credit Reporting Bill to be passed into Law, John Public suspects that the Big Three (3) Banks agree to more drastic cuts. The Credit Reporting Bill well as other relevant legislation as it relates to enableing Merchant Accounts to do online transactions i.e. buying and selling or goods and services via websites set up by entrepreneurs and Private Sector as well as Offshore Banking.

It would make the Big Three (3) Banks more amenable to the idea of lowering interest rates, even purchasing the recently issued lower rate Government of Jamaica Bond that Senator Audley Shaw, Minister of Energy and Mining is actually chiding the Banks to take up.

The bank’s investors would already be satisfied with lower lending rates and the ability do financial transactions over the Internet, both accepting and receiving payments would shore up their sagging loans portfolios and lackluster Credit and Debit Card Businesses, making their money earn foreign exchange.

This increased level of security for their deposits under a Credit Bureau Database (CBD) would encourage investors to take up the 8.52% 30-day, 60-day and 90-day Government of Jamaica instruments in a bid to stabilize the continued appreciation of the Jamaica Dollar, the “third lever” in this now nascent recovery that the Governor of the Bank of Jamaica Mr. Brian Wynter has pulled in an effort to pull in more Jamaican dollars and thus stabilize its appreciation.

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