THE Bank of Jamaica (BOJ) indicates that it has been actively supervising bank branch closures and advocates the move to digitisation and increased efficiency.

The comments come as the island’s two largest banks which have a combined 60 per cent of commercial bank assets — the National Commercial Bank (NCB) and Scotiabank Jamaica — have been matching each other in shuttering physical branches and moving into digital buildout.

Scotiabank Jamaica has switched six branches to fully digital while in 2022, NCB has plans to close five more physical locations, adding to two done in recent times.

The four NCB branches to be closed are in Kingston. One is in Black River St Elizabeth where Scotia is also shuttering physical operations. The banks note, however, that they are leaving ATM services in place.

The central bank was asked to respond to the push to digitisation and reduction of face-to-face and other banking services, with the Jamaica Observer highlighting recent research published by the UK-based BBC which says millions globally will struggle to cope in a cashless society.

In March 2022, the BBC in a feature on bank branch closures and its impact, said that “going cashless would make budgeting difficult and would be a major inconvenience”, quoting research by the Royal Society of Arts (RSA).

In the UK, thousands of bank branches have been closed, reducing access to cash withdrawals. The RSA said the “dash to digital” held high risks as finances were stretched with the research showing that “despite online banking and shopping becoming more common, our research shows the percentage of the population wholly reliant on cash is unchanged”.

The BOJ told the Business Observer that in closing branches with due notice, local banks in Jamaica were within the law.

A response sent from the office of Maureen Simms, deputy governor with responsibility for the Financial Institutions Supervisory Division, stated, “As it relates to the closure of physical branches and the thrust towards digital banking by deposit-taking institutions (DTIs), “we must advise that subject to Regulation 12 of The Banking Services (Establishment of Branches) Regulations, 2015, once a DTI determines that a branch operation will be discontinued, the DTI is required to provide to the supervisory committee, written notification of this intention six months prior to doing so. If the DTI desires to close a branch prior to the six month notice period, then an exemption is required to be approved by the supervisory committee.”

“In both cases the supervisory committee considers information regarding the arrangements by which the business of the customers of the branch will be transferred to another branch of that DTI. This will enable the supervisor to not only be aware of, but also to consider the suitability of the alternative arrangements to be established for customers of the affected DTI.”

Adequate notice

Simms said that adequate notice to customers is required. “Where notification is received of material changes that will impact customers, eg tellerless/cashless branches, pursuant to the requirements of the regulations, the [central] bank ensures that appropriate and adequate notification is provided to customers regarding the impending changes at the affected branch and that the alternate arrangements outlined are adequate to maintain banking services for the [commercial] bank’s customers.”

She said as well that customers are to be provided with other channels through which banking transactions may be conducted and adequate arrangements are to be made for them to transfer their accounts to a branch most convenient to them.

It was noted, “Notifications concerning these changes ought to be widely disseminated in both the print and electronic media as well as in-branch. These notifications are required to be provided to customers in advance of the intended change and should clearly outline the options available to each customer. Such arrangements are usually acknowledged formally by the [central] bank in writing as acceptable or satisfactory.”

The requirements fall within The Banking Services (Establishment of Branches) Regulations, 2015

No legal roadblock

Simms told the Business Observer, “While these criteria are established in law, the Bank [of Jamaica] has no legal provisions under the Banking Services Act (BSA) or Bank of Jamaica Act (BOJA) that mandates that banking services must be provided via a branch network or guarantees the mechanism by which access to banking services will be achieved. Essentially, there is no requirement for the type of business model to be pursued by each applicant nor does the [central] bank prescribe the specific delivery channel through which banking services are to be provided or offered to its customers. This is solely based on the DTI’s own business decision informed by its strategic plans,” she stated.

Nevertheless, banks and other deposit-taking institutions under the BSA are, however, required to seek and obtain the regulatory non-objection of the Supervisor for any intended change in delivery channels for existing businesses or products. The BSA also prohibits DTIs from implementing any major changes in existing operations, strategy or policy without first obtaining the written prior approval of the Supervisor.

The BOJ deputy governor noted that evaluations of planned closures are done primarily from a financial safety and soundness perspective as guided by the BSA.

Pandemic response

Simms noted that, arising from the novel coronavirus pandemic and the ensuing containment measures such as social distancing and reduced banking hours, DTIs, in response, have accelerated the pace of implementation of their planned digitisation strategies which have been gradually rolled out over the last few years.

“This saw the advent of greater use of online banking, automated banking machines, point of sales and bank-on-the-go channels including intelligent automated banking machines (iABMs) for facilitating cash transactions and cheque deposits directly to customers’ accounts,” Simms explained.

She applauded, “While we are cognisant of the shift in trends in delivery channels from the customary brick-and-mortar structures to digital services, it has reportedly enabled DTIs to leverage advances in technology to enhance the customer experience and provide greater convenience to customers while reducing cost and improving efficiency.”

Further, the deputy governor said, “The thrust towards digitisation is not unique to Jamaica and is a trend which is occurring globally.” She made no comment on the BBC published research, forwarded by the Business Observer, which indicates that many will experience dislocation as the society moves away from cash and closes more bank branches.

The BOJ itself is investing millions in a cashless society having introduced digital currency Jam-Dex in April 2022. So far, however, conversion appears to be occurring at a snail’s pace.