Durrant Pate/Contributor

The Inter-American Development Bank (IDB) is providing more technical assistance to Jamaica for the development and implementation of its twin-peaks regulatory regime for the island’s financial sector.

In an update to Parliament on Tuesday (June 11), Finance Minister Dr Nigel Clarke had this to say about the implementation of the new regulatory regime, “The team has benefitted from technical expertise provided by the World Bank and the International Monetary Fund. Discussions are currently underway with IDB for the provision of additional technical assistance.”

The implementation of the Twin Peaks model is expected by 2026 with Clarke telling Members of Parliament that the development of the legislation is receiving the required urgency and priority.

“We believe that it would be better at this time to focus the limited resources on the development of the legislation for a comprehensive and robust regulatory framework that the Twin Peaks model will deliver rather than developing interim legislation to address the gaps relating to consumer protection for financial services,” the minister explained.

Continuing, Clarke declared, “We are not waiting on all that time to pass before we begin to address urgent issues affecting the financial sector and especially those pain points being experienced by members of the public, who have to use the financial services.” 

Addressing some identified deficiencies

Given the timelines and the urgent need to begin to address some of the deficiencies identified in the shortest possible time, the minister reported that the Bank of Jamaica-Financial Services Commission (BOJ-FSC) Twin Peaks Steering Committee has proposed that a period of practice of the Twin Peaks arrangements within the constraints of the existing statutory provisions. This period should take place before the legal cut-over from the current framework to the Twin Peaks model. 

Arguing that this approach was adopted by the United Kingdom, Clarke articulated that, “for the Twin Peaks model of financial regulation to be successful and to facilitate a smooth transition once the anticipated changes to the legislative framework are passed, the  BOJ-FSC Steering Committee has recommended that during the practice period, both organisations collaborate in a structured way to allow a seamless transition for the financial sector and public.” 

The Twin Peaks practice period is scheduled to commence in this quarter and will run through to the selected appointed date when Twin Peaks legislative changes come into effect. The Twin Peaks practice period is intended to enable capacity building and closer collaboration between the regulators pending the passage of the legislation to enable implementation of the Twin Peaks model.

Practice period objective

In anticipation of the legislative changes proposed, the objective of the practice is to prepare team members for Twin Peaks implementation by providing opportunities for real-world experience in the supervision and regulation of deposit-taking institutions (DTIs) and non-DTIs within the constraints of the existing regulatory frameworks. It will also help to lay the foundation to facilitate a smooth transition at legal cut-over to the Twin Peaks Regime. 

During this practice period, the two regulatory entities – the BOJ and the FSC – will collaborate and operate within the confines of the existing laws. Clarke explained that a tangible example of the Twin Peaks Practice was the comprehensive set of service-level standards for the management of automated banking machines (ABMs) by DTIs that were jointly developed by the BOJ and the FSC and issued by the BOJ to its licensees on April 2. 

The performance of commercial banks against those standards is now being published so that there can be full transparency and the public can help to hold the institutions to account.

According to the finance minister, “ The laws governing the BOJ and the FSC do not at present provide them with legal authority to enforce such standards related to consumer protection through the imposition of fines. It is proposed that this will be addressed in the future dispensation under the legislative changes proposed to be made under the Twin Peaks model. In the meantime, the service-level standards for ABMs were developed and issued to address an urgent problem, through consultation.”

It is anticipated that standards such as these will be incorporated as legally binding regulations, when the market conduct and consumer protection framework is passed into law as part of the Twin Peaks Regime. The various institutions and umbrella associations in the financial sector are now being provided with detailed information on the proposed Twin Peak Practice.