The Bank of Jamaica (BOJ) has indicated that it is waiting on the Ministry of Finance and Public Service (MOFPS) and Cabinet to advance the implementation of the twin peaks regulatory framework.

That was the update provided by Senior Deputy Governor Dr Wayne Robinson at the recent quarterly monetary press conference held on December 22. The twin peaks regulatory framework will see the BOJ’s regulatory scope expanded to cover the prudential regulation of the entire financial sector while the Financial Services Commission (FSC) will oversee market conduct and consumer protection of financial institutions. It was originally announced in January 2023 by former Finance Minister Dr Nigel Clarke following the Stocks and Securities Limited (SSL) scandal which brought international scrutiny onto the Jamaican financial sector.

“The Ministry of Finance is currently finalising the Cabinet submission. As the Governor indicated, that represents the combination of a long period of extended reviews by different agencies of the Government. It’s now up to the ministry in terms of timelines going forward as it relates to Cabinet submission, approval, and the drafting of instructions,” Dr Robinson provided in his update.

The twin peaks regulatory framework was initially slated to take 18 to 24 months to implement, but BOJ Governor Richard Byles indicated in October 2024 that it would likely happen in 2026 due to the onerous nature of Jamaica’s legislative process.

The twin peaks regulatory model is being implemented in four phases known as preparation (phase 1), pilot (phase 2), practicum (phase 3), and implementation (phase 4).

The BOJ conducted joint prudential examinations with the FSC in 2024 and 2025 of securities dealers and life insurance companies while the FSC did market conduct examinations of commercial banks in the same time period. Phase one and phase two are being executed at the same time.

Phase three will involve the secondment of BOJ and FSC employees between both regulators to provide on-the-job training and expand cross-agency understanding of the different supervisory practices. Phase four is the period when the new regulatory model becomes operational and the operational structures and detailed work processes are adopted.

“One of the things that we’re working on is the development of a technology platform that can serve both Bank of Jamaica and the FSC, as well as the licensees in executing their supervisory functions. We think that this is critical as it will drive a lot more efficiencies in the supervisory process, as well as it will reduce the cost of supervision to all of our stakeholders,” stated Dr Robinson on the proactive work being done for this transition.

When Governor Byles spoke to centralbanking.com in late 2023, he indicated that both the FSC and BOJ would have independent board of directors under the proposed twin peaks arrangement. Byles became chairman of the FSC in January 2023 with the BOJ’s Chief Prudential Officer Keron Burrell being seconded to become the FSC’s new executive director after Everton McFarlane resigned.

Apart from Byles, Senior Deputy Governor Dr Wayne Robinson, Deputy Governor Dr Jide Lewis, Deputy Governor E George Roper, and then Senior Director Hillary Ann Robertson were appointed to the FSC’s board of commissioners. That resulted in the BOJ controlling half of the FSC’s 10-member board.

According to the FSC’s website, Ransford Braham, King’s Counsel, is the new chairman of the FSC. Professor Andrew Spencer and Madge Ramsay are the newest additions to the FSC’s board. Dr Robinson remains the sole BOJ executive on the FSC’s board, which now has eight commissioners. Braham is an attorney-at-law who was recently a Senator up to February 2025 and was the legal counsel for Prime Minister Dr Andrew Holness in 2024.

Governor Byles’ current contract is slated to expire in August 2026. Byles was appointed in August 2019 under a seven-year contract. The central bank executive turns 75 next month, culminating a career across the public and private sector shaping Jamaica in different roles.

Banks await Basel III timeline

The transition for deposit-taking institutions (DTIs) to the new Basel III standard appears to be on track as the BOJ finishes up work on the new capital standards. The Basel III framework was developed as a response to the 2008 financial crisis by the Basel Committee on Banking Supervision of the Bank for International Settlements. They aim to make banks stronger and more resilient.

“Where we are now is wrapping up our recommendations for drafting instructions. We haven’t finalised that, but I would say that we’re 95 per cent of the way there. So within the first quarter of next year [2026], we anticipate that we would be submitting that to the Ministry of Finance for their consideration,” said Deputy Governor Dr Lewis, who is responsible for Financial Institutions Supervisory Division.

Dr Lewis added, “Typically, regulations and the passage of regulations through that approval process is not as lengthy as for primary legislation. So we don’t anticipate that will be too much of a prolonged process, but that is something that is outside of the control of the central bank.”

The BOJ pushed an amendment to the liquidity coverage ratio (LCR) from 100 per cent to 120 per cent during 2024. Basel III will see changes to the bank’s capital requirements with the introduction of the capital conservation buffer (CCB) and countercyclical capital buffer (CCYB) to strengthen the financial system. When certain legislative requirements take place, the BOJ noted that there would be a one-year phase in arrangement and the CCB would be adjusted by 0.5 per cent each year until it hits 2.5 per cent.

The BOJ Deputy Governor noted that certain considerations were accounted for after consultation with the industry. This included the ability for banks to amortise their technology investments over two to three years instead of doing it all at once. The risk weighting for different types of loans to SME’s, households/individuals, and mortgages were also amended to match the Jamaican context. Regulatory capital calculations for banks don’t take into account intangible assets like computer software.

Jamaica’s financial sector is expected to come under additional pressure over the next four to five quarters as the BOJ expects the non-performing loan (NPL) ratio to double from the pre-Melissa figure of 2.7 per cent to possibly six per cent. However, this is below the 10 per cent consideration mark at which central banks begin to worry. Also, Dr Lewis pointed out that the capital adequacy ratio for DTIs was 14.5 per cent before Hurricane Melissa, well above the 10 per cent regulatory minimum. Several banks have been bulking up their regulatory capital in anticipation of the Basel III changes.

“All banks meet and are compliant with both Basel I and Basel III. So we’re not anticipating any cliff effects when those regulations come into force because they’ve already embedded all of those accounting standards technology in terms of reporting. Once it’s promulgated, we expect a very smooth transition that will redound to the safety and soundness of the banking system,” Dr Lewis closed.

ROBINSON…one of the things that we’re working on is the development of a technology platform that can serve both Bank of Jamaica and the FSC.