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Latibeaudiere wants single financial regulator - To lobby for full authority over $1.2 trillion financial sector
published: Friday | October 26, 2007
Lavern Clarke, Business Editor
The Bank of Jamaica. - File
Jamaica's central bank chief, Derick Latibeaudiere, wants one regulatory authority for all finacial institutions, saying he will be pushing for full oversight to be brought under the ambit of the Bank of Jamaica (BoJ).
"My preference," said Latibeaudiere to his colleagues gathered in Montego Bay, "is for an integrated and autonomous supervisory authority within the central bank."
The BoJ governor was in back-to-back meetings yesterday and was unable to expound immediately on his proposal, but has said he plans to lobby for the 'integrated' authority alongside pursuit of independence for the central bank.
Support for proposal
Latibeaudiere's proposal, though he appears to favour a lockdown of the nascent Financial Services Commission or its devolution to a unit of the BoJ, already has some level of support.
Minister without Portfolio Senator Don Wehby, while noting that the proposal is yet to be put formally to the current administration, said discussions have been taking place in financial circles for sometime, and that various models, including the Bank of England, are under review.
"One proposal is for the merger of the FSC and the BOJ," Wehby said Thursday.
"We will have to look carefully and study the best way to have the system structured."
Wehby said he was in the process of reviewing several studies on the issue, but would also want the new boards of the two institutions to weigh in.
The FSC board is to be named next week.
The two top regulators oversee a sector that, based on numbers obtained from the FSC and the BoJ, is valued on assets at $1.18 trillion, credit unions included. The entire financial sector is capitalised at $137 billion.
Commercial banks, of which there are six with another due on stream in 2008, are by far the richest of all financial institutions, with $462 billion of assets. The 34 registered securities dealers are worth $393 billion.
Pension fund managers, which span the insurance and securities sectors, oversee another $132 billion of retirement funds.
Latibeaudiere currently oversees deposit taking institutions, which includes the island's commercial banks, merchant banks and trust companies - referred to as FIA licensees private mortgage lenders or building societies, and, soon, credit unions.
The FSC, which was created six years ago in August 2001 to strengthen oversight of the investment community, regulates some 48 licensees, including 34 securities firms, as well as some 14 life and general insurance companies, and most recently the pensions industry under which some 800 schemes and superannuation funds operate.
The FSC describes itself as an "integrated" regulator.
Potentially harmful
But Latibeaudiere fears losing sight of the big picture, saying the shared oversight could be potentially harmful.
"The Bank of Jamaica has no regulatory authority over these other institutions, which makes it difficult to quickly gather and evaluate the necessary information to facilitate sound policy responses or avert crises," he said in Montego Bay at a gathering of the Association of Supervisors of Banks of Americas.
Latibeaudiere has signalled in the past his discomfort with the status quo and has mandated various companies to put a clear delineation between their deposit-taking operations and other interests.
GraceKennedy was among the first to unbundle its banking business in March, on the directive of the BOJ, creating a holding company to facilitate the move.
Latibeaudiere then confirmed to the Financial Gleaner that he was in talks with "all financial institutions".
Scotiabank Jamaica has also remodelled, and is now 'owned' by a new holding company, Scotia Group Jamaica, which is also parent to Scotia's wealth management business, Dehring Bunting & Golding.
Tighter reins needed
The BOJ's concerns were mirrored this year by the International Monetary Fund which argues that securities dealers needed tighter reins, saying the introduction of more risk-sensitive capital requirements would make them more resilient to interest rate risk.
"Within Jamaica, 65 per cent of the securities market is accounted for by securities firms that belong to the 11 financial conglomerates that dominate the domestic financial System," said the IMF in its Article IV consultation report on Jamaica.
"Within the conglomerates, the importance of the securities arm varies, ranging from 2.0 per cent of the total group assets to 91 per cent. Moreover, many of these conglomerates are active regionally."
In addition, the six banks in Jamaica account for more than 50 per cent of assets in nine countries, said the IMF
Latibeaudiere is not denying that the FSC's creation has made supervision more efficient, but says the linkage between the two was critical for continuous improvement in the analysis and management of risk.
"There are good reasons to believe that such an arrangement would significantly benefit the financial system as a whole," he said. "After all, price stability and financial stability go hand in hand, and prudence is intrinsic to central banking as it is to financial stability and supervision."
lavern.clarke@gleanerjm.com
published: Friday | October 26, 2007
Lavern Clarke, Business Editor
The Bank of Jamaica. - File
Jamaica's central bank chief, Derick Latibeaudiere, wants one regulatory authority for all finacial institutions, saying he will be pushing for full oversight to be brought under the ambit of the Bank of Jamaica (BoJ).
"My preference," said Latibeaudiere to his colleagues gathered in Montego Bay, "is for an integrated and autonomous supervisory authority within the central bank."
The BoJ governor was in back-to-back meetings yesterday and was unable to expound immediately on his proposal, but has said he plans to lobby for the 'integrated' authority alongside pursuit of independence for the central bank.
Support for proposal
Latibeaudiere's proposal, though he appears to favour a lockdown of the nascent Financial Services Commission or its devolution to a unit of the BoJ, already has some level of support.
Minister without Portfolio Senator Don Wehby, while noting that the proposal is yet to be put formally to the current administration, said discussions have been taking place in financial circles for sometime, and that various models, including the Bank of England, are under review.
"One proposal is for the merger of the FSC and the BOJ," Wehby said Thursday.
"We will have to look carefully and study the best way to have the system structured."
Wehby said he was in the process of reviewing several studies on the issue, but would also want the new boards of the two institutions to weigh in.
The FSC board is to be named next week.
The two top regulators oversee a sector that, based on numbers obtained from the FSC and the BoJ, is valued on assets at $1.18 trillion, credit unions included. The entire financial sector is capitalised at $137 billion.
Commercial banks, of which there are six with another due on stream in 2008, are by far the richest of all financial institutions, with $462 billion of assets. The 34 registered securities dealers are worth $393 billion.
Pension fund managers, which span the insurance and securities sectors, oversee another $132 billion of retirement funds.
Latibeaudiere currently oversees deposit taking institutions, which includes the island's commercial banks, merchant banks and trust companies - referred to as FIA licensees private mortgage lenders or building societies, and, soon, credit unions.
The FSC, which was created six years ago in August 2001 to strengthen oversight of the investment community, regulates some 48 licensees, including 34 securities firms, as well as some 14 life and general insurance companies, and most recently the pensions industry under which some 800 schemes and superannuation funds operate.
The FSC describes itself as an "integrated" regulator.
Potentially harmful
But Latibeaudiere fears losing sight of the big picture, saying the shared oversight could be potentially harmful.
"The Bank of Jamaica has no regulatory authority over these other institutions, which makes it difficult to quickly gather and evaluate the necessary information to facilitate sound policy responses or avert crises," he said in Montego Bay at a gathering of the Association of Supervisors of Banks of Americas.
Latibeaudiere has signalled in the past his discomfort with the status quo and has mandated various companies to put a clear delineation between their deposit-taking operations and other interests.
GraceKennedy was among the first to unbundle its banking business in March, on the directive of the BOJ, creating a holding company to facilitate the move.
Latibeaudiere then confirmed to the Financial Gleaner that he was in talks with "all financial institutions".
Scotiabank Jamaica has also remodelled, and is now 'owned' by a new holding company, Scotia Group Jamaica, which is also parent to Scotia's wealth management business, Dehring Bunting & Golding.
Tighter reins needed
The BOJ's concerns were mirrored this year by the International Monetary Fund which argues that securities dealers needed tighter reins, saying the introduction of more risk-sensitive capital requirements would make them more resilient to interest rate risk.
"Within Jamaica, 65 per cent of the securities market is accounted for by securities firms that belong to the 11 financial conglomerates that dominate the domestic financial System," said the IMF in its Article IV consultation report on Jamaica.
"Within the conglomerates, the importance of the securities arm varies, ranging from 2.0 per cent of the total group assets to 91 per cent. Moreover, many of these conglomerates are active regionally."
In addition, the six banks in Jamaica account for more than 50 per cent of assets in nine countries, said the IMF
Latibeaudiere is not denying that the FSC's creation has made supervision more efficient, but says the linkage between the two was critical for continuous improvement in the analysis and management of risk.
"There are good reasons to believe that such an arrangement would significantly benefit the financial system as a whole," he said. "After all, price stability and financial stability go hand in hand, and prudence is intrinsic to central banking as it is to financial stability and supervision."
lavern.clarke@gleanerjm.com
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