One could argue that the collapse of Stocks & Securities Limited (SSL) was the last straw for the propelling of a significant push for changes in the regulatory structure for the financial sector.

It was in June 2024 that then Minister of Finance Dr Nigel Clarke announced that the “Twin Peaks Model of Supervision and Regulation of the Financial Sector” should be implemented in 2026.

This twin peaks model will now see the Bank of Jamaica (BOJ) adopting to having “full responsibility for prudential supervision of all bank and non-bank financial institutions” and the Financial Services Commission (FSC) with oversight for market conduct and consumer protection.

Prudential supervision simply means that the Central Bank will execute the requisite rules toward strengthening and sustaining the soundness, stability and safety of financial institutions. Those being supervised will now need to adhere to firm positions on liquidity and capital adequacy,  among other things.

For the other aspect of the Twin Peaks, FSC will regulate, especially, the customer service of financial institutions and not financial stability as before, given that the latter will now be totally done by BOJ. As a result of the FSC’s focus, we may find institutions developing more suitable products, giving greater attention to customers, being more ethical with their competition as well as having more effective customer-complaint mechanisms.

The amendments to the regulatory mechanism of the financial sector will be evidenced in the Basel III framework, wherein, following the world financial crisis in 2008/ 2009, the Basel Committee on Banking Supervision developed some global rules intended to buttress regulations.

Some of the main areas of the Basel III framework will see banks and other financial institutions being required to have better minimum capital requirements, enhanced liquidity, as well as improved risk management, which will be able to be directly monitored by the regulator. With Basel III, regulators will also be able to insist on financial institutions being more transparent as a result of greater disclosure requirements. 

One of the key things that will likely be affected is the LCR (liquidity coverage ratio). The LCR assumes how a financial institution should perform over a 30-day stress situation.

If there is market chaos, such as a run on a bank or if certain short-term obligations are called, can the institution survive 30-days?

According to the Jamaica Observer’s January 11, 2026, article, “BOJ waiting on legislative changes for twin peaks implementation”, Rose wrote that, in 2024, there was an amendment of the LCR, from 100 to 120 per cent.

This means that for presumed quantifiable risks, for any 30-day period, for the 120 per cent LCR, a financial institution would be able to cover its short-term obligations 1.2 times. With 1:1 being an acceptable benchmark, 1:1.2 is exceptional. From the same article, the capital conservation buffer (CCB) – which is the additional buffer that banks and financial institutions are expected to have – will rise to a required 2.5 per cent under Basel III, wherein, my research tells me, it is now at 0.85 per cent.

The capital adequacy ratio (CAR) is an important indicator of, especially, an institution’s long-term health. It measures a bank’s ability to cover its liabilities while handling credit risks and operational risks. An acceptable CAR says an institution’s losses can be absorbed while depositors’ funds remain safe. While Basel III’s benchmark is anywhere between eight and 10 per cent, according to the senior deputy governor of BOJ, Wayne Robinson, in his recent address to JSE’s Regional Investments and Capital Markets Conference, the CAR for the banking sector is 14-15 per cent and 22 per cent for the securities industry. 

Now, with Base III to be fully implemented soon, what may be some of the disadvantages? At the core of the disadvantages, financial institutions will likely cite – costs. New systems may have to be implemented to be compliant, including what is needed to match the demands of new reporting relations. These new costs may impact profitability, with the domino effect being institutions levying fee hikes on customers to combat the added expenses.  

With the increased capital buffers, this may also affect an organisation’s profitability. As more monies are used to buffer, it means there would be less to lend towards securing credit interest income, which is a major contributor to a bank’s revenue.

LCR assets are required to be HQLA (high-quality liquid assets). Therefore, besides government bonds and treasury bills, there are not many options for HQLA, and so we may find institutions overly exposed in these areas.

Overall, for this transition to the Twin Peaks format, institutions may have the concern of higher operational costs and less revenue, which may impact profitability and lower returns for shareholders.

To reiterate, although the new format may bring benefits to the financial sector, the price of credit and fees may increase, in response and to combat these new Basel III expenses, further resulting in SMEs (the engine of the economy) being even less enticed to borrow at this time.

Early days yet. 

Garfield Goulbourne is a financial literacy consultant. Send comments and feedback to [email protected] and [email protected].