Legislation

The Bank of Jamaica’s supervisory authority and responsibility for deposit-taking financial institutions is established by virtue of a number of Primary and Secondary Legislative Acts of Parliament. These statutes provide the legal and policy parameters for the licensing and supervision of deposit-taking financial institutions, as well as the various powers available to the BOJ and the Minister of Finance in the event that bank distress or failure appear imminent or threatens the soundness of the financial system. Secondary legislation prescribing prudential criteria and minimum solvency standards to be maintained by licensees, also specify the precise requirements and procedures in dealing with certain areas of operations of commercial banks, merchant banks and building societies. (See also Recent Legislative Changes – “Banking Services Act” below)

Principal Legislation
The Bank of Jamaica Act, 1960 (amended 1992, 1994, 1995, 2001, 2002, 2004, 2005,2009,2010)
Amendment of Bank of Jamaica Act (Tenth Schedule Banking Services Act, 2014)
Act to amend the Bank of Jamaica Act – Act 24 of 2015
Act to amend the Bank of Jamaica Act – Act 32 of 2017
The Banking Services Act, 2014
The Building Societies Act, 1897 (amended 1995, 2002, 2004)
*Note: The Building Societies Act also amended by section 138(2) of the Banking Services Act 2014

Subsidiary Legislation
The Banking Services (Deposit Taking Institutions)(Agent Banking) Regulations, Resolution, 2016
The Banking Services (Deposit Taking Institutions) (Customer Related Matters)Code of Conduct, 2016
The Banking Services (Deposit Taking Institutions)(Licence Application) Rules, 2015
The Banking Services (Establishment of Branches) Regulations, 2015
The Banking Services (Amalgamations and Transfers) (Banks and Merchant Banks), Regulations, 2015
The Banking Services (Licence Fees) Regulations, 2015
The Banking Services (Deposit Taking Institutions) (Capital Adequacy) Regulations, 2015
The Banking Services (Hours of Opening) Regulations, 2015

 

Licensees also have statutory responsibilities under other pieces of legislation the administration of which reside principally with other competent authorities (e.g. The Jamaica Deposit Insurance Corporation; The Financial Intelligence Division; the Department of Public Prosecution):

Other Legislation
The Income Tax Act
Deposit Insurance Act, 1998
Companies Act, 2004
Terrorism Prevention Act, 2005
Proceeds of Crimes Act, 2007
Financial Investigations Division Act, 2010
Terrorism Prevention (Reporting Entities) Regulations, 2010
Credit Reporting Act, 2010
Copies available at the Ministry of Justice

Recent Legislative Changes
During 2018, there was no new legislation governing institutions supervised or regulated by the Bank of Jamaica.

LEGISLATIVE AMENDMENTS AND DEVELOPMENT OF SUBSIDIARY LEGISLATION
On-going review of the legislative framework is a necessary and fundamental step in achieving supervisory policy and developmental objectives, especially given the dynamism in local and international markets and the evolving nature of international best practice standards in banking supervision. In this regard, the Bank of Jamaica is involved in a number of initiatives for amendment of legislation and development of related Regulations as follows:

The Bank of Jamaica (Amendment) Bill
The Bank of Jamaica Act is to be amended to, clarify the mandate of the central bank; and to strengthen the central bank’s governance framework to ensure it supports the mandate. Accordingly the Bill reflects –

The mandate of the Bank is the maintenance of price stability and financial system stability with the primary objective being the maintenance of price stability;

Revised appointment mechanisms, composition requirements and tenure for the Board;

Express statutory fit and proper requirements for Board and executive management appointments;

Provisions designed to improve the financial independence of the central bank from central government – this means

  1. updating the statutory minimum capital requirement to a percentage of monetary liabilities; restricting the ability to make temporary advances to the Government; prohibiting the central bank from purchasing or acquiring on a primary issue securities issued or guaranteed by the Government;
  2. removing the requirement for Minister’s approval in matters of staff emoluments;
  3. exempting the central bank from the requirements of the PBMA. In this regard Regulations that will substantially incorporate the governance principles for public bodies under the PBMA are also proposed under the BOJ Act.

The relevant bill was tabled in Parliament in October 2018 and is being reviewed by a Joint Select Committee of Parliament.

The Co-operative Societies Amendment Bill
This amendment to the Cooperative Societies Act will, among other things, bring credit union cooperative societies under the regulatory ambit of the Minister of Finance and the Public Service and the Bank of Jamaica. Accordingly, this Bill includes provisions that will restrict the deposit-taking activities of cooperative societies to those cooperative societies, which operate as credit unions. Other substantive enhancements to the Cooperative Societies Act are contemplated by the Ministry of Industry, Investment, Agriculture and Fisheries (MICAF) (formerly Ministry of Industry, Investment and Commerce (MIIC)), which is the Ministry with portfolio responsibility for cooperative societies. It is anticipated that this Bill will be presented to Parliament jointly with the proposed Credit Unions (Special Provisions) Act which, contains the substantive prudential requirements to which credit unions will be subject once the aforesaid regulatory regime comes into effect. [1]

The Credit Unions (Special Provisions) Bill
A decision was taken to revise the regulatory legal framework that governs credit unions. The requisite Cabinet submission from Ministry of Finance & Public Service (MOFPS) was considered by Cabinet on 01 May, 2017 and approved. The Bill contains the framework that was initially proposed as Regulations to bring the operations of credit unions fully under the Bank of Jamaica’s prudential supervisory regime. Accordingly, the Bill will cover, among other things, licensing, capital, reserves, prohibited business, remedial and intervention processes as well as defines the role of specially authorized credit unions (see Supervision of Deposit-Taking Financial Institutions).

The Micro Credit Bill
To address the proliferation of privately-owned money-lending businesses operating in Jamaica, a determination was made for these institutions to be regulated by the Bank of Jamaica, while overseeing consumer protection will be undertaken by the Consumer Affairs Commission pursuant to the Consumer Protection Act. This is to ensure that these services operate within an environment of transparency and accountability and that the operations of these services are not used to facilitate financial crimes. The Bill will create a licensing regime and will incorporate the usual safeguards: of fit and proper requirements for licensees and their owners; establish operating requirements for licensees; and mandate the inclusion of processes to address complaints. The regime will accord the standard regulatory powers to conduct inspections, examine the records of licensees, impose regulatory sanctions for non-compliance and issue standards and guidance as well as a Code of Conduct for the money-lending services that will be governed by this legislation. Penalties with custodial sentences will be applicable on conviction for committing an offence in this legislation and the regime will allow for the less egregious offences to be answered by payment of a fixed penalty. The Bill also reflects that breaches of lending arrangements between borrowers and licensees can be referred to the Commission for resolution. A draft of the proposed Bill is currently with stakeholders for comments.

Pending Subsidiary Financial Legislation (Regulations, Rules, Codes of Conduct)

  1. Regulations - The Banking Services (Capital Adequacy) Regulations These regulations will address, among other things, the consolidated capital adequacy requirements for all licensees (i.e. deposit taking institutions (DTIs) and their financial holding companies (FHCs) under the Banking Services Act (BSA). These requirements were developed primarily in line with the Basel I Accord, (which is primarily credit risk based) and included minor aspects of the Basel II Capital Framework. However, following the conclusion of Jamaica’s Financial Sector Stability Assessment Programme (FSAP) in September 2018, one of the recommended actions for the Bank is to ensure the regulatory capital regime for licensees under the BSA is fully risk based and therefore in line with the applicable international standards (i.e. Basel II and III). The recommendation also reflected that this matter should be prioritized. Accordingly work on the Banking Services (Capital Adequacy) Regulations, 2017, has been suspended. Work on the new minimum capital regulations based on Basel II/III requirements is slated for completion in mid-2019 at which point new capital adequacy regulations will be proposed to repeal and replace the existing Banking Services (Deposit Taking Institutions) (Capital Adequacy) Regulations, 2015.

  2. Supervisory Rules - The Banking Services (Financial Holding Companies) (Licence Application) Rules These rules will be directed to FHCs under the BSA and will, among other things, set out the information which must be provided in an application to be licensed as an FHC under the BSA. The information required includes the same particulars relevant to applicants for a licence to operate as a DTI and as such covers ownership and group structure, financial resources and strength, strategic plans and projections, governance structure and arrangements, risk management and internal controls, corporate governance and IT systems, and details of the recovery and resolution strategy and plans. Applicants are also required to outline recovery options for entities within the financial group headed by the applicant.
    The regime reflected in the draft rules was shared with the industry, stakeholders and wider public on 30 November, 2016 through a consultation process which ended on 31 January, 2017. A draft of the proposed rules is with stakeholders for comments. [2]

  3. Anti-Money Laundering, Counter Financing of Terrorism (AML/CFT) and Proliferation of Weapons of Mass Destruction Rules The international standards on AML/CFT and proliferation (i.e. the revised FATF Recommendations 2013) include a number of enhanced requirements with which countries are asked to comply. [3] These enhanced requirements include the application of a risk based approach to allow competent authorities to ensure that measures to prevent or mitigate money laundering or terrorist financing are commensurate with the risks identified. The rules also enable such authorities to make decisions on how to allocate their resources in the most effective way. Accordingly, the framework that is implemented should, among other things: -

    1. maintain the requisite focus on the risks to the system, customers, services (including the business line and products) and the quality of compliance;
    2. have express triggers for periodic reviews, that is, major events, changes in management or operations;
    3. ensure that the frequency and intensity of supervision are clearly dependent on risks;
    4. ensure consolidated supervisory obligations with respect to AML/CFT remain applicable including the requirement for regulatory co-operation nationally and cross border, including co-operation on a diagonal basis;
    5. ensure that supervisors have the range of disciplinary and financial sanctions (including the application of administrative fines and the power to revoke and/or restrict or suspend the licence); and
    6. ensure that co-operation and collaboration with local competent authorities can be undertaken.

    Proposals for the development of drafting instructions for AML/CFT Supervisory Rules under the Banking Services Act, 2014 and the Bank of Jamaica Act are being developed. These rules will, among other things:

    1. codify the risk based examinations and oversight processes pertaining to the AML/CFT oversight functions of the Bank of Jamaica; and
    2. outline the areas in the BOJ’s AML/CFT Guidance Notes with which compliance will be expressly mandated and allow BOJ to directly sanction breaches of those requirements. The BOJ is currently the competent authority with responsibility for monitoring compliance with the requirements of the Proceeds of Crime Act (POCA) and Terrorism Prevention Act (TPA) for institutions comprising of the following:
      1. DTIs under the BSA;
      2. cambios (Exchange Bureaux);
      3. money transfer and remittance agents and agencies; and
      4. a society registered under the Cooperative Societies Act, which carries on credit union business.

    The requirements under the Guidance Notes with which compliance will be expressly mandated pertain to areas regarding:

    1. Risk Based Framework;
    2. Know Your Customer, Know the Transaction Counterparty and Customer Due Diligence;
    3. Special Guidance - UNSEC Resolutions on the Proliferation of Weapons of Mass Destruction;
    4. Special Guidance - Branches and Subsidiaries;
    5. Nominated Officer Regime;
    6. Board Responsibility and Employee Integrity and Awareness;
    7. Compliance Monitoring;
    8. Transaction Monitoring and Reporting; and
    9. Record Keeping

    The request for drafting instructions for the development of AML/CFT Rules under the BSA was issued to the MOFPS in November 2017. The draft Rules are with stakeholders for review.

  4. Non-Financial Legislation
    1. Establish the National Identification and Registration Authority (NIRA);
    2. Introduce a national identification system (NIDS) through the issue of a National Identification Number and National Identification Card;
    3. Ensure that the NIDS will function as the verification of the identity information for all citizens of Jamaica or for a person who is ordinarily resident in Jamaica; and
    4. Confer on the NIRA the powers and responsibility of administering the NIDS.


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