There is growing concerns within the financial sector over the large volumes of hard currency being shipped from Jamaica — upwards of $50 million monthly — which cannot adequately be justified.
This legitimises the de-risking concerns being exhibited towards Jamaica by foreign banks, which are refusing to hold US cash on behalf of their local counterpart.
Peter Higgins, who is a part of the Bank of Jamaica (BOJ) Foreign Exchange Code Working Group, admitted that “too much cash is being shipped from Jamaica and to a great extent it cannot be explained”.
Speaking at the Jamaica Observer Monday Exchange, he cited this as the main reason foreign banks are refusing to hold US$ cash on behalf of their Jamaican counterparts, citing de-risking concerns.
Higgins made the point that two years ago, he did a study, which showed that upwards of US$40 to US$50 million cash was being shipped from Jamaica on a monthly basis.
Most of this money is not coming directly from the banking sector but cambios buying hard currency in the market place.
“Even though we are a tourist destination most of the tourists use cards and not cash to pay for their vacation, so why is it that we are shipping so much cash,” Higgins reasoned.
He pointed out that whenever the question about the large volumes of cash from Jamaica is posited by correspondence banks in the United States and the explanation about tourism payments is advanced, the correspondent banks remained unconvinced, advancing the argument that so much cash cannot be coming from tourism, which mainly utilises electronic payment.
Higgins, who is also Assistant General Manager of National Commercial Bank (NCB), zoomed in on his bank explaining that NCB is not big on buying foreign exchange because of the risk and the cost that is involved, “We are trying to avoid the shipping of cash from Jamaica”. The career banker cited the case of HSBC bank, which was in Jamaica and would usually hold US cash for the local banking sector but pulled out giving them two weeks’ notice of their departure, citing de-risking concerns.
He said this was during the time the bank was fined US$1 billion dollars over the operations of a cambio in Mexico.
According to Higgins, HSBC made the point that they don’t make US $100 million in the Caribbean, and hey don’t make US$100 in Jamaica but could be fined US$1 billion, “so what they have said to us is that they need to see less cash coming from us (Jamaica)”.
Bank of Jamaica Deputy Governor Natalie Haynes disclosed that for the first half of the year some US$222 million cash was purchased, most of which came from cambios, as the commercial banks don’t do much buying of hard currency.