O'Hara wasn't the only banker expressing concern about the debt ratio and number of delinquencies on loans. The debt ratio is computed as total payments per month against gross earnings. Most banks prefer a debt ratio of around 35 percent maximum but many agreed they are seeing more and more customers with a ratio higher than 50 percent. The Bankers' Association president said that education campaigns by the various banks are underway and he also called on employers to help make their employees aware of the advantages of saving and of prudent credit practices. A big reason for the banks' concern is that as the debt ratio climbs, the chances for default also increase.
Adversity can be anything from unemployment or underemployment to an expensive illness.
Both Pancham and Chase colleague Richard Brown say that the problem has worsened since Hurricane Marilyn since so many people, especially in the tourism sector, have been under-employed. When the economy was stronger and consumer confidence was at a higher level, many people obligated themselves to the limit and, in some cases, beyond. Both Brown and Pancham emphasized that banks would rather have the cash flow from payments than seize assets, banks not really wanting to accumulate such collateral as vehicles and houses. Nevertheless, while the national delinquency rate is running two to three percent, Chase locally is seeing a five percent rate. Now, this can be contractually done.