JAMAICA’S banking sector, long upheld as a model of profitability and resilience, is grappling with deep structural risks that could threaten its stability, S&P Global has warned.

In its latest Banking Industry Country Risk Assessment, S&P Global describes the sector’s strengths as robust, stating, “Banks’ healthy regulatory capital, asset quality, and profitability should persist in 2026 as macroeconomic conditions improve.” The agency also pointed out that customer deposits, which “have covered about 100 per cent of the system’s loans in recent years”, have provided stability, reflecting “customers’ confidence in the system”.

However, S&P cautions that underlying vulnerabilities are obscured by these outward signs of strength. The agency highlights that Jamaica’s “large informal workforce and low GDP per capita — forecast at US$8,496 for 2025 and rising only modestly to US$8,875 by 2026 — still limit the private sector’s debt capacity, which remains below that of larger Latin American and Caribbean countries”.

“Low GDP per capita limits debt capacity, with banks’ loan portfolios exposed to cyclical economic sectors,” the agency warns.

This limitation constrains lending and reduces the size and stability of the market for banking products. S&P highlights that Jamaica’s private-sector debt-to-GDP ratio is approximately 51 per cent, describing financial leverage as “manageable”, but noting that “credit risk remains elevated because of the predominance of informal employment and moderate household income levels”.

This informal activity, described as “vast”, narrows the pool of borrowers and introduces more risk into bank lending.

Further complications are presented by “unregulated competitors [that] introduce market distortions”, notably credit unions, which S&P says “create some distortions in the system”.

However, it noted the work of regulators like the Bank of Jamaica that have “started an initiative to establish a formal supervisory framework for credit unions, which could help stabilise operating conditions in the coming years.”

A protracted reform path also features in the S&P analysis. According to the report, “Regulation for financial institutions is still in the process of being aligned with international standards.” The adoption of “a Basel III-type framework” and introduction of the ‘twin peaks’ model for supervision is expected to be gradual, requiring adjustments for Jamaica’s “specific characteristics and challenges”.

The report also notes that the banks face risks from their exposure to volatile industries like tourism, agriculture, and construction, as well as from hurricanes and droughts. This is despite forecasts that problem loans will remain stable at a low level of 2.4-2.6 per cent.

Trickle-Down Impact on Everyday Jamaicans

These systemic issues have a direct impact on ordinary Jamaicans. While savings in banks remain secure for now, S&P said the situation can “make it harder and more expensive for individuals and small businesses to access credit”. The agency pointed out that faced with a riskier environment, banks may tighten lending criteria or raise interest rates, creating hurdles for obtaining a mortgage or a business loan.

Still, the impact extends beyond individual borrowers to the government’s finances. The report observes that a “large informal economy means the government loses substantial tax revenue that could otherwise be invested in public services”, warning that these deficits can perpetuate a cycle of informality and constrain national economic development.

S&P also highlights that “slow-moving financial reforms” delay crucial updates to banking oversight, leaving the rules for preventing a crisis weaker than international standards. While the Bank of Jamaica has started implementing a Basel III-style framework and a new ‘twin peaks’ supervision model, S&P expects this alignment to be a “gradual” process.

Broader Economic and Social Repercussions

The problem also carries a steep social cost, as a large informal economy starves the government of tax revenue needed for public services like healthcare and education. This creates a vicious cycle: a lack of public investment perpetuates the very informality that weakens the system.

Further complicating the landscape are unregulated financial competitors, such as credit unions, which S&P says “introduce market distortions”. While commercial banks dominate the sector, these unsupervised entities create an uneven playing field and blind spots for regulators.

The core of S&P’s warning is that Jamaica’s hard-won economic stability is now in a delicate position. The nation’s progress is contingent on addressing these deep-seated flaws with urgency. The stability of the financial system — a cornerstone of daily life — depends on bridging the gap between outward profitability and inward resilience.