THE Bank of Jamaica (BOJ) has given the resilience of the island’s financial system throughout the global pandemic a positive assessment.

Whilst taking a hit from COVID-19, particularly in the earlier period, the local banking system has remained generally resilient throughout the global pandemic, leading to the positive assessment by Jamaica’s banking regulator.

The BOJ, in its latest quarterly assessment of the banking system, reported that both the primary ratio and capital adequacy ratio remained comfortably above their respective statutory limit. The primary ratio and capital adequacy ratios measure the capacity of local banks to absorb unexpected losses.

In its Quarterly Monetary Policy Report (QMPR) the banking data showed that local banks have remained very liquid, reporting liquidity coverage ratios in excess of 100 per cent at end-September. However, the central bank concedes that COVID-19, nevertheless, continues to affect activity in the domestic banking sector and overall financing in Jamaica.

DECLINE IN FINANCING TO INDIVIDUALS AND HOUSEHOLDS 

The BOJ reports that private sector credit provided by deposit-taking institutions (DTIs) is slowing down. The latest figures show that credit grew at a slower pace year over year as a result of declines in financing to individuals and households.

At the same time, the BOJ has implemented a number of initiatives aimed at supporting Jamaican-dollar liquidity in the financial sector. Since the start of the pandemic BOJ has utilised a number of monetary tools to beef up liquidity in the banking system.

Among the monetary tools employed by BOJ were the reduction in the Jamaican-dollar cash reserve requirement, the implementation of a Government of Jamaica bond-buying programme, and the reactivation of the BOJ intermediation facility. The BOJ also used a special repurchase facility for credit unions as well as the occasional term repurchase operation.

At end-October 2020, total Jamaican-dollar liquidity support provided by the BOJ since the start of the pandemic was in excess of $76 billion.

JAMAICA ACCUMULATES ONE YEAR’S WORTH OF FOREIGN RESERVES

As it regards Jamaica’s foreign reserves, the news was very much positive, with the latest out-turn showing that the island’s foreign reserves have accumulated to one year’s supply. In addition, Jamaica’s international reserves remain buoyant.

As at November 30, 2020 the BOJ reported US$2.96 billion in net international reserves, which represents 51.99 weeks of goods imports. The BOJ’s total foreign assets, as at the same time period, were US$3.93 billion — which is US$72 million more than the previous month in October.

Liabilities at November month end comprised US$969.56 million for the International Monetary Fund, up US$3.25 million over October. Gross reserves at end-October amounted to approximately US$3.9 billion — representing 116.2 per cent of the Assessing Reserve Adequacy metric for FY 2020-21.

The Government of Jamaica is targeting net international reserves of $2.4 billion at fiscal year end March 2021.