Forthcoming in Ethnicity, Race and Nationalism in the Caribbean, edited by Anton Allahar, Lexington Press, 2004.

Nationalism, Identity and the Banking Sector:

The English-speaking Caribbean in the Era of Financial Globalization

Introduction

At the beginning of the 21^st century, the structure of banking markets in the English speaking Caribbean reflected a shift from the 1970s of large government-owned commercial banks and some foreign-owned banks, to a consolidated banking market dominated by private ownership, based primarily in Canada and Trinidad. In this paper I examine how changes in the ownership of banks reflects perceptions of national and regional identity in the English speaking Caribbean, with a particular focus on Trinidad and Jamaica. In so doing I link the physical institution of banks and the political and economic decisions manifested in banking policy to the notions of nationalism and identity in the 21^st century English speaking Caribbean.

Perceptions and definitions of national identity are influenced and formed by political ideologies and political rhetoric. Once arrived at, these ideas of national identity are manifested in symbols such as government policies, state institutions, and cultural events such as festivals and awards ceremonies. Just as ideas about national identity change with time and political trends, so does the context within which governments and political movements attempt to create symbols of national identity. For example, it may be the case that an external environment may change to the extent that extant notions of national identity are no longer feasible in the new context. This is the case with the banking sector in the Caribbean. I argue that the recent changes in the ownership structure of the banking sector in the Caribbean has augured for a context in which banks are no longer suitable as symbols of national identity at the individual island level. However, rather than shift the identification with the banks as a symbol of nationalism to one of regionalism, banks are no longer used as political symbols at all.

Analyzing the changes in the use of banks as symbols of national identity reveals subtle but important dimensions of how political leaders attempt to construct concepts of identity. This is particularly interesting in the contemporary context where the dynamics of traditional symbols of national identity, such as banks, are as, if not more, influenced by external forces as they are by domestic or internal factors. By focusing on the banking sector as a microcosm and material manifestation of political ideas, I argue that 21^st century ideas of identity in the Caribbean continue to reflect an emphasis on island-specific notions of nationhood. This continuation of post-independence trends comes at the expense of the creation of a true regional identity, suggesting that even as global dynamics change, individual Caribbean states re-shape their political rhetoric to maintain individualistic ideas of national identity.

Globalization and Banking in the Caribbean

The late 20^th and the beginning of the 21^st century are overwhelmingly characterized by the political and economic shifts and accommodations to continued globalization. We can understand globalization in the context of this paper as a continuing process of economic and political restructuring on a global scale that directly and indirectly brings about political and economic realignments on a national scale, at the same as those national-level realignments dynamically influence change at the global level. In practice, contemporary globalization can be understood as comprising neoliberal policy applications and the multifaceted occurrences of multinationalization and internationalization.

Neoliberalism as a policy framework comprises financial anti-inflation measures, trade and capital market liberalization, and the reduction of government intervention at the domestic level (Milner and Keohane 1996: 20). Contemporary neoliberal policy responses to globalization, in developed and developing countries, generally comprise the deregulation of economic activity, privatization of government enterprises, openness to foreign investment and trade, and the rationalization of the fiscal account. Neoliberalism assumes that markets are free and fair, and that left to the market, the economy and society will realize the optimal outcomes of efficient resource allocation. Neoliberalism further proposes that all economies obey certain universal laws of economics, rather than the opposing view that economic processes are embedded in specific social and political contexts (Girvan 2000: 70).

At the global level, neoliberalism’s advocates argue that countries will perform those productive functions that the global market “freely and fairly” deems they are best suited to, thus achieving global competitiveness where their national endowments (whether of land, labour or intellectual capital) allow them to. Norman Girvan argues, however, that “competitiveness achieved at the cost of increasing unemployment, social exclusion, poverty and inequality is not acceptable” (2000: 70).

Yet another challenge to neoliberalism’s opposition is its endorsement by the global power elite. For example, neoliberalism has been the main ideological influence behind global trade agreements, specifically as embodied in the World Trade Organization agreements, and including the Free Trade Area of the Americas and European Union agreements. These international regimes have not come about as a result of a democratic process in which all global citizens are equally represented, and the rule-makers of these trade regimes correspond to those countries that are globally politically and militarily dominant. The implication is that developing countries have little say in these rules, but appear to be much more subject to severe economic and political pressures should they break those rules (Block 1994: 704).

Multinationalization, or transnationalization, implies the integration of production and service provision across national borders, often via direct foreign direct investment abroad, under the rubric of one large corporation, whose home base is usually in a developed country. This process of global sourcing, in its twentieth century incarnation, began in the 1960s. Global sourcing is “the use of multiple sources in different countries for the components of a particular product that is assembled elsewhere” (Knox and Agnew 1998: 282). In some cases, newly independent countries that sought to participate in the global economy attempted to capitalize on their perceived comparative advantage of surplus labour and primary products, and thus incorporated themselves into the global production chain of multinational (or transnational) corporations. Other developing countries incorporated themselves into the global production chain upon the realization of the limitations of autonomous import substitution industrialization strategies. As early as the mid-1950s, in Asia and Latin America, companies with the technology and capital were invited in to broaden the range of local production to include more consumer goods, as well as to build up local manufacture of capital and intermediate goods that were still imported and which drained foreign reserves (Gereffi and Evans 1995: 211).

Internationalization is akin to multinationalization, except that it implies a more spontaneous set of actions and activities that emerge out of the openings created by the revolution in information technology, and the neoliberal policies that precede, facilitate and accompany globalization. Internationalization is that set of “processes generated by underlying shifts in transaction costs that produce observable flows of goods, services and capital”:

Internationalization affects the opportunities and constraints facing social and economic actors, and therefore their policy preferences. As incentives change through internationalization, we expect to observe changes in economic policies and in political institutions. (Milner and Keohane 1996: 4)

Thus internationalization could be considered the precursor to increased multinationalization, while both are the outcomes of globalization.

Since the end of the Cold War and the concomitant sea change in the global economy, access to new and cheaper sources of labour and raw materials has increased with increased communication and transportation technology. The realization of these new opportunities is made possible by trade and economic opening on the part of those countries, many of whom have formulated and implemented neoliberal economic policies. Together with the changes in global politics, these new patterns of industrial organization in the world economy imply that a nation’s development prospects “are dependent on how it is inserted into global commodity chains” (Gereffi 1994: 225).

An evaluation of the results of these processes of globalization, neoliberalism, multinationalization and internationalization is beyond the scope of this paper. In most developing countries in the 21^st century, including in the Caribbean, economic and social problems are unwieldy and increasing. The state in developing countries has less control over both its internal and external environment. Whether this is a direct result of globalization, or of forces and trends related to globalization that are simultaneously producing these phenomena, or an outcome of an entirely discrete set of dynamics coincidental to globalization, remains the subject of debate.

In the midst of this, at the state decision-making level, there is a broad agreement on a few general assumptions regarding any short and medium term economic development strategy:

1. The Caribbean cannot disengage from the international economy or avoid its trading/production position in relation to the world economy; its most viable option is to attempt to maximize its “inevitable” position in the international economy.
2. The Caribbean is dependent on foreign capital and trade, especially in services such as tourism, for economic growth.
3. Both of these mean that the Caribbean must also play by political rules and norms that might not be of their own choosing, were all else equal. These political rules include:

(a) A foreign policy that at best pleases and at worst does not offend the regional and world hegemon, the United States of America (U.S.);

(b) Domestic economic policies in line with those promoted by the U.S. and by multilateral financial institutions, mainly involving fiscal cutbacks, privatization of state enterprises, and lowering of barriers to trade;

(c) The practice of U.S.-style liberal democracy, or at least the appearance of such, even where it is not compatible with traditional political configurations, or it has been so corrupted as to be a farce.

(d) Agreement to the implementation of policies and programmes, usually designed and funded by the U.S., intended to stem the supply and passage of drugs illegal in the U.S. Even where these policies and programmes breach international law, such as the jurisdiction of territorial waters, or go against local traditions, such as the growing of non-cocaine-intended coca, the pressure to accept them is enormous.

This leaves Caribbean countries with little room to maneuver. It would appear that their best option, at this point, is to optimize their options within these strictures, while attempting to maintain domestic political and social consensus, as well as some measure of political control at the domestic level. This is, indeed, a formidable challenge, akin to being painted in the proverbial corner.

Given the common trend in policy across a large number of developing countries, there are good reasons to think that international systemic pressures are at work and that the developing countries’ growing integration with the world economy has constrained government choices with respect to international financial policy. (Haggard and Maxfield 1996: 210)

As will be clear from the above understanding of globalization, the process of globalization creates openings for shifts in political dynamics, which may also lead to struggles for power and control in a new environment. The question then arises with regard to the financial sector: Does the globalization of financial services also lead to realignments or shifts in the political status quo ante? It is safe to say that where power connotes privilege and control, no holder of power is likely to want to give it up, or share it, and will therefore attempt to maintain its position (Coleman 1996: 19). This paper explores how, in the Caribbean, the changing power dynamics in the financial sector have manifested themselves in relation to nationalism, regionalism and identity.

The Political Economy of the Financial Sector: Global Considerations

There is a process of consolidation underway in the banking industry throughout the world. The multinationalization of retail banking in the late 20^th century is a global phenomenon (IMF 2000: 152). The internationalization of financial services must be understood as an interplay of the domestic situation within the country—what can be called “pull factors”—and a number of “push” factors on the part of the banks themselves. Since the 1990s, these two sets of factors have created a sort of inevitability as the global banking industry follows certain trends and patterns. Starting in the early 1990s, throughout the world, most national regulations regarding banks had been significantly liberalized. With increasing levels of deregulation, domestic banks lose their monopoly position over retail banking activities as barriers to entry fall (Pomerleano and Vojta 2001). At the same time, individuals’ financial behaviour has grown more varied, complex and sophisticated, with a greater demand for more, and more efficient, financial products and services. Along with this must be considered the rapid developments in technology that have been developed and applied to the financial industry, just in the decade of the 1990s, many entailing significant front-end investment requirements (Smith and Walter 1997: 102). This global scenario is entirely relevant to the consideration of the Caribbean financial sector in the 21^st century.

In sum, there are five major aspects of the multinationalization of retail banking:

1. The domestic political economy vis-à-vis the banking sector and entry barriers to foreign banks (“pull factors”)
2. Motivation of banks to expand beyond their home country (push factor)[1]
3. Global trends towards deregulation of the banking sector (push factor)
4. Global trends towards consolidation in the banking industry (push factor)
5. Increased consumer demand for more and more sophisticated financial services at the same time as such services are for the most part delivered via new and expensive technology, investments which can be offset by economies of scale (pull factor)

There is synergy among many of these five factors. The demand for new and expensive technology offset by economies of scale promotes greater consolidation. Similarly, as countries follow the “trend” of deregulation, foreign banks are presented with opportunities for expansion that did not previously exist. For example, in an analysis of the Spanish banks in Latin America, Guillén and Tschoegl (1999) conclude that the Spanish expansion resulted from a saturation of the Spanish market, and a lack of market opportunity in Europe and Asia, at the same time as Latin American banking markets were being deregulated and liberalized in the early 1990s. The Spanish banks, having recently experienced radical market liberalization themselves, sought to use their market know-how and implement new information and telecommunications technologies in culturally and linguistically comfortable environments.

Thus, the changes in the composition of the banking sector in the Caribbean are representative of a broader global trend. Indeed, most policy changes with regard to the financial sector in the Caribbean have been common to other developing countries, era by era, trend by trend. Most developing countries had enacted some sort of legislation during the 1960s and 1970s that either barred or restricted foreign banks from entering their countries. As well, some developing countries undertook the nationalization of foreign banks that had been present in the region for decades. In many sub-Saharan African countries in the 1960s the banking sectors were largely controlled by private foreign banks that remained after independence. The foreign banks’ risk-averse lending objectives, and the absence of a priority on their part towards local entrepreneurs, often led to nationalization of the foreign banks. By the 1980s most of these banks were insolvent, and by the 1990s they were re-privatized and re-sold to foreign owners once again (Murinde 2001).

In Colombia, prior to 1967, foreign investment was not restricted as it fit into the general outward-oriented development model. In 1967, however, the state reassigned itself as the director of investment and production, and no new foreign investment, including in the banking sector, was approved. In 1970, after Colombia had joined the Andean Pact, further restrictions were placed on investment in the financial sector, as the Andean Pact reserved the financial sector only for domestic investors, or investors from member countries (Barajas et al. 2000).[2]

In 1970s in Chile the banking system was nationalized by the Allende administration with the direct aim of gaining control of the commanding heights of the Chilean economy. The ostensible aim was to cut off control of the resource allocation mechanism from the business and middle class groups that had held it for the previous 50 years (Bosworth et al. 1994: 31). Shortly after Allende was overthrown, the economic reforms included re-privatization of banks. In December 1974 Chile abandoned the Andean Pact so as to allow foreign banks to open subsidiaries and branches and to allow direct foreign investment in commercial banks (Bosworth et al. 1994: 155).

Today, even in India, where banking institutions and the social content of lending are still considered legitimate instruments of social and economic change, the rules governing the entry of foreign banks changed significantly in the 1990s. There continue to be restrictions on the percentage of equity foreign entities can own in domestic banks, but by 2002 there were 28 banks operating in India, with another 20 maintaining representative offices (Arun and Turner 2002).

What is different about the Caribbean is the way in which domestic political dynamics, as created by history and specific interpretations of history, accommodate these global trends. Throughout the developing world, and the developed world too, the internationalization of the financial sector under globalization has taken place. But the paths that individual countries have taken to arrive at their distinct national consequences depend on the structure of the national financial system. As John Zysman’s seminal study on the political economy of financial systems argues, domestic issues are worth focusing on exclusively, “not because the dramatic changes in international monetary and banking systems are unimportant, but because one can isolate the dominant domestic structural elements that determine the domestic ramifications of an international economic development” (1983: 56).

Examining the Caribbean financial sector in the era of financial globalization is not only worthwhile as an academic exercise. In the context of developing countries’ experiences in the contemporary global financial polity, the English speaking Caribbean is virtually unique in being one of the only set of countries that has emerged in the 21^st century with strong indigenous banking institutions. Indeed, the Caribbean is one of the few developing regions with “national champions”.[3] This alone is worth exploring as a complete anomaly in the literature and experience of the globalization of the financial sector.

Economic Nationalism and the Banking Sector

The study of banks and banking is usually assumed to be the purview of economists; however, banks are important symbols of national identity, and are fulcrums for political and economic power. In economic theory, banks are considered to be key intermediaries by which money is created, distributed, and stored (Mizruchi and Brewster 1994), but banks are not simply mechanistic economic institutions that operate in financial market vacuums. Banks, and who controls them, are potential sources and explanations of power in a society. Banks are also key symbols in economic nationalism. It is well established that domestic political influence and private financiers influence financial sector reform.[4] Thus political power is an essential concept for the study of the politics of financial services (Coleman 1996).

As a historical phenomenon, nationalism constantly changes (Wright 1974). Economic nationalism in the twentieth century has its own dynamics, quite different from those of nineteenth century mercantilism. Modern economic nationalism can be dated to the post-World War II era, as the wave of independence and national autonomy spread throughout the developing world. As Samir Amin (1987) puts it, achieving political independence augured for a national bourgeois project to bring certain processes under control through the state and by the hegemonic national bourgeois class. These processes included control over natural resources, markets, and “financial circuits thus enabling the centralization of surplus and the orientation of its productive use.” Thus control over the banking sector is germane to economic nationalism.

More specifically, as part of a political ideology, economic nationalism optimistically promises a better material future for a nation’s citizens.

As a driving force, economic nationalism has two primary objectives. First, it seeks an amorphous goal of achieving as much economic self-sufficiency for a nation as possible. The second goal relates to the first and encompasses the attempts of developing states to pattern their economies after those of recognized world powers. Both objectives imply that a nation can achieve and secure the well-being of the individual citizen by controlling its own economic resources. Economic nationalists believe that a nation’s greatness depends upon its economic strength. They also maintain that political independence hinges upon economic power. Thus the fight for freedom is translated into a fight against outside economic penetration. (Wright 1974: 7)

This definition of economic nationalism falls squarely within the parameters of the Caribbean historical experience.

The role of the banking sector—insofar as it channels savings to credits and participates in the system of payments—in economic development has always been preeminent, regardless of the ideological basis of the economic development strategy, or the composition of the productive sector. This is because the banking system is the main arbiter of channeling savings to credit for investment, and because it controls the system of payments. Even private banks may be vulnerable to being leaned on by governments to direct and manage the flows of capital within their countries: “they can be influenced quietly and privately to favour certain industries, firms, projects, or regions” (Beim and Calomiris 2001: 256). Therefore the banking sector is central to ongoing political debates involving governments, financial and industrial elites, developmental ideologies, and the role of market forces. Accordingly, banks are important institutions for economic nationalists.

Firstly, financial institutions are central to economic development, especially in market economies, which most Caribbean countries ostensibly are, or aim to become. Banks are at the center of economic and financial activity, and are distinct from other economic or financial institutions as primary providers of payments services and as a fulcrum for monetary policy implementation. Financial institutions and markets rely on the payment system to mobilize, allocate and transform domestic and international savings into productive investments. A country’s payment system is essential to the development of money and capital markets and the implementation of monetary policy. Retail banks play a number of functions in a market economy, primarily as conduits for information, instruments for the payment of goods and services, and repositories for savings and investment.[5] The retail banking sector is also important as a growth sector in and of itself: as economies become more market-driven, and individuals become more aware of their choices as consumers, the sector is an increasingly important provider of goods and services whose profit-making potential expands exponentially with the liberalization of an economy.

Second, bank fragility is of critical concern to policy makers because of the negative externalities associated with bank failures, and the contagion and domino effects that bank failure can have on other banks, and on the economy. Public policy is also especially concerned with banks because of the public goods that banks provide vis-à-vis payments services and savings mobilization; virtually no government will permit widespread bank failures. Decisions regarding the payment system are policy matters, and not merely a technological or technical project. Such public involvement has political as well as economic determinants (Lindgren et al 1996: 6).

Third, economic nationalists consider that the banking system is an inherent part of sovereignty. In an era of financial globalization, there may be fears that domestic groups will lose access to financial services, as well as concerns that the country could lose control over the course of development if the domestic banking system is taken over by non-nationally owned banks (Pomerleano and Vojta 2001: 3). In this vein, Makler and Ness (2002) have explored how changes in financial intermediation, particularly the ownership of banks by non-nationals, challenge sovereignty in developing countries. They argue that the globalization of financial institutions and markets combine with domestic financial structure to powerfully challenge national sovereignty by weakening the state’s ability to make and enforce domestic policies, and ultimately eroding a country’s capability to project and maintain power.

Finally, at the micro level, individual banks operate based on access to private, usually quite sensitive information from debtors, and in accordance or response to the broader investment and political climate in which they are situated. The control and management of that type of information is critical, especially where members of a standing government are themselves entrepreneurs or debtors in some way to financial institutions. The identification of debtors in the aftermath of the Jamaican financial crisis of the 1990s was a contentious issue for exactly this reason. The Minister of Finance argued that while public money had bailed out the banks, the identification of the benefactors of taxpayers’ dollars would risk serious social and political cleavages. This makes for an interesting dynamic where ownership changes from nationals to non-nationals, with regard to pre-existing and sometimes long-standing bank-client (whether government or private individual) relationships that were not entirely based on rational economic decision making.

Banks, Finance and Identity in the Caribbean

Money is power, simply put. Money—how much of it there is and how it is allocated—is fundamental to a country’s political, economic and social relations. Money may not be the entirety of an economy and a society, but it affects most of what happens in one way or another (Hoffman 2001: 20). Money is also an important symbol of identity. Nowhere is this more evident than in newly independent countries, for whom an “own” currency, bearing a nationally relevant name and/or images of national icons was among the first order of business, along with a national anthem and a flag. After the failure of the West Indies Federation, and subsequently individual independence in the 1960s, a number of steps were taken to establish a national identity. One of these steps involved the creation of a national currency for each island, abandoning the West Indian dollar that had acted as a regional currency since 1951. For example, in Jamaica the front of each bank note bears the portrait of either a Jamaican national hero or a former Prime Minister, while local scenes and popular landmarks appear on the back. In sub-Saharan Africa, the names of the currencies range from the Zambian kwacha and the Angolan kwanza, to the Botswana pula and the Ghanaian cedi, all reflecting the names of traditional, pre-colonial means of exchange.

The creation and existence of a Central Bank is also an important symbol of identity and status as a sovereign state, beyond its practical function as an institution in the national monetary and financial system. Central banks were established as real symbols of nationhood, and a major aspect of the effort to “shed the yoke of colonialism” (Danns 1996: 5). Jamaica’s creation of its own Central Bank in 1960 was one of the first signs that Jamaica was contemplating withdrawal from the West Indies Federation (Brown 1989: 164). Ironically, in the 21^st century context of Caribbean politics, where the idea of a monetary union is held as the ultimate symbol of regional integration, those steps taken in the early 1960s meant the demise of what was the first true regional financial institution (Danns 1996: 3).

Beyond the Central Bank, retail and commercial banks are also used as symbols of national pride and identity. In the Caribbean, commercial banks have been used as symbols of national identity and as political focal points for decades. The banking sector as a symbol of national identity has many different and sometimes contradictory aspects, however. The ownership of the bank may or may not affect where the average retail customer—the working person with a checking and a savings account, for example—takes his business. In countries where the national banks have been weak, retail customers tend to prefer to take their business to a foreign bank, with the expectation that they are more stable and trustworthy. This was the case in Argentina, where in 1995 deposits moved from domestic to foreign institutions in the wake of the Mexico “Tequila Crisis”. After decades of government intervention in private deposits, the general idea was that foreign banks would not be subject to the vicissitudes of Argentine government bank policy. Nevertheless, banks are used as symbols of identity when the conditions surrounding the banks are perceived as favourable. For example, in Mexico after the near complete takeover of the domestic banking sector by foreign banks, there was one remaining Mexican-owned bank, Banorte. Banorte, based on consumer and market surveys, carefully manipulated its ownership status in its public relations and advertisements. In Argentina, the one remaining Argentine-owned bank, Banco Galicia capitalized on its foreign-sounding name when depositors were transferring their deposits from local institutions. However, when the financial crisis broke in 2001, and public resentment was directed towards the foreign banks, Banco Galicia changed its public relations strategy to emphasize its “Argentine-ness”. While banks may not capture the rousing sentiments of a national sports team, or even a strong foreign policy position such as the Jamaican government’s strong opposition to the U.S.’s proposed Ship Rider Agreement in 1997, there is a strong basis for arguing that the ownership of a bank is relevant to a sense of national identity and national pride. There are two distinct periods in recent Caribbean history that further support this argument.

In Jamaica in the 1970s, during the highly nationalist administration of the People’s National Party, the Worker’s Savings and Loan Bank was founded in 1973.

The WSLB was born during the 1970s, a time when the ruling government moved the public sector in the direction of taking over the “commanding heights of the economy”. Greater local financing of the powerful banking sector was the objective of this drive as the then banking sector was not believed to be doing enough to support and facilitate local development, especially in new areas of growth.[6]

The Jamaican Government also nationalized Barclays in 1977, and changed its name to the National Commercial Bank (NCB). NCB had started out as the Colonial Bank of London and began operating in Kingston, Jamaica in 1837. In 1925 the 11 branches of the Colonial Bank were acquired by Barclays Bank of London. In 1975, Barclays Bank transferred its Jamaican operation to a wholly owned subsidiary, Barclays Bank of Jamaica Limited. The NCB takeover was in many ways the epitome of nationalism and nationalization.[7]

The Black Power movement in Trinidad, in expressing its frustrations with the failure of the promises of independence, focused much of its energy on the Canadian commercial banks that dominated the banking system. For these political activists, the banking sector provided a clear example of imperial domination and control in Trinidad. It may also be argued that the storied preference of the banks for “fair-skinned” employees was a key factor in the choice of the banks as a Black Power target. Deryck Brown (1989) argues that it was the events of 1970 that precipitated what became the “localization” of the foreign banks in Trinidad and Tobago. In responding to the sentiments expressed by the Black Power movement, the government’s agenda sought to increase national participation in “important sectors of the economy” (181). What followed was a decades-long process of legislation geared towards forcing the foreign banks to issue local share offers. This process culminated in a near-complete “indigenization” of the Trinidadian banking sector by the beginning of the 21^st century, and, perhaps surprising from the viewpoint of the early 1970s, Trinidadian bank expansion throughout the English speaking Caribbean.

The second clear episode where we can identify images and issues of national identity in the banking sector was in Jamaica in the early 1990s. As a result of the privatization and liberalization policies carried out, a number of nationally owned private banks entered the market in the early 1990s. By 1994 there were many “indigenous” private financial institutions of many different types, including a number of retail banks. It was widely noted, at the time, that “the bulk of government assets appear to have gone to young black professionals or small to medium entrepreneurs. Workers Bank was sold, not to interest in the 21 families,[8] but to a relatively inexperienced group of black entrepreneurs.”[9] Again, one might be able to see hints of the resentment against the colonial and early post-Independence days’ preference for light-skinned bank workers resurfacing here.

It can be argued that this comprised the PNP’s larger effort to create a black entrepreneurial class and black economic elite. At the time, the new “indigenous” banks were held up by the government and the media as nationalistic examples of Jamaicanness, and often too of black entrepreneurship—images that were key to the implicit identity of the governing party and its political rhetoric, particularly during the 1993 election in which P.J. Patterson is widely held to have played the “race card”. These banks invested widely in real estate, tourism, and agriculture. While these extra-banking forays were retrospectively seen as a major cause of the later fallout, these investments were undertaken “in the mood of the 1980s and the early 1990s, when there was official government policy support for the expansion of the domestic financial sector into the productive sector.”[10]

An in-depth study of these “non-economic” factors of race and identity behind the Jamaican financial sector debacle has yet to be done. There are, however, some widely held perceptions, including on the part of the PNP itself, as to what transpired:

Dr. [Omar] Davies (PNP Member of Parliament and Jamaican Minister of Finance) in a bold speech in the pre-election period, admitted to two errors. One, that he indulged in some amount of social engineering by encouraging indigenous participation in the ownership and control of major banking institutions. Two, that in his zealousness to achieve a sociological (as opposed to an economic) objective, he stepped over the line in giving "blys" (I take that to mean unmerited favours) to individuals who would be proved by subsequent developments to be either unworthy of such considerations or incapable of making good on them.

The admission is innocuous enough in that it points to a fault or weakness in the minister that almost any progressive or nationalistic-minded Jamaican would forgive.[11]

The indigenous bankers that headed these banks were, as it is phrased in Jamaica, “visibly black”. They were feted in the media, by the political elite, and by the wider community. The cases of Century National Bank and of the Worker’s Bank epitomize this phenomenon, though virtually all of the “indigenous” bankers of the early 1990s fit this general trajectory. The charismatic head of Century started out as a teller at the Bank of Nova Scotia (BNS) in the mid-1960s, rising to the position of Senior Assistant Manager of the BNS head office. He was later recruited to run the Girod Bank in Jamaica.[12] He eventually gained a controlling interest in the bank, and it was renamed the Century National Bank.

The government divested the Worker’s Bank in the early 1990s. Five financial groups, three of whose roots were inarguably in some of Jamaica’s leading entrepreneurial (and fairer-skinned) families, bid to take control of the bank. The winning bid was a surprise to many. The new CEO revolutionized the banking industry, introducing new banking products and services, investing beyond the banking sector, establishing scholarships, and winning an award for business personality of the year in 1991. This CEO was seen as “one of the new-breed Jamaican businessmen aggressive with against-the-odds confidence… not so long ago, he was, by his own admission, just another ordinary Jamaican with a big dream.”[13] Other “stars” at Worker’s Bank were lionized in the media:

Cooly (sic) confident, [this banker] is unruffled by the late hours and heavy demands of his job. After all, he is only digging his teeth into what he does, and likes best: making money. With a business savvy that has earned him the reputation of a hard-nose financial dealer, [this banker] is himself the product of a competitive, result oriented corporate culture which has already spawned a host of young, rising stars in Jamaica's financial industry.[14]

This type of press was typical of the coverage given these high profile bankers.

The consequences of this “experiment” were disastrous for the banking system, the economy, and the individuals involved. A summary of the condition of the banks that were taken over by FINSAC, including the Worker’s Bank, found a litany of woes, including unreliable financial statements, inaccurate Bank of Jamaica reporting, non-existent investments recorded on bank accounts, loans diverted to subsidiary companies to avoid reporting as past due, and misstating financial statements and inflating balances, among many, many other findings (FINSAC 1999). Except for a very brief prison stay for one banker, none have yet been prosecuted, but they are all either living outside of Jamaica, or in much humbler circumstances just a decade after being held up as splendid models of entrepreneurship, success and possibility. For some, too, it is lamentable that “[t]he country has returned to the days when Jamaicans of a darker hue would be hard-pressed to recall names and count off on one hand, people in “big” business who look like them. There is an unintended but inestimable cost to all of this.”[15]

Interestingly, and adding further weight to the argument that banks reflect perceptions of national identity, is the presence of two Indian banks, in the two CARICOM countries that have significant Indian populations. The Bank of Baroda operates in Guyana and the Intercommercial Bank operates in Trinidad and Tobago. The role and operations of these banks, and their relationship to Indian identity in Guyana and Trinidad merits further research. Their presence, however, points to some of the underlying “fault lines” of a prospective Caribbean regional identity, with regard to the question of the possibility of creating a Caribbean identity where “Indians in the Caribbean have had a somewhat ambivalent relationship with the other peoples of the region and to proposals for its political unification” (Ryan 1999: 151).

Beyond the use of currency and financial institutions as political symbols of national identity, governments are concerned with bank ownership for less direct reasons of power and control. Banks and other financial services firms possess economic power in market economies through their control over the allocation of credit, the behaviour of financial markets, and as well through their relationships with the productive sector and their customer base. This economic power provides these firms with a considerable potential to shape what become matters for political consideration and to influence the outcomes of the public policy process. Governments, therefore, have multiple interests in maintaining, at best, control over, and, at worst, a mutually beneficial relationship with, those banks operating in their domestic system. At the same time, financial services firms seek to protect and further their interests through obtaining special access to political leaders, either through personal contacts, or via institutional government relations divisions that monitor the policy-making process (Coleman 1996).

The history of banking in the Caribbean explicates this argument. During the nineteenth century, up until independence in the 1960s, the banking sector was primarily geared towards financing and facilitating trading relations between the colony and the metropole. There was virtually no investment in production or consumer credit. This de facto established the identity of the then-Caribbean colonies as exporters of primary products and consumers of manufactured goods. The main banks present in the region were the British Barclays, that had grown out of the original Colonial Bank that was established in the 1820s and 1830s throughout the region, and three Canadian banks, Bank of Nova Scotia (BNS), the Canadian Imperial Bank of Commerce (CIBC), and the Royal Bank of Canada. Canadian banks began establishing themselves in the Caribbean in 1910 and by World War I “could be described as major financial institutions in the Caribbean” (Baum 1974: 21).

In the decade after independence, the foreign-owned banks began to be conceptualized as a chief target of rising economic nationalism. Advocates of the economic nationalism of the 1960s considered foreign ownership of strategic sectors a barrier to economic development, and ultimately, to political independence. Public ownership and control of key economic sectors became a primary goal.

Decisions about the banking sector would have been made in the context of dependency theory, which had become something of the reigning economic orthodoxy in many developing countries in the 1970s. Dependency theory broadly prescribed economic policies that were intended to insulate the domestic economy from international shocks.

As Clive Thomas stated in 1966:

[…W]e are satellite economies integrated to each other and to the U.K. and U.S.A. by a pervasive system of branches of financial institutions with Head Offices in these metropolitan countries. These institutions are neither exclusively concerned with developments within our economy or with promoting the sort of regional integration we may desire. Their exclusive interest is to make profits on all their operations, no matter where they may be located. Ultimately the only effective reform is the development of indigenous institutions and the imposition of controls on the movement of all funds outside the region.

Through the 1970s and 1980s, the larger CARICOM countries moved from branch banking operations owned and run by British and Canadian banks, to full or part-nationalization by governments.

Localisation occurred first in Jamaica and almost immediately afterward in Trinidad and Tobago, following a wave of structuralist economic thought of the 1960s and 1970s. Some economists, among them [George] Beckford, explicitly recommended the nationalization of commercial banks, and by the mid-1970s most banks in both Jamaica and Trinidad and Tobago were either locally or government owned. (Williams 1996: 68)

The newly independent countries felt it necessary to have banks that would be more responsive to the needs of the local economy and to nationally determined developmental objectives. The thinking was that the “banking arrangements of the pre-independence era did not favour economic and social progress in the colonies… . The mechanics of the [colonial] banking system, as economist Clive Thomas wrote, favoured the transfer of resources to overseas, and not to the host country,” (July 1995: 91). Commercial banks were seen to hold “the key to resource allocation and had the collective institutional capacity to determine lasting outcomes in the [Caribbean] economies,” (Danns 1996: 21).

By 1974 the situation was such that a Canadian analyst wrote:

For a number of reasons, both rational and irrational, there is a Commonwealth Caribbean sense of being exploited, and an answer is found for many in what must be described as black nationalism. Not infrequently, Canadian banks as holders of money find themselves the object of blame. After all, so the argument might run, the banks hold the money; if the banks used their deposits in the interests of the people, then the people would prosper. (Baum 1974: 6)

According to Baum, growing nationalism “nudged” the Canadian banks to offer stock, and in some cases, control to nationals of the islands in which they operated. Where the “nudging” was not heeded, a government might have intervened, expropriated and re-formed a locally owned bank, as happened with the Bank of Montreal in Trinidad. It was actions such as these that further “nudged” Canadian banks to “localize” ownership and, ostensibly, control (26).

Throughout the Caribbean there were moves towards ownership and localization in one form or another. Danns (1996) chronicles the various actions taken in Guyana, Trinidad, Jamaica, and Barbados. Where Caribbean governments did not nationalize foreign banks, regulations were designed so that loan requests were directed to sectors that had been targeted based on overall development goals (July 1995: 92). Many of these regulations brought about conditions of financial repression, where government intervention to set interest rates and direct the flow of credit, combined with price inflation, was detrimental to the deposit base for domestic bank lending (McKinnon 1973).[16]

These trends were not limited to the Caribbean. As but one example, in Colombia, prior to 1967, foreign investment was not restricted as it fit into the general outward-oriented development model. Foreign investment in the financial system dated to 1912, and the first financial legislation of 1923 did not restrict foreign banks. In 1967 a new foreign exchange and trade regime was adopted, based on strict foreign exchange controls. The state reassigned itself as the director of investment and production, and no new foreign investment, including in the banking sector, was approved, though it was not explicitly restricted by law. After 1970, the Andean Pact (to which Colombia was signatory) reserved the financial sector only for domestic investors, or investors from member countries.[17] Branches of foreign banks had to convert themselves into domestic firms. No new direct foreign investment in the financial system was allowed. In the early 1990s the laws were changed, the system became fully open, and foreign banks entered Colombia once again (Barajas et al 2000).

In sub-Saharan Africa, where the history of the financial sector was more similar to the Caribbean than that of Latin America, there was also a similar pattern of events in the banking sector. In African countries in the 1960s the banking sectors were largely controlled by private foreign banks that remained after independence. Their risk-averse lending objectives and the absence of a priority on their part towards local entrepreneurs often led to nationalization of the now-foreign banks. By the 1980s most of these banks were insolvent, and by the 1990s they were re-privatized and re-sold to foreign owners once again (Murinde 2001).

These policies that aimed to fulfill the nationalist aspirations of newly independent countries, such as those in the Caribbean, were in many ways attempts to replicate of similar processes and policies underway in the developed world. Particularly with regard to the financial sector, most developed countries in the post-WWII era placed stringent controls on cross-border capital movements and on the ownership of domestic financial institutions. The liberalized trading relations envisioned by the United States and the United Kingdom were limited to commodities, and to an extent, services. The financial sector, however, was to remain under the control of national governments. The main intellectual framers of the post-WWII economic order “concluded that a liberal international financial order would undermine the new state role emerging at the domestic level” (Coleman 1996).

The irony of the economic nationalism of the 1960s and 1970s, in many developing countries, is that it set out, as a populist measure, to give control of the country’s economic resources to the “people”. The result, in many cases, however, was a consolidation of economic power in the bourgeois political elite and their private sector elite constituents. As an economic strategy it failed.

Structural Adjustment and Changing Dynamics of Banks and Identity

Beginning in the late 1970s, there was the realization (whether conscious or forced) that nationalist economic plans would not produce the expected growth and development, in the context of the changing international economy. In the 1980s, “structural adjustment” policies were implemented in most Caribbean countries, with their general prescriptions of diminishing state regulation, ownership and control over the economy. Structural adjustment resulted in the “freeing up of the region’s financial sector from strangling exchange and other controls and regulations,” (Danns 1996: 4).

Policy makers were forced to accept the deficiencies of the structuralist approach… indeed it is ironic that those Caribbean countries which were most wedded to the structuralist approaches have abandoned those views and now adhere to the more monetarist prescriptions prescribed by the international financial institutions. (Williams 1996: 231)

Whether due to the divestment of government holdings of publicly-owned banks, gradual divestment via public share offers of foreign banks over many decades, or new startups by Caribbean nationals, the ownership structure in the banking sector shifted to nearly complete private ownership, both national and foreign.

After a decade of what could be considered “settling into” the new realities of private ownership, an open market economy, and further openness to the international economy, by the beginning of the 21^st century the number of banks owned by Caribbean nationals was lower in 2003 than it was at the beginning of the 1990s. This is especially so because of the fallout in Jamaica in the mid-1990s, and the closure or takeover of virtually all the ‘indigenous’ banks there. After a brief heyday in the early 1990s of Jamaican-owned commercial and merchant banks, that for a short time promised to become regional financial giants, the banking sector in the Caribbean has consolidated. The Caribbean-owned banks that remain, in large part, particularly those in Trinidad and Tobago, are strong and are successfully expanding throughout the Caribbean (Bissember 2003).

One of the casualties of the 1990s was the Jamaican banking sector. In part due to internal mismanagement and poor investment decisions, and in part due to an exceptionally harsh macroeconomic policy environment, virtually all of the banks failed in the midst of a financial sector crisis that began in 1996. Jamaica’s financial sector crisis is proportionally one of the costliest in the world, costing over ten times that of the Mexican “Tequila Crisis” of 1994-5, in terms of the amount the government had to put out to prevent widespread bank closures and stabilize the banking system.

One of the principal outcomes of the Jamaican financial crisis has been a remapping of the ownership of Jamaican retail banks. Many of the failed banks were taken over by the government, through its Financial Sector Adjustment Company (Finsac). Most of the smaller ones’ assets were merged and sold together to the Trinidadian RBTT Financial Holdings. At present in Jamaica, then, there are now four principal retail banks. Bank of Nova Scotia, a majority Canadian-owned bank, First Caribbean International Bank, formerly Canadian Imperial Bank of Commerce,[18] also majority-Canadian owned, the National Commercial Bank which was sold by the Jamaican government to a Canadian company, AIC,[19] and RBTT. There is no nationally owned retail bank in Jamaica today. Concomitantly, banks are no longer used as symbols of identity, at least not in the political dialectic. The banks themselves, however, continue to play the identity card.

The case of the National Commercial Bank is very interesting in this regard. In 1986 and 1991 two public share offerings gradually sold shares to the public, with the government eventually giving over controlling interest in the bank to the shareholders of the Jamaica Mutual Life Assurance Society and Jamaica National Building Society. In the early 1990s, in keeping with the nationalist fervour of the financial sector, NCB considered itself “bankers to the nation” or the “nation’s bank”. Internally, the bank thrived on idealistic notions and plans to “build Jamaica”. The bank ventured into investments in tourism and agriculture. In 1993 NCB acquired another large bank, before going into severe fiscal problems that nearly forced its closure; it was taken over by the Financial Sector Adjustment Corporation (Finsac) until its sale in 2002.

NCB was bought by AIC, which is owned by a Jamaican who emigrated to Canada in the 1970s, and who built a successful business in Canada in mutual funds. While the bank was bought and restructured using entirely Canadian capital, it heavily promotes itself as a “Jamaican bank”, and one of its principal public relations strategies is to capitalize on the Jamaican birth of its owner, and of its CEO, a Jamaican who built his banking career in the Middle East. Its slogan since its purchase by AIC is “come back home”. It has launched a number of initiatives, such as announcing the repatriation of all of its profits in Jamaica for at least five years, and establishing an education fund based on a fixed percentage of its credit card receipts.

While Jamaica’s nationally owned banking sector melted down in the 1990s, Trinidad and Tobago’s stabilized and strengthened. Trinidad and Tobago was one of the more “aggressive” countries in the Caribbean to nationalize its banking sector in the 1970s, and it did not suffer the fallout of the Guyanese or the Jamaicans. This itself warrants further indepth research, as an inquiry into the nature of Caribbean entrepreneurship. By 1994 five of the six retail banks in Trinidad and Tobago were fully or majority owned by nationals (Danns 1996, 21). For example, the Republic Bank in Trinidad and Tobago grew out of Barclays’ gradual divestment and sale of shares to government and private interests. Similarly, the Royal Bank of Trinidad and Tobago (RBTT) was created from the assets of the former Royal Bank of Canada.

The Trinidadian influence in Jamaica, as one of only four major banks in the country, is replicated throughout the Caribbean region. Today it is the Trinidadian banks that are the dominant regional players. Republic Bank in 2000 acquired majority shares of Grenada’s National Commercial Bank, and Guyana’s National Bank of Industry and Commerce. RBTT by 2001 had branches throughout the English speaking Caribbean, and even in Suriname, and the Netherlands Antilles.[20] The other dominant force in the Caribbean banking sector is Canada. The Canadian banks are Barclays merged with CIBC in 2002 to create the First Caribbean bank. With their combined operations, First Caribbean operates in virtually every CARICOM member state. The Canadian Bank of Nova Scotia has branches in ten CARICOM member states.

There are still a few, albeit small, private and public “indigenous” banks in the Caribbean, but there is a general agreement that they will soon give way to the inevitable consolidation already in process. Despite this reality, regionalization does not appear to have wholeheartedly been accepted. Certainly the political rhetoric at the popular level does not reflect this. For example, in the case of Dominica, according to the head of Republic Bank, one of the Trinidadian banks that is expanding throughout the Caribbean, and thereby stands to gain from any bank privatizations:

There is really no good reason why the government should still be holding on to [the National Commercial Bank of Dominica]. But it sees the bank as being a partner, with the state, in effecting government policy. The governments feel comfortable dealing with a local bank.[21]

It would appear that these nationally owned banks, however small, are perceived to represent one of the last holds these governments have over their countries.

Regional Integration and the Creation of a Caribbean Identity

Beyond structural adjustment, economic liberalization, and a reduced role for the government in developmental-type activities and enterprises, one of the main issues for the Caribbean in a globalized world polity is regional integration. The Caribbean integration movement has gone from CARICOM’s 1973 objectives of closer political, economic and social union among the former West Indies Federation members, to a “wider and deeper” Association of Caribbean States that include all the countries “whose shores are washed by the Caribbean Sea”. Ostensibly responding to the West Indian Commission’s admonition to “integrate or die”, CARICOM members meet more and more often, and continue to sign agreements for the creation of regional institutions. Central to the success of CARICOM, however, is the creation of a regional identity that goes beyond Heads of Government summits.

Integration theory has long held that regional integration is successful when ordinary citizens come to identify themselves as part of that regional entity that the integration effort aims at. Ian Boxill has convincingly argued that successful regional integration must be guided by an ideology that promotes regionalism. That ideology can “only be said to exist if a common perception of the region or a regional identity” is present (1993, 29). Boxill concluded that the Caribbean regional integration movement is weak precisely because “it is not based upon nor is it guided by an ideology of regionalism” (109). In my own previous work on Caribbean integration,[22] I have found that the processes of integration and development of a regional identity tended to occur in sectors or programmes where CARICOM governments had relatively little intention of this as an objective. The Caribbean banking sector would appear to be yet another example of this phenomenon. Terrence Farrell noted back in 1993, specifically referring to the banking sector, this very fact:

It is not the case that economic integration is being driven by the CARICOM political process. Rather it is being driven by a Caribbean private sector which has moved out front of their governments in achieving Caribbean economic integration at the level where it really matters. The end result of this process is likely to be a financial sector characterized by larger, stronger institutions, with a regional presence and a hemispheric reach.

In the Caribbean, many (if not the majority of) ordinary citizens are aware of the presence and activities of banks. Banks have been used as symbols of national identity throughout our post-Independence history. We have today, without any deliberate intention or effort of CARICOM or of individual Caribbean governments, an already regional, and “regionalizing” institution, that could serve as a symbol of a regional identity, just as it has served as a symbol of national identity at different times over the past decades.

Relative to the rest of the developing world, the Caribbean banking sector is one of the few in which there are remaining “indigenous” banks that are strong, and have the potential to become stronger. In the political rhetoric of symbols of national identity, the Caribbean banks ought to be a cause for celebration and pride. They were important symbols of independence and autonomy throughout the Caribbean in the 1970s. In Jamaica at the beginning of the 1990s they were potent symbols of black nationalist identity. Yet the emphasis on banks and the financial sector as symbols of development and of a regional identity has yet to be made in today’s Caribbean political rhetoric, either at the regional or the national level.

The question then, is why hasn’t this opportunity been grasped? I argue that there are three main reasons:

1. A continued emphasis on national-level ideologies of identity, as opposed to a true commitment to the creation of a regional identity. This tendency can be attributed to two discrete but parallel national-level factors. In some islands, Jamaica being, I argue, the prime example, regionalism is not perceived as a viable populist symbol of identity, and thus it is not emphasized. In other CARICOM member states, primarily Trinidad and Guyana, there are strong, what we might call “Indo-centric”, sentiments that reject what they perceive as the dominant Afro- or Creole-centric identity of the regional integration movement. Those who hold these perceptions and attitudes tend to be suspicious that the regional integration movement is one in which their own Indo-Caribbean identity is at best subsumed and at worst eradicated (Ryan 1999). Hence at the national level there is ambivalence about regional integration, despite the plethora of summits, agreements and commitments to regionalism.
2. The existence of an inter-island rivalry among the Caribbean business elite that dates back to the 1960s and 1970s. This is an area for which more research must be undertaken, but there is a popular sentiment, certainly in Jamaica, that the situation of Trinidadian and Barbadian business expansion in the late 1990s and early 2000s is “unfair” given the closure of those economies to Jamaicans in previous decades. This thus leads to a rejection of the Trinidadian banks as “regional” banks. The extent to which this perception is held at the level of the political elite is also an area of further research.
3. A change in the perception of a bank as a symbol of national identity in those countries where the banks are no longer under national control. It is debatable why this change has come about. Is it because the banks have escaped national control and there is no realistic prospect of them returning to national control, and thus it is a pragmatic change in attitude? Or, has there been a shift in ideology that no longer sees banks as nationalist institutions, but as necessary service providers whose owners’ nationality should be of no concern?

Analysis

By examining the banking sector in the English-speaking Caribbean over the last 50 years, one can discern three main features:

1. Banks in the Caribbean have been used as symbols of national identity, sovereignty and control over a nation’s development;
2. Ownership of banks in most Caribbean countries has gone from post-independence nationalization and individual national, usually government ownership, with some foreign ownership, to a general trend of Canadian and Trinidadian ownership, with only a few small nationally owned banks.
3. The more recent changes, to the present scenario as just described, have taken place without government direction, but rather have been market-driven.

From the experience and trajectory of the banking sector in the Caribbean, I argue that the construction of identity, both national and regional, is subject to the vagaries of individual CARICOM members’ political rhetoric regarding national identity at the local level. Nationalistic symbols that were once apt for political manipulation are discarded once those symbols change as a result of external forces, or forces that are beyond the control of the national government. However, while external conditions may change, the core post-independence emphasis on national identity does not change, it only adapts to the new environment by abandoning old symbols and focusing on new ones.

At the beginning of the 21^st century, that powerful symbol of identity of the past, the banking sector, has become one of the most regionalized businesses in the Caribbean, without the input or impetus of Caribbean governments. Further regionalization and expansion of regional financial services and institutions, not only banks, is impeded by national laws and prudential regulations of individual countries. These impediments include obstacles to the free movement of capital, to the right of enterprises to establish outside their home base, and to the ownership of real property under the Alien Landholdings Act. All of these issues are on the agenda for Caribbean governments to attend to (Bissember 2003). There is also an important barrier that continues to be discussed among regional decision-makers but that has not yet been materially altered on a regional basis, despite over a decade of discussion and promises, which is the free movement of labour. It is difficult to take CARICOM governments’ promises seriously when the first real move towards truly liberalizing the movement of persons within the region only came in 2003 when it became clear that this would be necessary to facilitate the smooth running of the 2007 Cricket World Cup.

The complete liberalization of the banking sector would appear inevitable given global and regional trends. The initial stage of liberalization, since the mid-1980s, has led to increased competition and profitability in the financial sector in the Caribbean (Williams 1996). One might also argue that it has led to greater transparency, particularly in the case of Jamaica after the 1996 crisis. There may be the concern that with the further relaxation of barriers to entry, Caribbean countries will then be open to the true financial giants that have swept much of Latin America, including the Dominican Republic. Yet here the Caribbean presents an unusual case in the current global context. The English-speaking Caribbean banking market, however enormously profitable it may be for the Canadian banks that are already here, is too small and too saturated to be worthwhile for any of the current expansionist giants, such as Banco Santander Central Hispano, or Citibank North America. As Bissember points out, given the pattern of the banking sector in the past few years, the removal of both financial and non-financial sector restrictions could likely, “see the creation of a truly CARICOM transnational corporation financed by regional financial resources” (2003).

There of course remains the fact that, as well as the new Trinidadian banking powers are doing, the Caribbean banking sector remains heavily dominated by Canadian banks. According to CARICOM’s figures, without distinction for type of bank, in 2002 there were 94 banks in the region of which 39 were locally owned and ten CARICOM (i.e. Trinidadian) owned. The remaining banks were owned by foreign entities mainly from Canada, and, to a much lesser extent, the U.S., via Citibank. Many of these Canadian banks, however, are partially owned by Caribbean people, as a result of the localization programmes of the 1970s. Including shareholders’ stakes, local and regional ownership ranges from 56% of the banks in Barbados and Guyana, to 62% in Jamaica, and close to 85% in Trinidad and Tobago (Bissember 2003).

Regardless of nationality, however, it is inarguably the case that all privately-owned banks have the same main objective: increased profits for shareholders. That they are profit-oriented does not mean, however, that they cease to be civic-minded, or to invest in “developmental” projects that do not promise a worthwhile return on capital, whether on their own initiative, or with prodding from the government. Furthermore, financial institutions have many incentives beyond profit to need to maintain good relations with the government, for their own benefit. They also need to be seen as good corporate citizens by their customers, and thus are unlikely to ignore the public relations benefits of their involvement in certain projects. Finally, it is in the banks’ long-term interest to invest in low-yield development projects, as the overall health and stability of the economy only redounds to their own benefit. Indeed, many banks, at least in Jamaica, factor non-profitable loans and investments in public works-type projects into their cost structure, as a part of the cost of doing business in a heavily politicized environment.

Conclusion

In the Caribbean, the banking sector has consolidated, as it has throughout the world. In the late 1960s and early 1970s the bank market structure was virtually controlled by British and Canadian banks. By the mid 1980s the banking sectors of many Caribbean countries showed significant market share by nationally owned, most public, banks. In the early 1990s, especially in Jamaica and Trinidad, there was a strong presence of nationally owned private retail banks. By the late 1990s and into the early 2000s, the ownership pattern of banks in the Caribbean had changed significantly, so that today the largest market share in the English-speaking Caribbean is held by Canadian and Trinidadian majority-owned and controlled banks.

While the current ownership structure of the banking sector would suggest that English speaking Caribbean countries are moving towards a consolidated regional financial sector, these facts have not been incorporated into the political rhetoric at the national or regional level. This examination of the banking sector in the Caribbean supports the proposition that the construction of a Caribbean regional identity will not come about if left to Caribbean governments. CARICOM governments have yet to make good on their repeated commitments to regional integration and the construction of a regional identity, even where opportunities to capitalize on existing regional institutions, such as banks, exist. They are still too concerned with island-specific definitions of and debates over national identity, despite the ever-tightening noose around the possibilities to promote these ideas. Nationalism and identity, after all, provide one last tool with which governments and political movements can rally public support and capture the people’s imagination, in a global political and economic context where little else is available for this purpose.

Endnotes

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[1] This factor is especially significant after the mid-1990s, as even in countries like Chile and Argentina where the banking sector had been relatively open for a decade or more, foreign banks only went there as part of a general Latin America expansion.

[2] This meant that branches of foreign banks had to convert themselves into domestic firms, and new direct foreign investment was prohibited. Due to loopholes in the law, however, control of the joint-ownership banks that were permitted ended up in foreign hands.

[3] “National champions” are those large, regionally or even internationally competitive, private banks that are still owned by nationals of the developing country in which the bank is operating. In some developing countries where foreign banks have begun to dominate the retail banking market, there is a “national champion” that is still managing to hold its own. In some cases, the national champion is even expanding, making acquisitions alongside the foreign banks’ acquisitions.

[4] For Latin America, for example, see Kessler 1999; Neiman Auerbach 2001; and Marichal 1997. For Asia see Lukauskas 2002 and Claessens and Glaessner 1999. For Spain and the former Eastern European socialist bloc see Pérez 1997, and Blejer and Škreb 1999, respectively.

[5] Retail banking is that part of commercial banking concerned with the activities of individual customers, generally in large numbers (Smith and Walter 1997, 101).Retail banks are those which provide services such as checking accounts (demand deposits), and consumer debit and credit cards.

[6] Raymond Forrest, “No requiem for Workers Bank,” The Financial Gleaner, 18 January 1991.

[7] “Big Bank Merger in Offing.” Insight IX (2), December 1-15, 1992, p. 8.

[8] The “21 families” refers to a commonly held perception that in Jamaica a handful of people, commonly called the oligarchy of the 21 families, are able to command and control the resources of the country for their exclusive use because of their wealth and access to the corridors of power.

[9] Neville Spike, “The oligarchy and privatization,” The Gleaner 2 February 1992, p. 20.

[10] Paul Chen-Young, as quoted in Franklyn 2001, p. 39.

[11] Henley Morgan, “Dr Davies' mea culpa,” Jamaica Observer, 25 October 2002.

[12] Girod Bank was established by a Puerto Rican entrepreneur in Jamaica in the mid-1980s.

[13] Paget deFreitas, “The Making of an Empire” The Gleaner 20 March 1992, p. 2.

[14] The Financial Gleaner, 16 October 1992, p. 7

[15] Henley Morgan, “Dr Davies' mea culpa,” Jamaica Observer, 25 October 2002.

[16] True to McKinnon’s hypothesis, Marion Williams’ comprehensive study later found that a liberalized banking system in the Caribbean meant increased competitiveness, greater profitability, and more availability of bank credit (1996).

[17] Foreign ownership of more than 20% of local banks was prohibited under Andean Pact rules during 1971-1987.

[18] Up until 2001, British Barclays still retained branches in 14 Caribbean countries. They are expected to rebrand under the First Caribbean name, since the merger with CIBC.

[19] AIC originally stood for Advantage Investment Counsel, but is now known solely by its acronym.

[20] See Bissember (2003) for a detailed account of RBTT and Republic Bank’s recent regional expansion.

[21] Robert Norstrom, cited in, David Renwick, “Unsettled Waters in the Caribbean.” The Banker 1 October 2002.

[22] I examined the work of the CARICOM Women’s Desk (1997), and of the Master in International Business degree programme between CARICOM, the Dominican Republic and Haiti (2000).

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