KINGSTON, Jamaica- Finance Minister Dr Nigel Clarke on Tuesday gave an update on the so-called twin peaks model of supervision and regulation of the financial sector.

The minister, who was speaking Tuesday in the House of Representatives, first announced the Government’s intention to reform and enhance the system of supervision and regulation of the country’s financial sector in January 2023.

At the time, the Bank of Jamaica (BOJ) was charged with leading a collaborative process for the introduction of the legislative framework and operational arrangements necessary to bring about the change.

Clarke told the House on Tuesday that under the twin oeaks model, the BOJ will assume full responsibility for prudential supervision of all bank and non-bank financial institutions. At the same time, the Financial Services Commission (FSC) will be transformed into a new regulatory entity that will supervise all bank and non-bank financial institutions from the perspective of  market conduct and the protection of consumers of financial services.

“The system of financial sector supervision that emerged after the financial sector meltdown of the 1990s is now in urgent need of a radical overhaul and significant strengthening. It is clear from the escalation of the public complaints about banking services, for example, that it is imperative for there to be the introduction of a comprehensive and robust consumer protection framework for financial sector services,” Clarke said.

He noted that the legislative framework for this is not presently in place but said the government was committed to addressing this gap as a matter of urgency.

“It is clear, from the high-profile instances of fraud involving financial institutions and the funds of depositors and investors, that there is a need to strengthen the supervisory framework for all financial institutions to address this.

“The adoption of the new twin peaks model will change the existing bifurcated supervisory architecture and sector-by-sector regulatory approach. This approach presently sees BOJ as regulator for deposit-taking institutions (DTIs) only, with the FSC having regulatory oversight for non-DTIs only,” Clarke shared.

He added that the new regulatory architecture, once implemented, will see the prudential regulation of commercial banks, building societies, merchant banks, micro-credit institutions and eventually credit unions, along with non-DTIs, comprising securities dealers, insurance companies and pension funds, being consolidated into one regulatory peak under the supervision of the BOJ.

“Similarly, all market conduct and consumer protection regulation, will be consolidated in the other peak under a proposed Financial Services Conduct Authority (FSCA), which will be a successor agency to the FSC. The FSCA, on full implementation of the Twin Peaks model, will be responsible for market conduct regulation and financial consumer protection for all operators in the financial sector whether they are DTIs or non-DTIs,” said Clarke.

In response to questions from Opposition members, Clarke admitted that while the Twin Peaks model was under active contemplation for some time, it had become more urgent following the multibillion-dollar fraud that has been uncovered at Stocks and Securities Limited.

Clarke said the implementation of the twin peaks model is expected by 2026. He said a twin peaks concept paper, which sets out the legal and operational contours of the model was prepared and submitted for his approval by the BOJ-FSC Twin Peaks Steering Committee chaired by the BOJ Governor Richard Byles in 2023.

Said Clarke: “The concept paper has been approved and we are now in the final stages of the preparation of a Cabinet submission for the consideration and approval of Cabinet, following which formal drafting instructions will be issued for the development of the Bill to address proposed changes to the law to give effect to the twin peaks model of financial regulation in Jamaica”.

The finance minister told the House that the development of the twin peaks legislation is receiving the required urgency and priority.

“We believe that it would be better at this time to focus the limited resources on the development of the legislation for a comprehensive and robust regulatory framework that the twin peaks model will deliver rather than developing interim legislation to address the gaps relating to consumer protection for financial services,” he said.