The past two weeks have been some of the busiest for Jamaica’s financial sector, which has been preparing its submissions for the debt exchange which were due yesterday. But the first three weeks of January have also been extremely hectic for other governments and financial sectors around the world. Though Jamaica’s plate is full, it is important that we realise that so is the rest of the world’s.

Just last week, two of the globe’s powerhouse economies, the US and China, announced that they too are doing some renovating, specific to their financial sectors. This follows the UK and France’s head start in mid-December of last year. The measures these countries have proposed are dramatically different to each other, and understandably so as each economy is faced with a unique set of challenges. And rest assured that Jamaica and the Caribbean are not being left off the band wagon – the region has also been pursuing ways to further revitalise its financial sectors. Global governments concur that financial reform is inevitable and they are taking drastic steps to get the wheels on their economies churning – the result of which will be a redefined global financial sector.

In fact, the US administration stepped into high gear last Thursday, taking no prisoners on Wall Street. President Barack Obama was hardly impressed by US banking giants such as Goldman Sachs Group Inc (GS) and JPMorgan Chase & Co (JPM), which reported robust fourth quarter earnings. Issuing a direct blow to Banks’ morale, Obama outlined a plan to restrict the size and range of their activities in an effort to reduce risky trading practices and eliminate the widely accepted “too big to fail” philosophy. He proposed that if these institutions had insured deposits, they would not be permitted to own or invest in private equity or hedge funds. Such Banks could also kiss proprietary trading (trading for their own account) goodbye, though they would still be allowed to offer investment banking to clients.

Naturally, Obama’s plan was met with some resistance. First of all, it appeared to be the resurrection of the Glass-Steagall, a financial reform following the Great Depression that was repealed in 1999 which prevented commercial banks from selling securities, proprietary trading and offering investment banking. Not to mention that the proposed measures do seem somewhat unfair from the Banks’ perspective as they have recently repaid their Trouble Asset Relief Program (TARP) funds, plus interest. And let’s face it, “prop” trading is a minimal component of most of their bottom lines (less than five per cent of Bank of America Corp (BAC) and Citigroup Inc’s (C) profits) so it begs the question of whether this aspect of the proposal is necessary.

But Obama has made it very clear that he is unsympathetic towards these Firms. Only a week prior, he proposed a tax targeted towards Banks, thrift and insurance Companies with more than US$50 billion in assets that would take effect June 30, 2010. His justification – “Never again will the American taxpayer be held hostage by a bank that is too big to fail” and his administration has referred to the tax as a “financial crisis responsibility fee”. It is implied that Obama’s “no mercy” approach to the financial sector will not stop at taxation and size limits either, as the details of each of these reforms have yet to be released. Regardless of the nitty-gritty, one thing is for certain — a major overhaul of US banking regulations is underway, and the fate of the likes of Highbridge Capital Management (JPM’s hedge fund) and GS Capital Partners VI (GS’s largest private equity fund) rests in Obama’s hands.

Meanwhile, Chairman of the China Banking Regulatory Commission, Liu Mingkang, has also been doing his fair share of spring cleaning. China has been on a lending spree sending the economy into overdrive. Its real GDP ballooned 10.7 per cent year-over-year (yoy) in the fourth quarter, with industrial production rising by 18.5 per cent in the year to December and retail sales surging by 17.5 per cent, the biggest increase in over two decades. In an effort to soak up excess liquidity and curb inflation, China’s central bank raised Banks’ reserve requirements last week for the first time since June 2008 to 16 per cent for larger Banks (an increase of 50 basis points) and 14 per cent for smaller Banks from 13.5 per cent.

In an even more dramatic move, Chinese authorities have ordered domestic Banks to reduce lending immediately — some have even been mandated to suspend issuing loans for the rest of the month. Chinese Banks lent US$161.1 billion (CNY1.1 trillion) in the first two weeks of January, more than double the monthly average of CNY 400 billion in the latter half of last year. Additionally, China’s government officials are now reviewing lending data daily instead of monthly.

Though the focus locally has been on the debt exchange, Jamaica has also been embarking on its own changes to the financial sector. It was reported in the media recently that the unit trust market is to reopen in December 2010, and the listing of government entities such as Port Authority of Jamaica on the Jamaica Stock Exchange could be on the horizon. The first half of 2010 might also see the launch of the Caribbean Exchange Network (CXN) geared towards integrating regional markets. Other countries within the region, such as Trinidad & Tobago also have their own regulatory reform agendas. Trinidad & Tobago’s Cabinet recently approved a draft version of the Credit Union Societies Bill, which is intended to facilitate a greater level of oversight for Trinidadian Credit Unions. As the world changes the face of the financial sector, Jamaica and the rest of the Caribbean will certainly take part in this global transformation.

Michelle Hirst is the Manager, Equities & Research at Stocks & Securities Ltd (SSL). You can contact her at mhirst@sslinvest.com