BANKS will face fines for breaching the recently announced minimum service standards for automated banking machines (ABMs) when the new regulatory regime for the financial sector takes effect in 2026, Finance Minister Nigel Clarke told Parliament in an update on Tuesday.

In the wake of public outcry with regard to ABMs and their downtime or lack of adequate cash in recent months, Bank of Jamaica (BOJ) in April issued a set of eight service standards deposit-taking institutions (DTIs) should follow to improve service to the public, but shied away from including fines if the standards are not upheld. The central bank instead said the DTIs would come under increased scrutiny if, for example, less than 90 per cent of their ABMs are working at any one time. In addition, it told banks that its ABMs that are working should be up at least 95 per cent of the time and should not be out of cash for more than one hour in urban areas and three hours in rural areas.

Since announcing the standards, the central bank has been publishing data on the performance of ABMs owned by the country’s DTIs as part of efforts to bring that increased scrutiny, but Clarke has now announced that banks in breach of the ABM standards will be fined when the Twin Peaks model of financial regulation is implemented and the Financial Services Commission (FSC) is tasked with market conduct and consumer protection regulation under a successor agency, the Financial Services Conduct Authority (FSCA).

“The laws governing the BOJ and the FSC do not at present provide them with legal authority to enforce such standards related to consumer protection through the imposition of fines,” Clarke told the House of Representatives as he outlined the current framework.

“It is proposed that this will be addressed in the future dispensation under the legislative changes proposed to be made under the Twin Peaks model,” Clarke added.

The fines are to be determined in the legislation to the drafted for the implementation of the Twin Peaks model and will take effect when implemented, with that timeline now set for 2026.

Asked both by Opposition spokesman on finance Julian Robinson and St Catherine Southern Member of Parliament Fitz Jackson why the delay until 2026 to draft legislation before banks start facing fines for breaching the ABM standards, Clarke insisted that it was better to do everything one time in the comprehensive legislation that is to be drafted for the change to regulating the financial sector under the Twin Peaks model.

“If we divert attention away from drafting…the comprehensive legislation to pursue [legislation to implement fines for breaching] ABM [standards] or fees [that] will delay the implementation much further,” he said. Clarke said the legislation will be drafted from “September or October” this year.

He added that since the publication of new ABM guidelines in April and the BOJ publishing the performances of each bank’s ABM network, there has been a marked improvement in the level of service customers are receiving at the machines. He read statistics published by the BOJ showing that in March, about 93 per cent of ABMs were working and in May, that improved to 97.5 per cent.

“Nobody wants to be last on that list or to be towards the bottom, so it has already led to certainly plans for massive investments in ABMs,” Clarke pointed out as he cheered the BOJs publication citing it has pushed banks to improve. But he said the addition of more ABMs to improve service standards will take some time, since it takes about 6 to 9 months for an ABM to arrive in Jamaica after it is ordered.

The finance minister also told the House that the financial sector will undergo a “practice period” starting this month and will run through until Twin Peaks is fully implemented in 2026. He said other than the recently announced ABM guidelines, other standards will be published during the practice period, though he gave no indication what those standards will be, but, he said, like the ABM standards, they will be part of the new legislation to be drafted for the Twin Peaks model and “will be incorporated as legally binding regulations, when the market conduct and consumer protection framework is passed into law.”

He added in notes that the various institutions and umbrella associations in the financial sector are now being provided with detailed information on the proposed Twin Peak practice period.

The Twin Peaks Practice will occur in phases.

– Preparation Phase

The aim of this initial phase is to build capacity of the members of FSC and BOJ teams assigned to market conduct and prudential regulation, through training.

– Pilot Phase

The pilot phase will seek to further deepen the capacity building process by:

(a) Carrying out simulation exercises involving the application of proposed requirements and supervisory models that will be implemented when Twin Peaks goes live, to mimic real-life regulatory cases both prudential and market conduct;

(b) Commencing a joint examination of selected conglomerates which have both DTI and non-DTI operations; and

(c) The publication of joint standards which will govern the behaviour of licensees of BOJ and FSC under both the prudential and market conduct/consumer protection ‘Peaks.’

– Practicum Phase:

During this phase staff from BOJ will be seconded to FSC and vice versa in order to gain deeper exposure in the supervision and regulation of all segments within the financial sector.

– Implementation Phase:

This phase will allow for seamless transition to Twin Peaks by implementing in both regulators the operational structure that it is anticipated will exist after legal cut-over. Until legal cut-over, the two regulators will continue to utilise existing laws in terms of approvals/rejections, on-site examinations, off-site monitoring, risk mitigation/prompt corrective action and enforcement.

Under the Twin Peaks model, the BOJ will be charged with scurtinising the books of all financial institutions in Jamaica to ensure they are safe and sound, that is one peak, while the second peak will have the new FSCA that will ensure that consumer and market issues are dealt with. Currently, Jamaica has a sectoral regulation of the financial sector, with the BOJ regulating banks and the FSC regulating non-bank financial institutions.