Overview of Banking, Pension and Asset Management Sectors

1. Competitive Landscape of the Financial Services Industry

1. Composition and Performance of the Financial Services Industry

The Jamaican financial services industry is one of the most critical sectors to the island. The industry consists of over 470 registered and licensed companies operating as:  

• Banks
• Building societies
• Securities dealers/ asset and wealth managers
• Pension fund managers and administrators
• Insurance companies,
• Finance Companies
• Credit unions, et al.

Deposit taking entities are regulated by the Bank of Jamaica (BOJ) while other institutions such as securities dealers and insurance companies are governed by the Financial Services Commission (FSC). The sector employs over 26,000 workers and is amongst the top employing sectors in Jamaica. It also contributes historically, approximately 11.0% of the country’s gross domestic product and is an important facilitator of economic activity for the other economic sectors.

The financial services industry is dominated by commercial banks, which control approximately 76% of the assets in the industry, followed by building societies that control 22% of the assets in the financial system. Total assets in the system (commercial banks, FIA Institutions and building societies) as at December 2013 amounted to J$1,059,085 million.

Table 2 Total Assets of Financial Institutions, 2011-2013, Source: ESSJ 2013 and the BOJ

1.  Developments in the Financial Services Industry

There was an exchange initiative launched in February 2013 known as the National Debt Exchange. Under the programme, $860 billion of domestic debt instruments were exchanged for longer term instruments with lower coupon rates. This exchange impacted the profitability of the financial sector and resulted in institutions realigning their portfolios with US$ denominated holdings.

The years 2013 and 2014 also saw a policy shift in the Jamaica’s financial sector by way of the drafting of legislation. Acts passed during the period included:

• Banking Services Act, 2014
• The Financial Administration and Audit (Amendment) Act, 2014
• Securities (Amendment) Act, 2013
• The Pensions (Superannuation Fund and Retirement Schemes) (Validation and Amendment) Act, 2013
• The Companies (Amendment) Act, 2013

These legislative changes were aimed at formulating policies to encourage economic development as well as industry protection. The legislative changes also strengthened the powers of regulatory oversight bodies with a view to achieve macroeconomic stability.

This following section provides a macro look at the banking, securities and pension sectors, given their relevance to the proposed operations of JNFM 2.0 – investment banking (including loans), securities dealing and pension administration and management.

1. Overview of Banking Industry

The Jamaican banking industry consists of thirteen (12) players: six (6) commercial banks, four (4) building societies and two (2) merchant banks. The number of commercial banks was reduced to six, following the acquisition of RBC Jamaica Limited by Sagicor Group Jamaica, for which regulatory approval was received in June 2014.