Banks and other Financial I nstitutions Banks and other Financial I - - PowerPoint PPT Presentation

PROTECTING DEPOSITS FOR YOU AND ME FOR YOU AND ME

FINANCIAL SYSTEM FINANCIAL SYSTEM SOUNDNESS SOUNDNESS CONTRIBUTES TO JAMAICA’S CONTRIBUTES TO JAMAICA’S INVESTMENT INVESTMENT INFRASTRUCTURE INFRASTRUCTURE Present Presentati tion

• n made

made at the at the 8th

th Annual Int

Annual International Business Expo rnational Business Expo Lauder Lauderhill Regional Chamber of Commer egional Chamber of Commerce Lauder Lauderhill Regional Chamber of Commer egional Chamber of Commerce Lauder uderhill, F hill, Florida, US

• rida, USA

06 October 06 October 20 2011

Presenter: Antoinette McKain Chief Executive Officer, JDIC

Banks and other Financial I nstitutions Banks and other Financial I nstitutions have a special place in the Economy

 Bring savers, borrowers and investors together in the

economy.

 Convert liquid deposits and investment funds into long

term less liquid loans and investments term less liquid loans and investments.

 Risk is thereby created.

y

 Role in the economy makes them subject to regulation.

GOVERNMENT OF JAMAI CA’S FI NANCI AL SYSTEM SAFETY NET SYSTEM SAFETY NET

MINISTRY OF FINANCE

[Minister of Finance – Cabinet Minister of Government]

Responsible for policy, licensing and regulation of deposit- p p y, g g p taking institutions: commercial banks, merchant banks building societies (DTI’s)

• Intervention of failed banks

JAMAICA DEPOSIT INSURANCE CORPORATION

• Management of Deposit

BANK OF JAMAICA Regulation and supervision of FINANCIAL SERVICES COMMISSION

• Management of Deposit

Insurance Fund

• Limited guarantee of deposits

in deposit taking institutions:

COMMERCIAL BANKS MERCHANT BANKS

g p deposit taking financial institutions -

COMMERCIAL BANKS MERCHANT BANKS BUILDING SOCIETIES (DTI’s)

Regulation of Supervision

• Insurance companies,

securities dealers,

• investment companies,

JAMAI CA STOCK EXCHANGE

MERCHANT BANKS BUILDING SOCIETIES (DTI’s)

( )

• Intervention action by Supervisor
• f Banks and Financial Institutions

investment companies, pension funds, unit trusts

FI NANCI AL REGULATORY COUNCI L FI NANCI AL REGULATORY COUNCI L Financial Secretary, Supervisor of Banks and Financial I nstitutions, Executive Director of FSC and Chief Executive Officer of JDI C

Compares to the financial system regulation Compares to the financial system regulation in the United States U S Department of the Treasury

 U.S. Department of the Treasury

 Secretary of the Treasury

d l k

 Federal Reserve Bank  Federal Deposit Insurance Corporation  U.S. Securities and Exchange Commission

WHY DEPOSI T I NSURANCE?

To protect depositors and guarantee payment where banks fail. Deposit Insurance helps to

build confidence in the financial system as it confidence in the financial system as it

provides certainty to depositors as to their exposure in bank insolvency. Provides a tidy framework for resolution of failing or failed banks. failing or failed banks.

DEPOSI T I NSURANCE DEPOSI T I NSURANCE I N THE WORLD

Over 120 countries in the world with explicit d it i h M f th deposit insurance schemes. Many of these, including the Jamaican scheme were set up after a banking system crisis. after a banking system crisis.

.

THE DEPOSI T I NSURANCE SCHEME I N JAMAI CA

The JDIC’s primary role is to manage the Deposit Insurance Scheme to protect depositors from p p loss.

• Levy premiums on Policyholders
• Issue Deposit Insurance Policies to Policyholders

and monitor compliance

• Manage the Deposit Insurance Fund
• Manage the Deposit Insurance Fund
• Facilitate the efficient solutions for failing banks
• Conduct payouts to depositors if bank fails

Co duct payouts to depos to s ba a s

I NSTI TUTI ONS I NSURED UNDER THE I NSTI TUTI ONS I NSURED UNDER THE SCHEME – POLI CYHOLDERS

Only deposit taking financial institutions regulated and supervised by the Bank

• f

Jamaica:

 COMMERCI AL BANKS  COMMERCI AL BANKS

 MERCHANT BANKS  BUI LDI NG SOCI ETI ES

IT’S CUMPULSORY

WHAT ARE THESE DEPOSI TS WHAT ARE THESE DEPOSI TS I NSURED?

S i d Ch i A t

 Savings and Chequing Accounts  Certificates of Deposits  Money Orders and Drafts  Foreign Currency Deposits  Foreign Currency Deposits  Prepaid cards where the cardholder has a

beneficial right to the bank balances on beneficial right to the bank balances on cards

COVERAGE LI MI T

 Coverage – up to $600,000  Per depositor per institution

Test of Jamaica’s Financial System Stability

 Global financial crisis of 2007 – 2009 or

credit crunch the worst financial crisis since the Great Depression of the 1930’s.

 US Financial Crisis Inquiry Commission

reported its findings in January 2011. reported its findings in January 2011.

How did the Jamaican Banking How did the Jamaican Banking System fare during this period

 Jamaican bank regulations required a  Jamaican bank regulations required a

higher than internationally recommended levels of capital levels of capital. P d ti l i t it d l l

 Prudential requirements monitored closely.  Separation of banking and investment

business to minimize the risk of contagion. g

 The net effect of these safeguards that

existed in the regulations allowed the banking system to remain resilient during this period. No financial institution failed in Jamaica.

Other Features which promote a Other Features which promote a favorable I nvestment Climate

Jamaica Trade and I nvest (JAMPRO)

G t d i tit ti

 Government sponsored institution

promoting multi-sector investment and t d ti trade promotion.

 Guides investors through steps, approvals

to making their projects possible. g p j p

Trade and Investment Incentives Laws

 Shipping Act  Shipping Act  Modernization of Industry Programme  Urban Renewal Act  Urban Renewal Act  Factory Construction Law  Jamaica Export Free Zone Act  Jamaica Export Free Zone Act  Accelerated Depreciation/Special Capital

Allowance Allowance

 International Technical Assistance Programme  No Exchange Controls

Free movement of

 No Exchange Controls – Free movement of

capital

Private Sector Organization of Jamaica

 Corporate Governance Committee -  Corporate Governance Committee

facilitate implementation of best practices through a Code of Corporate Governance through a Code of Corporate Governance

Comments on the Comments on the Jamaican Economy

Progress under the economic programme is already being reflected in an extended already being reflected in an extended period of almost unprecedented stability in the macroeconomic environment and the macroeconomic environment and improving business confidence.

(Extract from the Governor of the Bank of Jamaica’s address to the Institute of Chartered Accountants Forum “Stability, Interest Rates and Economic Growth” Wednesday 5 Oct 2011) Economic Growth Wednesday, 5 Oct. 2011)

Law Reform

 Reform of laws to facilitate company

restructuring where businesses meet restructuring where businesses meet difficulties. N l t f ilit t f ti d

 New laws to facilitate formation and

management of offshore companies

Government has introduced a Government has introduced a comprehensive reform of the tax system aimed at: aimed at:

 Reducing distortions, removing inefficiencies

and stimulating growth and stimulating growth

 Reform will simplify the tax system  Widen the tax base and improve equity  Widen the tax base and improve equity

mainly through the rationalization of tax waivers, exemptions and incentives. , p