BOJ reports primary, capital adequacy ratios remained comfortably above respective statutory limit
Jamaica’s financial system, while taking a hit from COVID-19 has remained generally resilient throughout the global pandemic.
That is the latest assessment of the island’s Central Bank in its most recent Quarterly Monetary Policy Report (QMPR). The report showed that both the primary ratio and capital adequacy ratio, which measures the capacity of local banks to absorb unexpected losses, remained comfortably above their respective statutory limit.
The Bank of Jamaica (BOJ) reports that local banks have remained very liquid, reporting Liquidity Coverage Ratios in excess of 100 per cent at end-September. In its assessment, the BOJ concedes that COVID-19 nevertheless continues to affect activity in the domestic banking sector and overall financing in Jamaica.
Private sector credit slows down
Private sector credit provided by Deposit Taking Institutions (DTIs) grew at a slower pace year over year, as a result of declines in financing to individuals and households. Since the start of the pandemic, the BOJ has implemented a number of initiatives aimed at supporting Jamaican dollar liquidity in the financial sector.
Among some of the monetary tools employed by the BOJ were the reduction in the Jamaican dollar cash reserve requirement, the implementation of a Government of Jamaica bond-buying programme and the reactivation of the BOJ Intermediation Facility.
This was in addition to a special repurchase facility for credit unions and also the Occasional Term Repurchase Operation.
At end-October 2020, total Jamaican dollar liquidity support provided by the BOJ since the start of the pandemic was in excess of $76 billion.
One year of import coverage in foreign reserves
In the meantime, the BOJ reports that Jamaica has import coverage of one year in foreign exchange reserves pointing out that the country’s international reserves remain buoyant.
The BOJ had US$2.96 billion in net international reserves, an amount which represents 51.99 weeks of goods imports, as at November 30. The BOJ’s total foreign assets as at November 30 were US$3.93 billion which is US$72 million more than October 2020.
Liabilities at November month-end comprised US$969.56 million for the International Monetary Fund, up US$3.25 million over October. Gross reserves at end-October amounted to approximately US$3.9 billion, representing 116.2 per cent of the Assessing Reserve Adequacy metric for FY2020/21.
The Government of Jamaica is targeting Net International Reserves of $2.4 billion at fiscal year-end March 2021.