The Bank of Jamaica (BOJ) has written to Cornerstone United Holdings Jamaica Limited (CUHJL) stating it has no objection to a proposed reorganisation of the financial group.

According to OBSERVER ONLINE sources, the central bank confirmed the no-objection pursuant to Section 7 of the Banking Services Act in a letter dated March 10, under the signature of BOJ Governor Richard Byles, on condition that Barita Finance Limited and MJR Real Estate Holdings Limited be consolidated in the group for prudential reporting purposes.

PricewaterhouseCoopers, according to sources, oversaw the consolidation of the financial results of the Cornerstone Group which includes Barita, Cornerstone Trust and Merchant Bank, Cornerstone Financial Holdings Limited, CUHJ, and the managed SPVs.

As a prerequisite to the approval, it is also understood that Cornerstone would have had to submit information to the BOJ from 2018/19 to 2021/22 with the application being submitted in 2021/22.

Similar approvals were recently given to Victoria Mutual Group and JMMB Group ahead of FHC licensing. NCB Financial Group and Jamaica National Group are among other financial institutions to have received similar authorisations from the central bank.

The reorganisation of the financial groups is pursuant to Sections 69 and 70 of the Banking Services Act which requires every group of companies containing a deposit taking institution (DTI) to hold all regulated entities under one financial holding company to enable consolidated supervision by the BOJ.

Given that the Cornerstone Group owns both CTMB, which is a DTI, together with Barita Investments Limited, and Barita Unit Trusts Management Company Limited, which are additional regulated entities, the Act requires the reorganisation of the group to consolidate the ownership of all regulated entities under a financial holding company.

Currently, Cornerstone Financial Holdings Limited (Barbados) owns 75 per cent of Barita while CTMB is wholly owned by Cornerstone United Holdings Jamaica.

OBSERVER ONLINE understands that following the restructuring of the Cornerstone Group via a court sanctioned scheme of arrangement, both Barita and CTMB will be owned 100 per cent by a financial holding company, to be named Cornerstone Financial Group Limited.

Mark Myers, Chairman of CUHJ and Barita, said “the BOJ’s no objection is made possible by the hard work of our boards, Paul Simpson, and the executive team.”

According to the chairman, “the executive team has been exemplary over the past four years with their unmatched, work ethic, putting in 17-hour days, six days per week, especially at the heights of the pandemic. In speaking for myself as chairman, and on behalf of the Boards across the various groups, I can say that Paul Simpson, Jason Chambers, and the team have managed the business in a safe and sound way with the highest levels of prudence, integrity, competence and foresight, which have formed the bedrock of our Group and redounded to our success over the last several years. The Board has deliberately established best practices as it relates to governance including independence of our audit, compliance, and risk management functions. I am truly happy to be working with this esteemed team.”

Simpson, who is the founder, president and CEO of the Cornerstone Group, added: “The vision for our Group was always to provide frictionless integrated banking, investment banking, infrastructure and real estate investments in building Jamaica first, and the wider Caribbean at large. Even before final implementation of the BSA, it was clear to me and the initial shareholders of our Group all the way back in October 2013, that in order to fulfil our business objectives, it would be critical for our Group to be well positioned through our corporate structure to fairly seamlessly enable, at a future date, the consolidation of the ownership of our bank and all other regulated entities under one financial holding company.

“The other initial shareholders and I, who would have commenced this journey some 10 years ago, are extremely proud to acknowledge the fact that we are one step closer to having significant impact in Jamaica, the wider Caribbean, and the Americas. As a key enabler to effecting the future consolidation of our Group in accordance with the law, the initial shareholders of our Group ensured that the requirement for the shareholdings and shareholders of CFHL and CUHJ to be mirrored at all times, was enshrined in the articles of CUHJ. This has always been a key ethos to ensure that no shareholder who initially placed their faith and confidence in me in 2013, is left behind,” Simpson said.

Following the reorganisation of the Cornerstone Group, it is expected that shares of the new FHC, Cornerstone Financial Group, will be offered over the JSE in exchange for shares in Barita. Similar exercises were carried out by the Scotia Group in 2007, followed by the JMMB Group in 2015, and NCB in 2016.

“The listing of the FHC will create and unlock tremendous value for initial and recent Cornerstone shareholders while offering shareholders of Barita and the public significant value via the opportunity to own the banking operations of the Cornerstone Group as well which is expected to grow market share over the next few years exponentially through a digital focused strategy supported by reduced transaction related fees, and seamless and frictionless digital service delivery,” said Jason Chambers, Chief Investment Officer of the Group.

“The reorganisation is also expected to drive greater efficiencies within the new Group in realising certain technical and operational internal economies of scale which we expect to compliment our existing key value drivers,” added Chambers.

MJR Real Estate Holdings Limited, managed by Barita, is expected to continue to play a pivotal role in generating alpha for the Cornerstone Group. With Barita’s off-book real estate vehicle owning over 2,000 acres of prime real estate for large-scaled future development purposes, there is significant off-balance sheet value that is yet to be unlocked for the shareholders and other stakeholders of Barita and Cornerstone.

According to Chambers, “Cornerstone is in advanced talks with global partners for infrastructure and real estate development, who will provide up-front cash injection as capital, towards funding project development vehicles, thereby immediately impacting the cash flow profile of the assets. The Cornerstone Group, in conjunction with its strategic partners, will enable a structured, phased development of the property holdings over the next several months to years which provides line of sight to significant cash flows and sustainable value creation for shareholders, the wider community, and Jamaica.”

Chambers continued, “As real estate experts know, the development of 2,000 acres of ocean-front, real estate property is long-tailed and so will necessarily be undertaken over time and Cornerstone has already commenced the planning and engineering phase for these developments, which is being undertaken in conjunction with leading global partners.

“An important part of Cornerstone’s future plans is to make these real estate development vehicles accessible to the public for investment exposures, which is consistent with our Group’s ethos of democratizing wealth creation for Jamaican and Caribbean person, as well as catalyzing foreign direct investments in Jamaica and the Americas,” Chambers added.