The Bank of Jamaica, BOJ, has confirmed that the country’s financial system remains resilient and well-capitalised. This amid mounting global economic uncertainty triggered by shifting US trade and immigration policies.
The BOJ’s statement follows the latest meeting of its Financial Policy Committee, FPC, last week.
Chevon Campbell tells us more.
According to the BOJ’s Financial Policy Committee, recent developments include the pause in monetary policy easing by major central banks and a decline in US gross domestic product, GDP, during the March quarter.
This has increased global financial market volatility. Several major economies are also now expected to record slower growth.
Despite these global headwinds, the central bank says Jamaica’s domestic macro-financial conditions remained broadly stable over the quarter.
The country recorded real GDP growth, inflation continued to moderate, and financial market conditions remained relatively calm.
The BOJ’s composite indicators of financial stability remained well below the thresholds that would indicate a financial crisis.
Key indicators, such as capitalisation, liquidity, and asset quality, also remained above regulatory benchmarks.
However, profitability in the financial sector has been declining, mainly due to rising operating costs and sluggish income growth.
To further assess the system’s resilience, the BOJ conducted rigorous stress tests and contagion simulations to gauge how financial institutions would cope with various shocks to credit and market risk.
The results indicated that the sector’s capital buffers are strong enough to absorb potential economic disruptions, even though some isolated vulnerabilities remain and may require targeted capital injections.
Still, the FPC cautioned that risks remain on the horizon.
These include the potential for a prolonged global trade war, rising inflation, and greater financial market volatility, all of which could pressure domestic economic performance.
Additionally, climate-related financial risks, cyber threats, and the risk of a global economic downturn continue to pose challenges in the near to medium term.
As part of its forward-looking agenda, the BOJ outlined several major policy initiatives.
These include a transition to a Twin Peaks model of financial supervision in collaboration with the Financial Services Commission, the establishment of a special resolution regime for systemically important institutions, and the implementation of the Basel III Framework with a focus on introducing a systemic risk buffer.
The central bank reaffirmed its commitment to continuous risk monitoring and pledged to adjust its reform agenda where necessary to maintain stability in the financial system.
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