Durrant Pate/Contributor

The Bank of Jamaica (BOJ) is close to approving two more financial holding companies (FHC) but is keeping mum on the identities until the final approval has been given.

So far only two FHCs, namely NCB Financial Group Limited and JN Financial Group Limited have been approved as a licenced FHC under the relatively new Banking Services Act (BSA). The Act requires every company intending to function as an FHC for a financial group, which includes a deposit-taking institution (DTI) – a commercial bank, merchant bank or building society to apply to the BOJ’s Supervisory Committee for a licence. 

Responding to questions from Our Today at last week’s quarterly news briefing, Dr. Jide Lewis, BOJ deputy governor in charge of its Financial Institutions Supervisory Division,  explained that so far eight institutions have applied for an FHC licence with two applicants at an advanced stage of approval.

He stated, “in order to comply with the requirement of the BSA several of them (financial institutions) have to restructure and reorganise themselves in a way so as to make themselves supervisable and that’s the process that they applied for in getting a non-objection (from the BOJ). Non-objection in terms of their reorganisation.”

Dr. Lewis reiterated the BOJ’s position that the communication from the BOJ of a non-objection to a plan to reorganized is not an approval but merely part of a process, leading to final approval.

Applicants at varying of the process

Dr. Lewis told the BOJ’s quarterly news briefing that the applicants, who have come forward are at varying stage in the application process, emphasizing that two of them “have reached a fair stage in terms of reorganizing themselves. We have others that have  a formal application before the BOJ. I don’t want to say much more on this because it’s a very dynamic process and  I do not want to make any projection on the process at this time.”

On the matter of reorganization, the BOJ Deputy Governor explained that while the six other applicants are at the stage of reorganizing themselves posited that “some don’t even need to reorganize themselves because it is not mandatory to reorganize but you have to look at the BSA and make that determination and then apply.”

Asked by Our Today what factors would cause a hold up in the process, Dr. Lewis responded, “it’s not a finite list but some of the matters that have come up include governance issues, risks identification and management, issues with transparency.  As a supervisor you want to ensure you can see through the balance sheet of not just the FHC but also the subsidiaries so we want to ensure that we have full visibility of the consolidated balance sheet.”

He emphasised that “some entities are able to demonstrate that and some aren’t and to the extent that they can’t demonstrated that they have to reorganize themselves. Another issue is the ability to meet the capital adequacy requirement at the group level. At this point we are looking at the primary ratios, which essentially is 6 per cent of total consolidated assets. “

He made the point that there are several criteria noting that this is going to vary, articulating that like with any licensing process, the BOJ will have to consider each applicant on its own merit.