BOJ establishes ‘twin peaks’ committee
THE Bank of Jamaica (BOJ) has indicated that credit unions will finally fall within the ambits of its regulation when the supervision structure for the nation’s financial sector is transitioned from sector-by-sector regulation to a “twin peaks” regulation model.
The transition towards a twin peaks supervisory model for the financial sector is set to end in the 2024/25 fiscal year. It will see the Financial Services Commission (FSC) becoming a consumer protection and market conduct supervisor for financial entities while the BOJ will ensure the entities are financially sound as the prudential regulator. The BOJ has so far established a committee to help it navigate the intricacies of the transition.
The central bank, writing in its just-published 2022 Financial Stability Report — the report for the prior year is published at the end of March of the current year — said the key areas of focus for each group are (i) prudential supervision unification, (ii) legislative amendments processes and governance issues, (iii) human resources, (iv) technology and facilities management, and (v) conduct regulation and consumer protection unification.
The transition to the twin peaks model will involve three components: interim management, legal reform and institutional restructuring, and change management.
The interim management component of the transition is currently underway as new appointments to the board and management of the FSC have been made. During this stage the BOJ and the FSC will maintain their distinct regulatory roles while a framework for the merger of responsibilities is developed. The new board and management, along with help from consultants and multilateral partners, will facilitate this process. Additionally, the legislative component will involve the drafting and implementation of relevant amendments to the FSC and BOJ Acts, among other legislation, and the institutional reform component will involve organisational reviews to decide on new structures and staffing arrangements.
In addition to that, the central bank pointed out that when it becomes the unified prudential regulator the “new approach will engender a more extensive view of Jamaica’s financial landscape, spanning the banking, credit union, securities dealers, insurance, and pension industries”.
The central bank currently supervises deposit-taking institutions such as commercial banks, merchant banks and building societies. Though credit unions are deposit-taking institutions, they have never come in for direct supervision from the BOJ. However credit unions have been designated as ‘specified financial institutions’ under the Bank of Jamaica Act as a preliminary step towards placing these institutions under the supervisory oversight of the Bank of Jamaica. This specification currently enables the central bank to obtain information on their operations.