THE Bank of Jamaica (BOJ) has dismissed fears that its inherent conservative nature will cause it to stifle innovation in the securities dealers market when it takes over regulation of the sector.

Richard Byles, governor of the BOJ, played down the concern as he responded to a question on the matter at the central bank’s monetary policy press briefing last week.

“I think…labelling institutions [as not being innovative] is not the right way,” Byles replied as he called on securities dealers to work with the central bank in achieving their aim of innovating new products for the market within the boundaries of the regulation under which they will operate when the BOJ becomes the overall prudential regulator for all financial entities next year.

Finance Minister Dr Nigel Clarke announced the change will be made over the next few months as part of the reorganisation of regulation within the financial sector in the aftermath of the multi-billion-dollar fraud that took place over several years at Stocks and Securities Limited, a boutique Kingston-based securities dealer.

Byles was, however, not daunted by the concerns that the BOJ would stifle innovation when the transition is complete.

“We ourselves have been quite innovative, and indeed the securities dealers made that point at the recent stock exchange conference,” Byles said.

“Our central bank digital currency, that’s not innovative? We are one of the few [central banks] in the world who have initiated that.

“We have a sandbox with all kinds of innovative [ideas] and we have opened the door where everyone with a technological innovation in the financial sector, in the payments industry, to come in and to demonstrate to us what they have in mind.”

He, however, pointed out that as a central bank, the BOJ has standards of regulation that it will not compromise on.

“We do consider managing risk to be vitally important, and I would think that anyone in the financial sector should agree with that. Beyond that, there’s nothing special about [the] Bank of Jamaica’s regulation. We just want institutions to manage risk properly, and nothing more if you want to make money,” Byles continued.

Seeking to give further assurances, the BOJ boss outlined, “We’re open to doing business and we want growth, we want innovation, we want progress, we want modernity. There is nothing in our policy that prevents that, and there’s nothing in what we have done so far that makes you feel like we don’t want progress.”

Despite the BOJ’s pronouncement, in late January when the announcement was made that the central bank will become the sole prudential regulator for all financial entities, the Jamaica Securities Dealers Association (JSDA) was not enthused.

“There is a global market view that bank regulators are typically overly conservative, which is not necessarily supportive of the entrepreneurial underpinnings of the securities market which thrives on innovation, necessarily set within the context of prudent risk management,” Steven Gooden, president of the JSDA and CEO of NCB Capital Markets, outlined in his speech at the Jamaica Stock Exchange 18th Regional Investments and Capital Market Conference at the Jamaica Pegasus hotel in St Andrew a day after the finance minister made the announcement.

“This is unlike a securities regulator that tends to facilitates market deepening and innovation within the context of prudent risk management,” he continued before adding, “Our fears exist in this regard.”

Gooden, however, admitted then that central banks have become friendlier in recent times. Efforts to reach him to see if his initial fears have been allayed, at least in any preliminary meetings. However, after expressing his fears, Gooden in January said he would focus on the consultation process which is set to take place ahead of the change in regulatory structure for the financial sector.

“We must ensure there is balance between prudential oversight and that of market growth and deepening,” Gooden pointed out then in an exchange with the Jamaica Observer.

Meanwhile, Byles also defended the BOJ against claims that it used the SSL saga to engineer a takeover of the entire financial sector — a claim made by a securities dealer to the Business Observer. Byles was, however, forthright in his dismissal of the claim when it was raised at the quarterly press briefing.

“The decision to create the ‘Twin Peaks’ and to give us, the Bank of Jamaica, control over the entire prudential regulation of the financial sector is the minister’s decision; it’s not ours. We didn’t do a takeover bid. The minister, for his reasons, asked if we are prepared to do it, and we said yes. we are up to the challenge and we accepted that request,” he said.

While the regulatory changes to effect the twin peaks model are yet to start, the governor and three of his deputy governors are now on the board of the FSC, with Byles as chairman, taking over from his former senior deputy governor in January. He was asked what he has seen so far in meetings and especially if the events at SSL were isolated.

“It’s early days. Mr [Keron] Burrell, [the new FSC executive director], who is in there, has been doing a good job of becoming familiar with the portfolio. We’ve had meetings with the sector — security dealers, in particular. So it’s a time where we are becoming familiar with what exists.”

“I can’t comment on what if anything else looks like an SSL in the system. I don’t think so. But as we work our way through, we will always be transparent and come to the media and the public with whatever we may find.”