THE Senate has approved amendments to legislation strengthening the regulatory powers of the central bank in the financial sector, including giving it the right to insist that deposit-taking institutions be decoupled from other firms in a group and revoking the licences of institutions which fail to comply.

The issue raised little stir when the amendments to the Bank of Jamaica Act, the Banking Act, the Building Societies Act and the Financial Institutions Act, moved through the lower House.

But on Thursday in the Senate, the Opposition declared the powers being granted to the Bank of Jamaica, which is legally the supervisor of banks, to be “extremely wide and dangerous powers”.

It could result in the closure of banks that merely fail to provide information the authorities request, argued Opposition senator, Anthony Johnson.

The new powers to the BOJ is the latest in a series of laws to strengthen the regulatory powers of the authorities since the mid-1990s systemic collapse of banks and insurance companies.

The government blamed the melt-down, for which it has a bail-out bill of over $120 billion, on loose inter-company lending by banks which were part of groups, poor internal management and risk assessment, expansion outside their core business and a mismatch of assets and liabilities.

Government critics, however, have argued that that is only one part of the story. They point to inappropriate policies which undermined growth, a lax management of money supply and then an over-zealous attempt to correct the problem, which caused interest rates to spiral, driving businesses to the wall. All this was complicated, the critics insist, by the government’s voracious appetite for debt.

However, in the wake of the crisis, the central bank was given greater say over who could own and manage banks and financial institutions had to provide a wider range of information than before.

With these latest amendments, the supervisor will have the power to demand that “any company which is a member of a group of which a bank is a member, or as the case may require, all companies within that group to submit… information” which the central bank “considers necessary for the effective supervision of the bank concerned”.

The kind of information that may be demanded would relate to the effect of the group’s operation on a commercial bank, merchant bank or building society and whether the group is obtaining financing or other benefit “directly or indirectly” from the deposit-taking institution.

The regulators will also have the authority to delve into the risk management capability of the group as whole.

In piloting the amendments, the leader of government business in the Senate, Burchell Whiteman, said that they were aimed at plugging existing loopholes in the legislation.

“This situation arises in the context of several institutions which, by the size of their managed portfolio, are not pursuing banking business as their core business,” said Whiteman.

However, Jamaica Labour Party (JLP) member Johnson, argued that legislation with such sweeping powers should have been widely discussed before being debated in Parliament, and he claimed that the authorities would now have the right to go on “fishing expeditions” inside companies.

“I suspect the reason we are not given a white paper is because they want to be able to go on fishing expeditions into the private affairs of firms and individuals,” Johnson said.

The attorney-general, A J Nicholson, denied the claim, saying that the request for information would be limited to prescribed areas.

Johnson was not assuaged.

“We are giving the right for a banker’s licence to be revoked if the bank refuses to act in a certain manner,” he lamented. “I don’t think, frankly, that this is a matter which should be glossed over lightly because it is extending and expanding the powers of the regulatory authority and I can’t see the reason for it.”