P ROTECTING D EPOSITS F OR Y OU AND M E F OR Y OU AND M E FINANCIAL SYSTEM FINANCIAL SYSTEM SOUNDNESS SOUNDNESS CONTRIBUTES TO JAMAICA’S CONTRIBUTES TO JAMAICA’S INVESTMENT INVESTMENT INFRASTRUCTURE INFRASTRUCTURE th Annual Int Presentati Present tion on made made at the at the 8 th Annual International Business Expo rnational Business Expo Lauderhill Regional Chamber of Commer Lauder Lauderhill Regional Chamber of Commer Lauder egional Chamber of Commerce egional Chamber of Commerce Lauder uderhill, F hill, Florida, US orida, USA 06 October 06 October 20 2011 Presenter: Antoinette McKain Chief Executive Officer, JDIC
Banks and other Financial I nstitutions Banks and other Financial I nstitutions have a special place in the Economy Bring savers, borrowers and investors together in the economy. Convert liquid deposits and investment funds into long term less liquid loans and investments term less liquid loans and investments. Risk is thereby created. y Role in the economy makes them subject to regulation.
GOVERNMENT OF JAMAI CA’S FI NANCI AL SYSTEM SAFETY NET SYSTEM SAFETY NET MINISTRY OF FINANCE [ Minister of Finance – Cabinet Minister of Government] Responsible for policy, licensing and regulation of deposit- p p y, g g p taking institutions: commercial banks, merchant banks building societies (DTI’s) - Intervention of failed banks JAMAICA DEPOSIT INSURANCE BANK OF JAMAICA CORPORATION FINANCIAL SERVICES Regulation and supervision of g p COMMISSION - Management of Deposit - Management of Deposit deposit taking financial institutions - Insurance Fund Regulation of Supervision COMMERCIAL BANKS JAMAI CA - Limited guarantee of deposits - Insurance companies, MERCHANT BANKS STOCK in deposit taking institutions: securities dealers, EXCHANGE BUILDING SOCIETIES COMMERCIAL BANKS - investment companies, investment companies, (DTI’s) ( ) MERCHANT BANKS MERCHANT BANKS BUILDING SOCIETIES - Intervention action by Supervisor pension funds, unit trusts of Banks and Financial Institutions (DTI’s) FI NANCI AL REGULATORY COUNCI L FI NANCI AL REGULATORY COUNCI L Financial Secretary, Supervisor of Banks and Financial I nstitutions, Executive Director of FSC and Chief Executive Officer of JDI C
Compares to the financial system regulation Compares to the financial system regulation in the United States U.S. Department of the Treasury U S Department of the Treasury Secretary of the Treasury Federal Reserve Bank d l k Federal Deposit Insurance Corporation U.S. Securities and Exchange Commission
WHY DEPOSI T I NSURANCE? To protect depositors and guarantee payment where banks fail . build Deposit Insurance helps to confidence in the financial system as it confidence in the financial system as it provides certainty to depositors as to their exposure in bank insolvency. Provides a tidy framework for resolution of failing or failed banks. failing or failed banks.
DEPOSI T I NSURANCE DEPOSI T I NSURANCE I N THE WORLD Over 120 countries in the world with explicit d deposit insurance schemes. it i h M Many of these, f th including the Jamaican scheme were set up after a banking system crisis. after a banking system crisis. .
THE DEPOSI T I NSURANCE SCHEME I N JAMAI CA The JDIC’s primary role is to manage the Deposit Insurance Scheme to protect depositors from p p loss. Levy premiums on Policyholders Issue Deposit Insurance Policies to Policyholders and monitor compliance Manage the Deposit Insurance Fund Manage the Deposit Insurance Fund Facilitate the efficient solutions for failing banks Conduct payouts to depositors if bank fails Co duct payouts to depos to s ba a s
I NSTI TUTI ONS I NSURED UNDER THE I NSTI TUTI ONS I NSURED UNDER THE SCHEME – POLI CYHOLDERS Only deposit taking financial institutions regulated and supervised by the Bank of Jamaica: COMMERCI AL BANKS COMMERCI AL BANKS MERCHANT BANKS BUI LDI NG SOCI ETI ES IT’S CUMPULSORY
WHAT ARE THESE DEPOSI TS WHAT ARE THESE DEPOSI TS I NSURED? Savings and Chequing Accounts S i d Ch i A t Certificates of Deposits Money Orders and Drafts Foreign Currency Deposits Foreign Currency Deposits Prepaid cards where the cardholder has a beneficial right to the bank balances on beneficial right to the bank balances on cards
COVERAGE LI MI T Coverage – up to $600,000 Per depositor per institution
Test of Jamaica’s Financial System Stability Global financial crisis of 2007 – 2009 or credit crunch the worst financial crisis since the Great Depression of the 1930’s. US Financial Crisis Inquiry Commission reported its findings in January 2011. reported its findings in January 2011.
How did the Jamaican Banking How did the Jamaican Banking System fare during this period Jamaican bank regulations required a Jamaican bank regulations required a higher than internationally recommended levels of capital levels of capital. Prudential requirements monitored closely. P d ti l i t it d l l Separation of banking and investment business to minimize the risk of contagion. g
The net effect of these safeguards that existed in the regulations allowed the banking system to remain resilient during this period. No financial institution failed in Jamaica.
Other Features which promote a Other Features which promote a favorable I nvestment Climate Jamaica Trade and I nvest (JAMPRO) Government sponsored institution G t d i tit ti promoting multi-sector investment and trade promotion. t d ti Guides investors through steps, approvals to making their projects possible. g p j p
Trade and Investment Incentives Laws Shipping Act Shipping Act Modernization of Industry Programme Urban Renewal Act Urban Renewal Act Factory Construction Law Jamaica Export Free Zone Act Jamaica Export Free Zone Act Accelerated Depreciation/Special Capital Allowance Allowance International Technical Assistance Programme No Exchange Controls No Exchange Controls – Free movement of Free movement of capital
Private Sector Organization of Jamaica Corporate Governance Committee - Corporate Governance Committee facilitate implementation of best practices through a Code of Corporate Governance through a Code of Corporate Governance
Comments on the Comments on the Jamaican Economy Progress under the economic programme is already being reflected in an extended already being reflected in an extended period of almost unprecedented stability in the macroeconomic environment and the macroeconomic environment and improving business confidence. (Extract from the Governor of the Bank of Jamaica’s address to the Institute of Chartered Accountants Forum “Stability, Interest Rates and Economic Growth” Wednesday 5 Oct 2011) Economic Growth Wednesday, 5 Oct. 2011)
Law Reform Reform of laws to facilitate company restructuring where businesses meet restructuring where businesses meet difficulties. New laws to facilitate formation and N l t f ilit t f ti d management of offshore companies
Government has introduced a Government has introduced a comprehensive reform of the tax system aimed at: aimed at: Reducing distortions, removing inefficiencies and stimulating growth and stimulating growth Reform will simplify the tax system Widen the tax base and improve equity Widen the tax base and improve equity mainly through the rationalization of tax waivers, exemptions and incentives. , p
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