Bank of Jamaica (BOJ) Governor Richard Byles has described the decision taken by the central bank last week to temporarily suspend dividend payment from financial institutions as being only a short-term measure, as the country seeks to mitigate the economic fallout from the COVID-19 pandemic.

“It’s just a postponement. I have kindly asked the banks, based on the uncertainty of the current COVID[-19] crisis, to postpone —not cancel — the payment of dividends outside of the financial holding companies for a while,” he said in speaking to Richard “Richie B” Burgess of Edge FM on his Top of the morning show earlier this week.

“Given the circumstances, we don’t know how long this will last, how deep the depression will be, we don’t know what it will take to pull us out of this situation. So, I’ve asked them to postpone the payment – not cancel, just postpone,” he said while noting that the deposit-taking institutions were very receptive to the request.

He said that while the Banking Act does provide the BOJ with some power to stop a dividend payment, this can only be exercised in cases where financial institutions are illiquid.

“This was, however, not the case. They are liquid so we had to ask, and I must say in the spite of the challenges that we are facing they all agreed to hold off on the payments — even those that had declared it already and those who have announced board meetings where dividends were going to be considered. I am very grateful for this generosity on their part.”

The governor said that the move was a pre-emptive one through which the BOJ has sought to ensure that its mandate of financial system stability is executed, that financial institutions are able to provide liquidity, and thus the move is not to be seen as one to deprive shareholders of their rightful benefit.

He noted that he expects the resumption of “not only those [payments] that have accrued but those that will accrue in the future”.

“The banks are in very good capital condition, the liquidity in the banks are reasonable – we just don’t know what the future holds for us and we are being preemptive,” he continued.

When asked about the impact to shareholders and pension funds that may be invested in these financial institutions, Byles said that the measure was just a temporary one which is not expected to significantly affect beneficiaries.

“It means a little less liquidity to the pension funds but it won’t be for a prolonged period, so I don’t believe it will have a significant impact. Dividends are declared maybe once per quarter or twice a year, but to the extent that there are people [who survive from these payments]…I’m very appreciative of that condition but we are really working for the greater good – and the greater good is the hundreds of thousands of Jamaicans who can feel assured that any day or hour they go into a bank their cash can be made available to them”, Byles said.

The BOJ governor said that while countries around the world continue to ponder the shape of recovery from this crisis, his best estimate is likened to a Nike swoosh— “where it is deep coming down and prolonged coming up”.