NCB sold a stunning US$900M net in FX market in 2020

Jamaica’s largest commercial bank may not be Jamaica’s central bank, but their size and profitability probably rank them just behind Bank of Jamaica as the most powerful and influential financial institution in the country. NCB’s influence on the local forex market is only exceeded by that of BOJ, no other bank comes close, locally and their power and reach may have saved the country from steep devaluation and a major rundown of the NIR.

In September, after the Jamaican dollar rate versus the US dollar climbed above J$151, ICInsider.com was reliably informed that NCB management thought the rate was overextended and the bank sold large amounts into the market that helped to push the rate down towards $142 by the month end. The sales were made easier by the banking group, with the confirmation that they had raised US250 million from the issuance of diversified payment rights for payments due from correspondent banks.
NCB is not the darling of a large segment of Jamaican society as they dominate so much of the financial sector. Many Jamaicans see the multi-billion profit of the NCB Group as insane in a country where the majority struggle financially. Worse, many small customers of the bank see them as uncaring and lacking good customer relation practices.
The extent of NCB’s impact on the local foreign exchange market is not fully known. There are strong views by many with knowledge of developments within the financial sector that sees National Commercial Bank as the main players that influence the value of the Jamaican dollar and they do not like it.
Data out of the Bank of Jamaica for 2019 and 2020 indicate clearly that NCB impact on the market is extremely significant, but not in the manner many persons think. The data shows that when NCB is not a major net seller in the market, the exchange rate tends to depreciate and when they are not net sellers, the rate tends to appreciate.
In the period from the start of 2020 to late September, NCB sold a net of US$692 million to the market, in stark contrast to their nearest rival – Bank of Nova Scotia. BNS bought a net of US$38 million over the same period. In September last, NCB sold a net of US$127 million short and only had net purchase on just three days in the month.
NCB’s net sales in 2020 follow a significant US$453 million net sales for the twelve months in 2019. NCB sold a net of US$217 million to the system between October and December last year, bringing the total for the year to a stunning US$909 million.
According to a spokesperson for NCB, the bank actively manages its foreign exchange portfolio, buying long or selling foreign currencies short as their reading of the market dictates. Part of the net sales, they explained, came from the conversion of non-US currencies in overseas markets into US dollars. The bank is also involved in forward contracts for buying and selling of the currency, this publication was informed by someone close to the group.
Included in funds sold to the market in 2020 was the conversion of CAD$400 million that was sold into the system as US dollars.