BOJ prepares for 'twin peaks' transition
...readies system, staff
BOJ Governor Richard Byles (right) at the press conference on January 23, 2023 at which Finance Minister Nigel Clarke announced proposed changes to the regulation of the financial sector. Next to him (from right) are, Septimus Blake, CEO, NCB; Wayne Robinson, senior deputy governor, BOJ; Metry Seaga, president of the PSOJ and Steven Gooden, CEO, NCB Capital Markets. (Photo: Karl Mclarty)

FURTHER to Minister of Finance and the Public Service Dr Nigel Clarke's announcement last week Monday that the Bank of Jamaica (BOJ) will be given the responsibility of micro-prudential supervision of deposit-taking institutions (DTIs) and non-bank financial institutions (NBFI), the central bank has indicated that it is now in the process of preparing its operational systems and staff members to transition to the "twin peaks" regulatory framework.

Clarke said the 'twin peaks' regulatory model will be introduced after legislative changes are made in the next 18-24 months.

The first peak would be prudential supervision focusing on the health and soundness of financial firms. As these financial firms have become increasingly interwoven in financial conglomerates, the vision of integrated cross-sector prudential supervision is increasingly compelling.

That prudential supervision will see the BOJ adding the supervision of securities dealers, insurance companies, and pension funds which constitute NBFIs, to its reporting system which now involves commercial banks, merchant banks, building societies, and soon to be added, credit unions.

"Bank of Jamaica is equipped with the personnel, technology and the supervisory systems at globally accepted and recognised standards to undertake its existing micro-prudential supervisory activities. The central bank is committed to strengthening its systems, upgrading the competencies of BOJ staff, as well as collaborating to synergise the appropriate technical skills at the Financial Services Commission (FSC) to fulfill the central bank's additional responsibilities for the fair, transparent, open and diligent regulation and supervision of all financial institutions to global standards as prescribed by law and government policy," the bank shared in a release last week.

With the BOJ taking over supervision of both DTIs and NBFIs, the FSC will be given a new mandate to monitor market conduct and enforce and ensure consumer protection in the financial services sector. The FSC would solely focus on the proper functioning of markets and fair treatment of consumers, instead of regulating as it now does. As such, in the FSC's new role it "will receive complaints, investigate complaints, adjudicate and apply penalties" as needed, according to Minister Clarke.

"The BOJ team will be working closely with the management and staff of the FSC to give effect to the transition that will include the transfer of responsibility for market conduct of DTIs to the FSC, which will also have added to its remit financial consumer protection, in addition to retaining market conduct oversight for NBFIs. The two entities will also be cooperating to undertake the necessary assessment of the required amendments to the legislative, policy and institutional frameworks to give effect to the new government policy," the release from the BOJ said.

So far, the minister of finance has appointed BOJ Governor Richard Byles as chairman of FSC's board of commissioners and Major Keron Burrell as executive director-designate. The latter, who will be on secondment from the central bank, last Thursday, January 26 met with management and line staff of the FSC to encourage them to continue offering their best during the ongoing transition and beyond.

At the same time, Byles said the new FSC board will be depending on the continued commitment and professionalism of the organisation's management and staff in creating a new FSC and implementing the necessary steps towards achieving the stated objectives of the Government.

"Bank of Jamaica and the FSC will be consulting with the requisite stakeholders in the public and private sectors to ensure the seamless and effective implementation of the responsibilities of the organisations," the central bank outlined.

"As Bank of Jamaica embarks on the processes required for the consolidation of prudential regulatory supervision of DTIs and NBFIs, BOJ will provide updates to the minister of finance and the public service and other stakeholders, including the people of Jamaica and local and global investors," it concluded.

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