THERE are expected to be additional board changes amongst financial holding companies (FHC) and deposit-taking institutions (DTI) during 2026 as firms move to comply with the Bank of Jamaica’s (BOJ) new corporate governance rules.

The BOJ published a standard of sound practice for effective corporate governance of DTIs and FHCs in November 2025. This standard outlines a new framework for the composition and standards for boards of FHCs and DTIs. The new standard came into effect on November 21, with existing FHCs and DTIs having a one-year conformance period to enable full compliance with the provisions in the standard.

“In keeping with its mandate for maintaining the stability of the financial system, Bank of Jamaica maintains a keen interest in promoting sound corporate governance at DTIs and FHCs as it is an essential element in the safe and sound functioning of each institution and may adversely affect its risk profile if it is not operating effectively,” the standard stated in its introduction.

The BOJ published a consultation paper in December 2024 and received feedback up to March 2025 on this new standard for the financial sector. While this new standard does not possess the force of law, direct contravention or non-observance by licensed FHCs and DTIs can be regarded as evidence of “unsafe and unsound” business practice. This would open a licensee to remedial action under Section 109 of the Banking Services Act (BSA) 2014.

The significance of these standards has already resulted in FHCs such as NCB Financial Group Limited (NCBFG), Scotia Group Jamaica Limited (SGJ) and JMMB Financial Holdings Limited (JMMBFH) making changes to their board compositions over the last two years. These changes involved the FHCs or their main group board reducing the number of independent directors that sit on both boards, along with those of their subsidiaries.

These developments arise from the new standard placing limits on cross-directorships and the BOJ’s intention to issue supervisory rules to increase the statutory minimum fraction of independent directors on the boards of FHCs and DTIs. Currently, Section 34 of the BSA requires that at least one-third of the board of directors consist of independent directors. The BOJ’s new supervisory rules would increase this threshold to a fraction which allows for independent directors to constitute a majority of the board of directors.

The new standard also outlines new directorship limits among entities within the financial group or FHC. If a DTI is a subsidiary of a FHC, the aggregate number of directors from the DTI and other subsidiaries within the group shouldn’t exceed 30 per cent of the total membership of the FHC’s board. There is also a restriction where the number of directors on boards of entities within financial groups concurrently serving on the board of a DTI within the group shouldn’t exceed 30 per cent of the DTI’s total board membership.

Thus, if bank A is a subsidiary of FHC A which has 10 directors, there shouldn’t be more than three directors from bank A or other subsidiaries sitting on the FHC’s board of directors. These new guidelines aren’t meant to prohibit cross-directorships but are intended to preserve board independence and prevent undue influence on decision-making authorities across groups.

“The idea behind that particular principle is that you want each board for each financial institution within a group to be independent and think independently about its own mandate. You don’t want conflicts of interest,” said BOJ Deputy Governor Dr Jide Lewis at the recent quarterly monetary press conference held on December 22.

Dr Lewis added, “We’ve written to them to say we want them to begin to adjust so that you have those contending views. We look at those board minutes to see that is prevailing.”

There are currently seven licensed FHCs in Jamaica, which account for 93 per cent of financial sector assets. There were five FHC licenses issued between 2023 to 2024, which saw the reorganisation of DTIs and their subsidiaries. While this move gave better oversight for the central bank into the financial sector, the result of these reorganisations was that there were mirror boards between FHCs and DTIs, effectively blurring the views which may exist at each entity.

Under the new standard, there is expected to be more constructive tension between boards as there are more degrees of separation between both boards of directors. The BOJ has also stipulated through this new standard that each board committee must have at least three directors, a majority of which must be independent and be chaired by an independent director. While the BOJ has not barred the inclusion of executive directors on board committees, the standard does not recommend that board committees have an executive director except for the board nominations and remuneration committee. Each FHC and DTI board is required to have at least five directors as per the BSA.

“You want the bank and the board of the bank to be focused on making profits, meeting customer needs, but most importantly, protecting depositors. You want the board of the financial holding company to be focused on risks across the group, making sure that different subsidiaries have the liquidity that they need, capital being reallocated,” Dr Lewis explained on the idea of stronger independence.

While NCBFG, SGJ and JMMBFH have made changes to satisfy this requirement ahead of the November 2026 deadline, there is an expectation that there will be additional board changes for different FHCs. An examination by the Jamaica Observer of some DTI and FHC boards revealed significant overlap with independent directors. Some DTI boards are also expected to have additional board appointments to increase the level of independent directors.

The new standard has outlined responsibilities of the board, group governance, risk culture, business conduct, and other considerations surrounding governance. The BOJ’s move to add these governance changes comes at a time as it builds out additional guidelines for FHCs. Some of these guidelines include prudential standards, liquidity coverage ratio (LCR), regulatory arbitrage, and double gearing/double leverage. These all come against the backdrop of the twin peaks regulatory framework, Basel III requirements for DTIs, and the special resolution regime (SRR).

“We haven’t built out the regulatory framework for financial holding companies at this point. That’s something that we’re going to be focusing on come 2026. Our focus for the last few years has been licensing,” Dr Lewis closed.

LEWIS…you want each board for each financial institution within a group to be independent and think independently about its own mandate.