General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
December 03, 2018

IMF published a report on the Financial System Stability Assessment (FSSA) for Jamaica. The report recommends prioritization of intensified oversight and group-wide risk-based supervision, especially for groups with systemic connections. Implementation of Basel’s Pillar I on minimum capital requirements and Pillar II on the supervisory review process should help build enough buffers at the individual and group levels. An effective macro-prudential framework should build on strong micro-prudential foundations of supervisory oversight and go hand-in-hand with heightened commitment to transparency and accountability.

The report highlights that the authorities have made good progress in implementing the 2006 Financial Sector Assessment Program (FSAP) recommendations. Although the financial sector has significantly expanded since the 2006 FSAP, the crisis management framework and risk-based supervision work have been lagging. The stress tests suggest broad resilience to solvency shocks, but the interconnectedness analysis points to high risk of contagion. Active cooperation and coordination with other supervisors in the region, particularly for those affecting systemic groups, should be strengthened and access to timely granular data, analyses, and monitoring is key. The FSSA report further highlights that Bank of Jamaica has made good progress in establishing a system for monitoring of systemic risk. Bank of Jamaica is also considering instruments to include in a “macro-prudential policy toolkit,” with a view to mitigate and contain systemic risks across time and structural dimensions, including those found within Basel III.

Further action is required in implementing prudential standards on a consolidated basis. Introduction of a broader comprehensive Pillar I approach that captures all risks, a thorough Pillar II methodology, a surcharge reflecting the systemic importance of deposit-taking institutions, and a minimum quantitative prudential liquidity standard would enhance the risk coverage of the prudential framework and complement efforts of the Bank of Jamaica to foster convergence with international standards. The forthcoming implementation of IFRS 9 raises new challenges. A better alignment with the international accounting standards is desirable. Moreover, defining a transition period, as intended by the Bank of Jamaica, would be prudent considering the complexities associated with the calculation of expected credit losses and the limitations on historical information that may be needed. Bank of Jamaica should, however, be transparent to the deposit-taking institutions about how it will use the current regulatory provisions regime in an IFRS 9 environment. Bank of Jamaica should also develop its technical capabilities and provide a clear set of definitions for non-performing exposures, forbearance, and restructured loans.

The report states that work is underway to modernize the resolution framework for financial institutions. To this end, a consultation paper was jointly published by the members of the Financial Regulatory Committee in February 2017. It is an ambitious initiative that will require substantial resources and close cooperation by all safety net regulators to implement its provisions. The authorities have not prepared formal contingency plans for dealing with a systemic crisis such as was experienced in the mid-1990s. A systemic crisis contingency planning and simulation exercise agenda should be pursued as part of normal business practice in due course. Also, the draft 2014 Emergency Liquidity Facility Policy should be reviewed and finalized.

The FSSA report also highlights that there has been significant progress in the area of insurance supervision. IFRS 17, the adoption of which is being planned by 2021, should be introduced in combination with a modernized risk-based solvency regime, allowing for consistency between valuation and capital adequacy and supporting consistency of the prudential framework. Meanwhile, binding regulations for asset-liability management should be introduced and the regular stress testing framework should be extended to general insurers. 

 

Related Link: FSSA Report

Keywords: Americas, Jamaica, Banking, Insurance, Securities, FSSA, FSAP, Basel III, Stress Testing, IFRS 9, IFRS 17, Macro-prudential Policy, Resolution Framework, Bank of Jamaica, IMF

Related Articles
News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News
News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News
News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 16, 2019 WebPage Regulatory News
News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News
News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News
News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News
News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News
News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News
News

OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR Disclosures

OSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920