…Says system well capitalised and resilient

Jamaica’s financial system has been assessed as stable during the March 2021 quarter with institutions well capitalised and resilient.

This is the latest assessment of the Bank of Jamaica’s (BOJ) new Financial Policy Committee on its review of the country’s financial system of financial risks over the March 2021 quarter.

At its meeting on Wednesday (June 2), the Financial Policy Committee gave the financial system a passing grade for the quarter.

In a statement released by the BOJ on Friday, the Financial Policy Committee reports that the “macro-financial conditions, as indicated by individual and composite indicators of financial developments, remained stable during the March 2021 quarter. Financial institutions also continued to be well-capitalised and largely remained resilient to simulated financial shocks. This performance occurred in the context of the stable macroeconomic environment and the continued recovery of the Jamaican economy.”

SIGNIFICANT DECLINE IN STOCK OF LOAN MORATORIA

The Financial Policy Committee advised that there has been a significant decline in the stock of loan moratoria provided by banks.

“Continued weakness in the debt profile of some borrowers, particularly in the tourism sector, during the March 2021 quarter led deposit-taking institutions to maintain payment accommodations,” the committee explained.

Given the highly interconnected nature of financial institutions, the BOJ continues its enhanced surveillance of the financial system.

The global economy is projected to experience strong recovery in 2021. This recovery, according to the BOJ’s Financial Policy Committee, is expected to have strong spill-over effects on the Jamaican economy which, coupled with appropriate fiscal and monetary policies to mitigate the impact of the COVID-19 pandemic, should support a recovery of the Jamaican economy in the near-term.

According to the Financial Policy Committee, “this outlook will allow deposit-taking institutions to release loan-loss reserves set aside during the pandemic as the debt repayment capacity of borrowers improve. Further, as the Jamaican economy recovers and as capital markets regain momentum, we expect that financial entities will begin to report increased profits”.

As the supervisors of the island’s financial system, the BOJ said it will continue its enhanced monitoring of early warning indicators to ensure that the system remains sound.