Bank of Jamaica (BOJ) has announced plans to establish a central digital depository for know your customer (KYC) information. It’s aimed at addressing the challenges consumers face when switching banks and is just one of the other tools the BOJ intends to introduce to tackle inflation.

“All of your KYC data is going to be stored in this central depository digitally,” said BOJ Governor Richard Byles, who announced this on Thursday at the Pension Industry Association of Jamaica’s annual luncheon in New Kingston. “Just like, more or less, when you go to a country and you present your visa, and behind that presentation of the visa, a lot of interrogation goes on and they say, yes, you can come in. This is what will happen with the EKYC.”

Byles highlighted the challenges consumers face when trying to switch banks, citing the cumbersome process of opening a new account and providing extensive KYC data. He noted that this difficulty allows banks to regard customers as “captive” and discourages them from seeking better services or interest rates elsewhere. The BOJ plans to ensure the excellence of information stored in the EKYC, through collaborative effort with commercial banks and the World Bank, to facilitate seamless acceptance of the information by all banks, promoting efficiency and competition in the sector.

“I would like to see it done before I retire. And I will retire in about two years and two months. So there is your timeline,” he said humorously.

Addressing the challenge of inflation, Governor Byles highlighted the impact of foreign exchange rate volatility on imported inflation in Jamaica’s small, open, and import-dependent economy. With approximately 60 per cent of consumed goods being imported, the BOJ has taken a proactive approach to participating in the market. Between October 2021 and April 2024, the BOJ sold around US$3 billion to mitigate volatility, seasonal demand, and transactional demand. Conversely, it purchased approximately US$6 billion from the market during the same period. Inflows have been robust, making this policy tool highly effective for Jamaica. According to business surveys, the foreign exchange rate is no longer the primary concern for price setting, as international commodity prices have become the dominant factor. Speaking to pension fund managers, Governor Byles emphasised the positive real Jamaican dollar rates, stable foreign exchange rate over the past two to three years (with an annual movement of approximately 1.6 per cent), and growing reserves.

“We are now at over $5 billion in reserves. We started 2020 with $3 billion of reserves, and we are at $5 billion of reserves now. Where we have a current account surplus, you know what that means? That means that the pipe is on, and it is filling up the foreign exchange market. So we have a positive current account surplus,” he said.

Governor Byles also noted that dollarisation, which measures the ratio of US dollar deposits to Jamaican dollar deposits in the deposit-taking institutions (DTIs) sector, has decreased from 44 per cent in January 2022 to 39 per cent. This indicates a growing trust in the Jamaican dollar, with fewer savings being held in US dollars. Furthermore, Jamaica’s issuance of its first Jamaican dollar-denominated bond on the international market signals that foreign investors are increasingly willing to take on Jamaican dollar risk. This development, combined with the downward trend in inflation, suggests that interest rates will soon decline, stabilising within the 4-6 per cent corridor. According to Byles, this outlook warrants optimism.

On the horizon, a comprehensive framework is being developed to address troubled financial institutions, prioritising financial stability and confidence. Although Governor Byles refrained from sharing specific details, he emphasised that this new framework is a crucial piece of legislation designed to safeguard depositors’ interests and protect taxpayers.

“When a financial institution fails and the taxpayer has to draw the check, it’s your lifelong debt. You have to carry that anchor around your neck. This legislation is designed to not only make sure that institutions stay safe, but the moment they show a sign of weakness, they trigger a process that ensures they do not become a liability to the taxpayer or to the normal, ordinary Jamaican. And that is coming shortly,” he shared.