Jamaica National (JN) Group is establishing a commercial banking arm in the United Kingdom and the Cayman Islands against the backdrop of losing hundreds of millions of dollars due to the withdrawal of overseas correspondent banking relations.
JN Group Chief Executive Officer, Earl Jarrett, who made the announcement, disclosed that work is far advanced in establishing the first Jamaican and Caribbean bank in the UK while management has agreed to setting up a commercial bank in the Cayman Islands. Speaking at the Group’s well-attended annual general meeting at the Jamaica Pegasus Hotel on Wednesday, Jarrett painted a picture of mounting operational costs stemming from the withdrawal of overseas correspondent banking relations, which is like an albatross around its neck.
“JN Money Services experienced a 42 per cent increase in banking costs in the UK over four years, while in the Cayman Islands, the cost rose by over 1,000 per cent over the past five years.”– Jamaica National Group CEO, Earl Jarrett
Heavy burden from loss of overseas correspondent banking relations
He emphasised that “the correspondent banking crisis has significantly increased our cost of operations. For example, JN Money Services experienced a 42 per cent increase in banking costs in the UK over four years, while in the Cayman Islands, the cost rose by over 1,000 per cent over the past five years.”
Jarrett pointed out that JN has spent an alarming £2.4 million and KY$2.1 million, since it lost correspondent banking services in both markets, while applying very limited increases in their transaction fees. According to the JN boss, while the cost from the withdrawal of correspondent banking relations was heavy, JN sought not to pass on the cost to its customers in these two markets.
In the case of JN Money Services in Cayman, Jarrett argued that, “the cost could not be passed on, as it would make remittance entity uncompetitive.” Turning to the UK, the JN Group CEO underscored that the 145 year-old institution had to find innovative ways to manage the challenges the correspondent banking crisis presented, where their banking accounts with these entities, which they have been operating with for years, were literally closed overnight.
As a result of the mounting operational costs and as part of its expansion thrust, JN has been pursuing the establishment of a commercial bank in the UK given the fact that it could no longer rely on overseas banks for correspondent banking relations.
Jarrett told the packed audience that UK banking regulators will shortly be arriving in the island to conclude discussions, leading to the issuing of a UK banking licence to JN. The UK banking regulators will also be scrutinizing JN banking operations, as part of its due diligence in granting a banking licence to the Jamaican financial conglomerate.
The anticipated start-up of the commercial bank in the UK is the first quarter of next year, where it will offer banking services to the Caribbean Diaspora and the wider customer base of Caribbean people in the UK. Over time JN UK bank will offer savings and deposit and loan product to the wider UK market.
The bank, which will be based in Brixton, will start small offering savings and unsecured loans to Caribbean nationals before moving on to small business loans. It will be technologically driven, offering mobile banking services and will not be handling much cash initially.