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ANNUAL REPORT
2013
Report and Statement of Accounts for the
Year Ended 31 December 2013
ANNUAL REPORT
2013
Report and Statement of Accounts for the
Year Ended 31 December 2013
© 2014 Bank of JamaicaNethersole Place
KingstonJamaica
Telephone: (876) 922 0750-9Fax: (876) 967 4265
Email: [email protected]: www.boj.org.jm
ISSN 0067 3668
Printed in Jamaica
Mission Statement
The mission of the Bank of Jamaica
is to formulate and implement
monetary and regulatory policies
to safeguard the value of the domestic
currency and to ensure the soundness
and development of the financial system
by being a strong and efficient
organisation with highly motivated
and professional employees
working for the benefit of
the people of Jamaica.
BANK OF JAMAICA
PRINCIPAL OFFICERSAs at 31 December 2013
GOVERNOR & SUPERVISOR OF BANKS Mr. Brian Wynter
SENIOR DEPUTY GOVERNOR Mr. John Robinson
DEPUTY GOVERNORS Mrs. Gayon Hosin - Financial Institutions Supervisory Division
Mr. Livingstone Morrison - Administration & Technical Services and Finance and Technology Division
GENERAL COUNSEL
Mr. Robin Sykes - Corporate Secretary’s Office
DIVISION CHIEFS Mr. Calvin Brown - Administration & Technical Services Division
Ms. Maurene Simms - Financial Institutions Supervisory Division
Mrs. Natalie Haynes - Banking & Market Operations Division
Dr. Wayne Robinson - Research & Economic Programming Division
FINANCIAL CONTROLLER - DIVISION CHIEF Ms. Angela Foote - Finance and Technology Division
CHIEF AUDIT EXECUTIVE - DIVISION CHIEF Mr. Ian Williams - Internal Audit Division
Abbreviations
Foreword by the Governor
1. Bank of Jamaica: Our Role and Function 1
2. The Economy and Monetary Policy Review 32.1 Economic Overview 3 2.2 International Economic Developments 72.3 Balance of Payments 132.4 Foreign Exchange Market 17
Box 1: Jamaica’s Medium-term Economic & Financial Programme - FY2013/14 to FY2017/18 19
2.5 Prices 252.6 Money and Credit 332.7 Production 422.8 The Stock Market 502.9 Public Finance 542.10 Monetary Policy and Interest Rates 62
Box 2: Enhancements to Liquidity Management Framework 632.11 Economic Outlook 69
3. Financial System Surveillance and Policy 713.1 Supervision of Deposit-taking Institutions (DTIs) 713.2 Supervision of Cambios and Remittance Companies 903.3 Financial System Stability Assessment of DTIs 933.4 Financial Legislation 102
4. Financial Market Operations 109 4.1 Open Market Operations 1094.2 International Reserves 1154.3 Reserve Management 120
5. Payment System Oversight 123
6. Banking & Depository Services 131
7. Currency Operations 137
CONTENTS
8. Administration 141
9. Governance 145
10. Community Outreach 147
11. Bank of Jamaica’s Strategic Objectives 2012-2015 149
12. Calendar of Monetary Policy Developments 153
Final Accounts for the Year Ended 31 December 2013 i Appendices xlvii
ABBREVIATIONS
ABM Automated Banking MachinesABT Alcohol, Beverages & TobaccoACH Automated Clearing HouseAML Anti-money Laundering ARP Average Realized PriceASBA Association of Banking Supervisors of the AmericasAvg Average BCP Business Communication PlanBCP Basel Core Principle Bn BillionBOE Bank of EnglandBOJ Bank of JamaicaBoJ Bank of JapanBOJ-SWEP Bank of Jamaica Summer Work Experience ProgrammeBOP Balance of PaymentsBRMO Bi -Monthly Repurchase Operationbps Basis points
CAD Canadian Dollar/Current Account DeficitCAP Clarendon Alumina PartnersCAR Capital Adequacy RatioCARTAC Caribbean Regional Technical Assistance CentreCCMB Capital & Credit Merchant BankCD Certificate of DepositCEO Chief Operating OfficerCEMLA Centre for Latin America Monetary StudiesCF Clothing & FootwearCFATF Caribbean Financial Action Task ForceCPC Chief Parliamentary CounselCFT Counter-Financing of TerrorismCOM CommunicationCPI Consumer Price IndexCPI-AF Consumer Price Index excluding Agriculture and FuelCPI-FF Consumer Price Index excluding Food and FuelCRA Credit Reporting ActCRR Cash Reserve RequirementCSD Central Securities DepositoryCTMS Central Treasury Management System
DNFBPs Designated Non-Financial Businesses & ProfessionsDSGE Dynamic Stochastic General EquilibriumDTIs Deposit-taking InstitutionsDVBP Dollar Value of a Basis Point
EBIS Enterprise Business Intelligence SystemECB European Central BankED EducationEFF Extended Fund FacilityELMF Enhancements to Liquidity Management FrameworkEU European UnionEWS Early Warning System
FATF Financial Action Task ForceFed Federal Reserve (US)FCIBS First Caribbean Building SocietyFFIT Full-Fledged Inflation TargetingFHC Financial Holding CompanyFHERM Furniture, Household Equipment & Routine Household MaintenanceFIA Financial Institutions ActFIDs Financial Investigations DivisionFIDA Financial Investigations Division ActFIU Financial Intelligence UnitFNB Food and Non-alcoholic Beveragesf.o.b. Free on boardFRC Financial Regulatory CouncilFSB Financial Stability BoardFPP Fiscal Policy PaperFSAP Financial Sector Assessment ProgrammeFX Foreign ExchangeFY Fiscal Year
GBP Great Britain PoundGCT General Consumption TaxGDP Gross Domestic ProductGFA Gross Foreign AssetsGKMA Greater Kingston Metropolitan AreaGOJ Government of Jamaica
HLTH HealthHWEG Housing, Water, Electricity, Gas and Other Fuels
IDB Inter-American Development BankIFPAS Inflation Forecast & Policy Assessment SystemIMF International Monetary FundIPCP Index of Primary Commodity PricesIT Information Technology
JDX Jamaica Debt ExchangeJMD Jamaican DollarJMMB Jamaica Money Market BrokersJSE Jamaica Stock Exchange
LOI Letter of IntentLRS Local Registered StockLTO Large Tax Payer Office
MaFI Macro-Financial IndexMEFP Memorandum of Economic & Financial PoliciesMIIC Miscellaneous Goods & ServicesMOU Memorandum of UnderstandingMN MillionMPIs Micro-prudential Index
NCBJ National Commercial Bank Jamaica LimitedNDA Net Domestic AssetsNDX National Debt ExchangeNII Net Interest IncomeNIR Net International ReservesNPL Non-Performing LoansNPS National Payment SystemNWC National Water Commission
OMO Open Market OperationsOMT Outright Monetary TransactionOPBs Other Public BodiesOSFI Office of the Superintendent of Financial InstitutionsOUC Other Urban Centres
PAYE Pay As You Earn (income tax)PBs Public BodiesPBOC People’s Bank of ChinaPD Primary DealersPOCA Proceeds of Crime ActPOS Point of Salepps Percentage pointsPSE Public Sector EntityPSIP Public Sector Investment Programme
QPC Quantitative performance Criteria
R&A Restaurants AccommodationRA Rural AreasR&C Recreation & CultureROAA Return on Average AssetsRSPs Remittance Service ProviderRTGS Real Time Gross Settlement
SCT Special Consumption TaxSDR Special Drawing RightsSIPPA Security Interest in Personal Property ActSLF Standing Liquidity Facility
SPBS Selected Public BodiesTAJ Tax Administration DepartmentTPA Terrorism Prevention ActTRAN TransportTRIM Trimmed Mean
USA United States of AmericaUSAID United States Agency for International DevelopmentUSD US dollarUTECH University of TechnologyUWI University of the West Indies
WASR Weighted Average Selling RateWATBY Weighted Average Treasury Bill YieldWGPSLAC Working Group on Payment Systems for Latin America and the CaribbeanWTI West Texas Intermediate (crude oil)
YOY Year over Year
FOREWORD by the governor
During 2013, the primary factors influencing the Bank’s operations were
ongoing fiscal consolidation, the implementation of a national debt ex-
change and the approval of a medium-term economic programme sup-
ported by a four-year Extended Fund Facility (EFF) from the IMF. Public
uncertainty surrounding the approval of the EFF and the ability of the
Authorities to meet the quantitative targets and structural benchmarks
served to challenge the conduct of monetary policy. In addition, slower
growth in the global economy, partly influenced by concerns surrounding
the US Federal Reserve’s tapering of its bond purchases, served to temper
external demand conditions.
Against this background, the Bank lowered its policy interest rate early in the year. During the year, the Bank
also enhanced its liquidity management operations through the offer of longer dated instruments. The liquid-
ity management framework was further enhanced by the introduction of a regular cycle of two-week repur-
chase agreements to alleviate periodic liquidity constraints faced by the deposit-taking sector. In addition,
the Bank introduced a Standing Liquidity Facility (SLF) to provide automatic access to overnight liquidity for
DTIs.
Despite the approval of the EFF by the IMF’s Executive Board which, among other things, resulted in greater
inflows from the multilateral agencies, there was lingering uncertainty among investors. This uncertainty was
manifested in a reduction in net private capital inflows which contributed to a faster pace of depreciation in
the exchange rate. The accelerated pace of depreciation was also in the context of relatively low net interna-
tional reserves and a high current account deficit. Notwithstanding, the greater flexibility in the exchange
rate allowed for an adjustment in relative prices and an improvement in Jamaica’s external competitiveness.
During 2013, the Bank occasionally intervened in the foreign exchange market to smooth supply and demand
conditions and intermediate funds through the Public Sector Entities facility.
Inflation for 2013 was 9.5 per cent relative to 8.0 per cent in 2012 and marks the third consecutive year of
single-digit inflation. The uptick in inflation was against the background of significant administrative ad-
justments in transport and utility rates, continued depreciation in the exchange rate and increased crude oil
prices. The impact of these inflationary impulses was moderated by generally weak domestic demand condi-
tions, reduction in international grains prices and lower communication costs. The relatively weak domestic
demand conditions, which persisted from the previous year, were influenced by declining real wages and
higher unemployment. Against this background, there was marginal growth of 0.2 per cent in real GDP for
2013.
During the review year, DTIs remained largely resilient to macro-prudential stress tests due to continued
strong capital positions. The DTIs performed creditably in response to hypothetical shocks despite weak eco-
nomic activity, depreciation of the Jamaica Dollar and lower earnings performance due to the implementation
of the NDX. In particular, the stress test results revealed that average post-shock capital adequacy ratios for
the banking system largely remained above the 10.0 per cent minimum benchmark in response to hypotheti-
cal market, credit and liquidity shocks.
There were no amendments to financial legislation in 2013 as the country’s legislative agenda was focused
on enacting laws consistent with benchmarks set under the EFF-supported programme. However, the policy
focus of the Bank with respect to financial supervision continued to be the development of the Omnibus Bank-
ing Bill which will serve to consolidate existing pieces of legislation and regulations that govern DTIs. The
Omnibus Banking Bill will also incorporate enhanced supervisory standards in keeping with developments
in international standards in recent years. The resulting Act will, among other things, provide the Bank with
greater supervisory autonomy, address counterparty exposure limits and establish a consolidated supervi-
sory framework. Other policy matters that were of importance included the refinement of draft Credit Union
Regulations and a special survey of bank fees and charges. This survey was commissioned by Parliament in
response to the public’s concern about the fees being charged by commercial banks.
The Bank of Jamaica continued to provide a range of banking services to its customers during 2013. In this
regard, the Bank operated the JamClear Real Time Gross Settlement (RTGS) system and provided administra-
tive support to the Automated Clearing House (ACH) system, owned and operated by the commercial banks.
Consistent with its risk mitigation strategy and its commitment to having large value transactions settled in
the RTGS, the Bank lowered the ACH value threshold to $2.0 million from $3.0 million. Additionally, with the
implementation of the Government’s Central Treasury Management System, the Accountant General’s De-
partment was granted access to the ACH. This led to significant efficiency gains to the payment system given
that the Government is the single most significant initiator of retail transactions.
During the review year, the Bank also continued to explore ways in which it could increase the efficiency and
quality of the resources that are employed in its operations. Accordingly, organizational reviews of some de-
partments which have been impacted by expanded or new mandates were conducted to ensure that the nec-
essary staffing and work arrangements were properly aligned to support the prescribed objectives. In terms
of training, the Bank facilitated 134 programmes involving 586 participants. Forums on health and wellness
were also organized and conducted during the year. The Bank’s Energy Management Programme recorded
its fourth consecutive year of reduction in energy consumption while the Environmental Management Pro-
gramme yielded positive results with improvements in air and water quality, reduction in the use of paper and
the elimination of the use of styrofoam products.
The work of the Bank in 2013 was dominated by the negotiation of the EFF with the IMF and the subsequent
monitoring and achievements of targets. The EFF was necessary to support a comprehensive economic pro-
gramme aimed at progressively raising the rate of real GDP and per capita income growth. This transforma-
tion was urgently needed as, in the context of a cycle of low growth and unsustainable public debt, Jamaica’s
access to financial markets had become severely impaired. All the quarterly quantitative and associated in-
dicative targets were met.
As a key member of the negotiating team, I want to express gratitude to staff members who have worked with
integrity and aplomb, continuing to render loyal service to country. I also pay tribute to members of manage-
ment and the Board for their assistance in the running of the Bank in a year when the Bank was faced with
numerous challenges. Specifically, I want to thank Mrs. Myrtle Halsall who retired at the end of 2013 as Sen-
ior Deputy Governor and Deputy Chairman of the Board after almost 35 years of service to the Bank. Let me
also congratulate Mr. John Robinson who succeeded her as Senior Deputy Governor and Deputy Chairman
of the Board. In general, I am grateful to all members of staff for their continued hard work and commitment
to the goals of the Bank.
In many respects, the outlook for the Jamaican economy is positive. Growth in real GDP is expected to accel-
erate in 2014, given continued improvements in Jamaica’s external competiveness and an expected strength-
ening of global output. This stronger growth is expected to be driven primarily by increased external demand
as domestic demand conditions are anticipated to remain relatively weak. Headline inflation is projected
to decelerate relative to the rate recorded for 2013. Furthermore, it is anticipated that with continued fiscal
restraint there will be improvements in the fiscal and debt dynamics that should facilitate improved inves-
tor confidence. These improvements will provide the opportunity to address the continuing concerns about
the high level of unemployment and declining real wages. Against this background, the Bank will remain
focussed on maintaining single-digit inflation and achieving the monetary targets under the economic pro-
gramme.
Brian Wynter
GovernorBank of Jamaica
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1. Bank of Jamaica: Our Role & Function
Bank of Jamaica (BOJ), established by the
Bank of Jamaica Act (1960), is responsible for
the implementation of sound and consistent
monetary policies, while ensuring financial
system stability through robust supervisory
and regulatory policies. The achievement of
these objectives is critical to the attainment of
sustainable growth in the Jamaican economy.
The two-fold nature of the Bank’s operations is
captured in its mission statement:
The mission of the Bank of Jamaica is to
formulate and implement monetary and
regulatory policies to safeguard the value of the
domestic currency and to ensure the soundness
and development of the financial system by
being a strong and efficient organization with
highly motivated and professional employees
working for the benefit of the people of Jamaica.
Bank of Jamaica conducts monetary policy
with the aim of achieving inflation in line with
that of our major trading partners. While the
Bank does not operate an explicit inflation
targeting regime, at the beginning of each year,
the Minister of Finance announces an inflation
target range for the current fiscal year, based
on the BOJ’s recommendation. In formulating
monetary policy to achieve this target, the
Bank takes into consideration all prevailing
and prospective developments in the macro
economy, fiscal operations, external sector as
well as relevant market information. A decision
to change the stance of monetary policy can be
reflected in a number of adjustments. These
include changes in the rates paid on the Bank’s
certificates of deposit and adjustments to the
liquid asset and cash reserve ratios.
In fulfilling its mandate to maintain financial
system stability, the BOJ has supervisory and
regulatory oversight of commercial banks and
other licensed deposit-taking institutions.
The BOJ routinely monitors institutions’
compliance with all the relevant legislation
and regulations to ensure the highest level of
prudence and integrity in the management
of such organizations. The Bank’s overall
responsibility for financial stability is supported
by micro- and macro-prudential assessments,
which are underpinned by the results from
early warning systems and risk models.
The Bank’s responsibilities also include:
• oversight of the operation of the payments
system and the foreign exchange market;
• the issue and redemption of currency;
• the provision of banking services to the
Government and commercial banks
as well as fiscal agency services to the
Government; and
• management of the external reserves of
Jamaica.
- 3 -
2. The Economy & Monetary Policy Review
2. The Financial Systemenhancements to these arrangements were done
on 16 December for DTIs. These enhancements
included a Standing Liquidity Facility (SLF)
under which DTIs have automatic access to
overnight funding and a bi-monthly repurchase
operation (BMRO) under which additional
support could be accessed. During 2013, the
Bank also occasionally intervened in the foreign
exchange market to smooth supply and demand
conditions and continued its intermediation
through the Public Sector Entities (PSE) facility.
During 2013, foreign exchange market
developments were largely conditioned by
the uncertainty surrounding Jamaica’s near-
term macroeconomic outlook. Additionally, the
domestic exchange rate continued to adjust in
the context of an unsustainable current account
deficit. Consequently, the foreign exchange
market reflected intermittent periods of
volatility, particularly during the March quarter,
as the excess demand for foreign currency
outweighed the supply to the system. The
conditions associated with the demand-supply
imbalance were also exacerbated by uncertainty
surrounding the timing and content of an
agreement with the IMF and the relatively low
level of the net international reserves (NIR). In
the context of these developments, the Jamaica
Dollar reflected a point-to-point depreciation of
12.6 per cent vis-à-vis the US Dollar in 2013,
following a depreciation of 6.9 per cent for 2012.
2.1. Economic Overview
The Bank of Jamaica (BOJ) reduced its signal
rate, the interest rate payable on its 30-day
Certificate of Deposit (CD), on one occasion in
2013. This policy action, taken on 25 February,
was effected in a context of continued weak
domestic demand conditions and a relatively
favourable inflation outlook. The Bank’s
policy stance was consistent with the lower
domestic interest rates which followed the
successful implementation of the National
Debt Exchange (NDX) by the Government of
Jamaica (GOJ) and revenue measures aimed
at improving fiscal sustainability. The BOJ’s
focus on meeting the monetary targets in the
economic programme and efforts to contain
inflation expectations influenced the decision
to maintain the rate at that level, 5.75 per
cent, for the remainder of the calendar year.
However, against the background of the NDX,
fiscal consolidation and the implementation
of the Central Treasury Management System,
the Bank augmented its liquidity management
operations, by offering a suite of special open-
market operations (OMO) instruments with
varying tenors. These operations were enhanced
by the introduction of special repurchase
agreements in the September quarter, in order
to alleviate periodic liquidity constraints faced
by deposit-taking institutions (DTIs). Further
- 4 -The Economy & Monetary Policy Review
Bank of Jamaica
The
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modest increases in tourism and remittance
inflows relative to 2012. Weak domestic
demand conditions were underpinned by
increased unemployment, a fall in real
wages as well as low business and consumer
confidence. Growth was recorded in both the
tradable and non-tradable industries, and was
mainly reflective of expansions in Mining
& Quarrying, Construction & Installation,
Hotels & Restaurants, Transport, Storage &
Communication and Finance & Insurance
Services.
In the context of uncertainty, tight liquidity
conditions, concentration of liquidity and
a generally weak domestic economy, there
were mixed movements in market determined
interest rates. Specifically, the weighted
average yields on GOJ 30-day and 90-day
Treasury bills declined by 6 basis points (bps)
and 14 bps to 6.25 per cent and 7.53 per cent,
respectively, for the year. On the other hand,
there was an increase of 107 bps to 8.25 per cent
in the weighted average yield on the 180-day
instrument. The movements in the Treasury
bill yields reflected investors’ preference for
shorter-term investments in the context of the
accelerated pace of depreciation of the Jamaica
Dollar. With regard to private money market
rates, there were increases in the overnight,
inter-bank and 30-day rates. In contrast, there
was a decline in the weighted average interest
rate on commercial banks’ foreign and local
currency denominated loans to the private
sector. The overall weighted average lending
Despite the sharp level of depreciation, inflation
remained in single digit for the calendar year.
Specifically, headline inflation, as measured
by the annual point-to-point change in the
All Jamaica Consumer Price Index (CPI), was
9.5 per cent for 2013 relative to 8.0 per cent
for 2012. The uptick in inflation for the review
year was largely influenced by administrative
increases in bus and taxi fares as well as water
and sewage rates. Inflationary pressures also
emanated from the continued depreciation
of the domestic exchange rate coupled with
increased crude oil prices. The impact of
these impulses was, however, moderated by
reductions in international grains prices and
communication costs as well as generally
weak domestic demand conditions. With
respect to the core inflation measures, the
CPI without Agriculture and Fuel (CPI-AF)
and the CPI without Food and Fuel (CPI-FF)
increased while the Trimmed Mean (TRIM)
declined relative to 2012. The increases in
CPI-AF and CPI-FF largely reflected the
non-recurrence of the significant reduction
in communication costs in 2012, coupled
with increases in the costs of utilities, some
household durables as well as health services.
The domestic economy recorded growth of 0.2
per cent for 2013, following a contraction of 0.5
per cent for 2012. This expansion in economic
activity was largely driven by greater external
demand, the impact of which was partly offset
by weak domestic demand. Improvements in
international economic conditions facilitated
- 5 -
Annual Report 2013
The Economy & Monetary Policy Review
The
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rate on local currency denominated loans
declined by 95 bps to 17.49 per cent at end-2013,
in contrast to an increase of 41 bps in 2012. The
change in the overall private sector loan rate
reflected declines in rates on all loan categories.
Against the background of these developments,
the monetary base expanded by 6.1 per cent for
2013, relative to an expansion of 6.5 per cent
for 2012. This deceleration was reflected in a
sharp slowdown in the growth of the commercial
banks’ local currency cash reserves as well
as a decline in the banks’ current account
relative to an expansion in 2012. The impact
of these developments on base money was
partially offset by acceleration in the growth
of currency issue to 7.9 per cent from 3.3 per
cent for 2012. An increase in the net domestic
assets (NDA) was the source of the expansion
in the monetary base as there was a decline in
the NIR. At end-2013, the monetary base was
largely in line with programme projections,
while the NIR and NDA targets outlined
in the programme were comfortably met.
For 2013, growth in the measure of broad
Jamaica Dollar money supply that excludes
foreign currency deposits (M3J) accelerated
to 4.8 per cent from 0.6 per cent in 2012.
This expansion largely reflected the impact
of an exceptional transaction, the merger of a
building society with its affiliate commercial
bank. The stock of commercial bank credit to
the private sector grew by 16.3 per cent and
was largely denominated in Jamaica Dollar
loans and advances, which expanded by 18.3
per cent relative to growth of 15.9 per cent for
2012. The expansion in loans and advances was
reflected in both business and personal lending.
Concurrently, the ratio of non-performing
loans to total loans declined to 5.6 per cent at
end-2013 from 6.8 per cent at end-2012. The
improvement in the quality of commercial
banks’ business loans portfolio largely reflected
significant increases in loan write-offs and to a
lesser extent net repayments by some sectors.
Jamaica’s balance of payments is estimated
to have improved for 2013 relative to 2012.
Provisional data indicated that Jamaica’s
current account deficit (CAD) improved by
US$339.1 million to US$1 566.2 million or
11.0 per cent of GDP for 2013, relative to a
CAD of 12.9 per cent of GDP for 2012. The
improvement for 2013 was reflected in all sub-
accounts, particularly the trade balance, due to
a sharp decline in imports. The lower imports
occurred in the context of continued weak
domestic demand conditions, declines in the
prices of international non-fuel commodities
as well as the impact of the exchange rate
depreciation. This reduction was primarily
reflected in fuel and all non-fuel categories of
imports, with the exception of Manufactured
Goods, Miscellaneous Manufactured Goods
and Crude Materials. Net Private and Official
Investment inflows were insufficient to finance
the deficits on the capital and current accounts.
Consequently, the NIR of the Bank fell by
US$77.7 million to US$1 047.8 million at end-
- 6 -The Economy & Monetary Policy Review
Bank of Jamaica
The
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decelerate relative to the rate recorded in 2013.
The outlook for inflation is also predicated on
the non-recurrence of administrative price ad-
justments that took place in 2013, declining
international commodity prices and continued
excess domestic capacity conditions. The main
risks to the inflation forecast include adverse
weather, the impact of fiscal adjustments and
volatility in international commodity prices. For
growth, the main risks are slower than antici-
pated global growth, delays in key infrastruc-
tural projects, adverse weather and lower than
expected consumer and business confidence.
In this regard, the Bank will remain focussed on
maintaining single-digit inflation and achiev-
ing the monetary targets outlined in the pro-
gramme under the EFF while ensuring appro-
priate levels of liquidity in the financial system.
2013, with gross reserves representing 13.1
weeks of projected goods and services imports.
The budget for the Central Government was
formulated within the context of the macroeco-
nomic projections and obligations under the
IMF four-year EFF. Against this background,
for the period April to December 2013, Cen-
tral Government operations resulted in a fiscal
deficit of $19.6 billion, relative to the budg-
eted deficit of $24.8 billion and the deficit of
$47.5 billion for the corresponding period in
2012. This performance facilitated the attain-
ment of a primary surplus of $61.7 billion for
the period, exceeding the EFF target by $89.6
million. The fiscal deficit reflected lower than
budgeted expenditure in a context of weak-
er than budgeted tax revenue. The financ-
ing of the deficit as well as debt amortization
of approximately $35.5 billion was sourced
mainly from the multilateral lending agen-
cies. As a consequence, there were no public
offers of debt instruments during the period.
Growth in the domestic economy is expected to
accelerate in 2014, given continued improve-
ments in Jamaica’s external competiveness
and a strengthening of global output. This fore-
cast assumes continued expansions in Mining
& Quarrying, Agriculture, Forestry & Fish-
ing, Construction and Hotels & Restaurants.
Growth is expected to be driven by increased
external demand as domestic demand condi-
tions are anticipated to remain weak, due to the
protracted decline in real wages. In this con-
text, headline inflation for 2014 is projected to
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Annual Report 2013
The Economy & Monetary Policy Review
The
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2.2. International Economic
Developments
2.2.1. Overview
Global growth moderated in 2013, relative to
2012, reflecting the impact of slower economic
activity in some advanced and emerging
market economies. In particular, there was
a deceleration in growth in the USA, largely
reflecting a contraction in government spending
relative to the previous year. The impact of the
slower growth in the USA was partly offset by
improved performance in most of the other
advanced economies, including the Euro area
and Japan. Emerging market economies were
negatively affected by concerns surrounding
the US Federal Reserve’s (Fed) tapering of its
monthly bond purchases. This anxiety about a
decision by the Fed underscored the decline
in economic growth for emerging market
economies as investors reduced investment in
risky assets. However, a decision to actually
taper was not taken until the end of the year.
During the review year, a number of central
banks in both advanced and emerging market
economies maintained an expansionary
monetary policy stance aimed at inducing
growth. Notwithstanding the execution of these
policies, there was a deceleration in global
inflation stemming from depressed demand
conditions and generally lower commodity
prices.
2.2.2. Output
Growth in the global economy is estimated at
3.0 per cent for 2013 compared to 3.1 per cent for
2012. This outturn reflected marginally slower
growth rates in both advanced and developing
economies. Advanced economies are estimated
to have registered growth of 1.3 per cent for
2013 relative to the expansion of 1.4 per cent for
2012 while developing countries are assessed
to have expanded by 4.7 per cent in comparison
to 4.9 per cent for 2012 (see Table 1). China
Table 1
Country
2012 2013* 2012 2013* 2012 2013* 2012 2013*
Advanced Economies 1.4 1.3 8 8.1 2 1.4 n/a n/a
of which
USA 2.8 1.9 8.1 7.6 2.1 1.5 0.0 - 0.3 0.0 - 0.3
UK 0.3 1.7 8 7.7 2.8 2.6 0.5 0.5
Euro Area -0.7 -0.4 11.4 12.3 2.5 1.4 0.8 0.3
Canada 1.7 1.7 7.3 7.1 1.5 0.9 1 1
Japan 1.4 1.7 4.4 4.2 0 0.4 0.1 0.1Sources: The World Economic Outlook Update estimates as at, October 2013 and January 2014 as well as, statistical offices of individual countries.
*Estimates ** Annual average *** End-of-period
GDPUnemployment
Rate Inflation Rate**
INDUSTRIAL ECONOMIESReal GDP, Consumer Prices and Unemployment Rates
(Annual percentage change and per cent of labour force)
CB Target Interest Rates***
- 8 -The Economy & Monetary Policy Review
Bank of Jamaica
The
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continued to record the fastest rate of growth
among emerging and developing economies
for 2013 (see Table 2).
With respect to the advanced economies, the
slower pace of growth principally reflected a
deceleration in the US economy emanating
from reduced government expenditure
associated with the implementation of
spending cuts at the start of the year as well as
a government shutdown in October. However,
arising from its quantitative easing programme,
the USA continued to realize expansions in
consumption and investment expenditure,
albeit at a decelerated pace. The Euro Area
registered a smaller contraction for 2013,
when compared with the previous year, as the
region slowly emerged from a deep recession.
The continuation of austerity measures amid
persistently high unemployment and debt to
GDP ratios in the region, hampered growth in
some member countries, particularly Italy and
Spain. Nonetheless, these countries showed
improvements while growth in Germany
decelerated. There was an acceleration in
economic growth in Japan for 2013, following
the Bank of Japan’s monetary easing programme
as well as the government’s fiscal stimulus
which was implemented to end deflation and
stimulate growth.
For the developing countries, overall growth in
economic output continued to decelerate. This
estimate largely reflects the impact of tighter
financial conditions and monetary policy
positions in mid-2013. In this context, emerging
market economies have been significantly
affected by an outflow of capital, which primarily
emanated from concerns surrounding the Fed’s
decision to begin tapering its monthly bond
purchases. Furthermore, political uncertainty
in some countries supported the lower growth
estimate for developing countries. In particular,
the Middle East and North Africa region
recorded a deceleration in output growth to 2.1
per cent for 2013 from 4.6 per cent for 2012. The
estimate for the review year mainly reflected
the impact of slower export-led growth in the
context of sanctions by the West on exports from
Iran as well as heightened geopolitical tensions
in Egypt and Syria.
2.2.3. Monetary Policy
In the context of weaker-than-expected
demand conditions, the central banks of
selected advanced economies maintained an
expansionary monetary policy stance during
2013. In particular, the Fed continued its
purchase of Treasury securities at a pace of
US$45.0 billion per month and additional
agency mortgage-backed securities at $40.0
billion in a third round of its quantitative easing
(QE3). The Fed also maintained its target
interest rates within the range of 0.0 per cent
to 0.25 per cent in keeping with its mandate of
achieving a long-run unemployment rate below
6.5 per cent and projected inflation between
one and two years ahead remaining below 2.5
per cent.
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Table 2
2012 2013* 2012 2013*
Emerging and Developing Economies 4.9 4.7 6.1 6.2
Latin America and the Caribbean 3.0 2.6 5.9 6.7
Argentina 1.9 3.5 10.0 10.5
Brazil 1.0 2.3 5.4 6.3
Chile 5.6 4.4 3.0 1.7
Colombia 4.0 3.7 3.2 2.2
Dominican Republic 3.9 2.0 3.7 4.5
Ecuador 5.1 4.0 5.1 2.8
Mexico 3.7 1.2 4.1 3.6
Peru 6.3 5.4 3.7 2.8
Uruguay 3.9 3.5 8.1 8.5
Venezuela 5.6 1.0 21.1 37.9
Caribbean*** 2.3 1.7 5.0 5.0
Antigua & Barbuda 1.6 1.7 3.4 2.0
Barbados 0.0 -0.8 4.5 2.5
Dominica -1.7 1.1 1.4 2.0
Guyana 4.8 5.3 2.6 4.1
Jamaica**** -0.5 0.2 8.0 9.5
St. Kitts & Nevis -0.9 1.9 1.4 3.0
St. Vincent & Grenadines 1.5 1.3 2.6 2.1
Trinidad & Tobago 0.2 1.6 9.3 5.6
Developing Asia 6.4 6.3 4.7 5.0
China 7.7 7.7 2.7 2.7
India 3.2 4.4 10.4 10.9
Indonesia 6.2 5.3 4.3 7.3
Malaysia 5.6 4.7 1.7 2.0
Philippines 6.8 6.8 3.2 2.8
Thailand 6.5 3.1 3.0 2.2
Middle East and North Africa 4.6 2.1 10.8 12.3Sources: The World Economic Outlook Update, October 2013; January 2014*, statistical offices of individual countries,
*Estimates, **Annual average, ***GDP weighted, **** Point-to-point
SELECTED DEVELOPING COUNTRIESReal GDP & Consumer Prices
(Annual per cent Change)
CountryGDP Inflation Rate**
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target interest rates at 6.0 per cent and 8.25 per
cent, respectively. Conversely, the Central Bank
of Brazil increased its Selic rate by 275 bps to
10.0 per cent in order to restrain inflationary
pressures.
2.2.4. Inflation
There was a deceleration in global inflation in
2013. The deceleration largely reflected a decline
in primary commodity prices, underpinned by
subdued demand conditions in advanced as
well as emerging and developing economies.
With respect to advanced economies, the
annual average inflation rate decelerated to
1.4 per cent in 2013 from 2.0 per cent in 2012
(see Table 1). In contrast, developing countries
inflation was relatively stable recording an
uptick of 0.1 percentage point to 6.2 per cent in
average inflation for 2013 (see Table 2).
2.2.5. Selected Exchange Rates
Selected international currencies such as the
Canadian dollar (CAD), the Great Britain Pound
(GBP), the Japanese Yen, the Brazilian Real
and the Indian Rupee depreciated against the
US dollar (USD) while the Euro, the Chinese
Yuan and the Mexican Peso appreciated during
the year (see Table 3). The depreciation of the
CAD, the GBP, the Real and the Rupee mainly
reflected the impact of concerns regarding a
moderation in the Fed’s QE3 programme while
the depreciation of the Yen can be attributed
to the BoJ’s monetary easing measures aimed
at reversing that country’s trend of deflation.
The appreciation of the Euro emanated from
With the exception of the European Central
Bank (ECB) which lowered its target interest
rates in May and November of the year under
review, all central banks of the advanced
economies maintained their target interest
rates at the levels as at end-2012. In addition,
the ECB maintained its Outright Monetary
Transaction (OMT) programme and the Bank
of England (BOE) left the size of its asset
purchase programme unchanged at £375.0
billion.1 The Bank of Japan (BoJ), however,
implemented additional monetary easing in
2013. Furthermore, the BoJ adopted a price
stability target of 2.0 per cent which replaced
the previous target of 1.0 per cent. Under the
revised price stability target, the BoJ pledged to
pursue monetary easing in order to achieve its
inflation target by 2015. The BoJ also undertook
steps to further expand liquidity through its
commitment to increase the monetary base at
an annual pace of about ¥60.0 to ¥70.0 trillion,
primarily reflecting additional purchases of
long-term Japanese government bonds.
The central banks of some large emerging
market countries also maintained their
accommodative monetary policy stance for
2013. In particular, the Reserve Bank of India
reduced its key rates by 25 basis points (bps)
to 7.75 per cent, in order to inject liquidity into
the financial system while the People’s Bank of
China (PBoC) and the Bank of Russia kept their
1 The OMT involved the pledge by the ECB to purchase
distressed government bonds with short-dated maturities of up to
about tthree years in unlimited quantities.
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an improvement in macroeconomic conditions
in the region. The appreciation in the Yuan
largely reflected the impact of speculation that
the Peoples’ Bank of China would implement
measures to increase the value of the currency
so as to reduce its reliance on export-led growth.
2.2.6. Commodity Markets
The IMF’s Index of Primary Commodity
Prices (IPCP) declined by 1.6 per cent in 2013,
following a fall of 3.2 per cent in 2012 (see
Table 4). This contraction reflected declines in
both the Energy and Non-fuel Commodities
indices. The Energy index fell in the context
of lower prices for Brent and Dubai crude oil
prices, the impact of which was partly offset by
higher prices for the West Texas Intermediate
(WTI). Brent and Dubai prices fell amid an
increase in shipments of crude oil of the North
Sea blend. WTI prices reflected the impact of
increased geopolitical tensions in Egypt and
fears surrounding a possible American-led
military strike against Syria in August and
September as well as positive macroeconomic
developments in the USA. The impact of
these factors on WTI prices was tempered by
increased fuel inventories in the USA for the
year.
The reduction in the Non-fuel Commodities
index reflected declines in both Edibles and
Industrial Inputs. Of note, the decline in Edibles
mirrored the sharp fall in Beverages as there was
an increase in Food. Similarly, Industrial Inputs
reflected a reduction in Metals as there was a rise
in Agricultural Raw Materials. 2
2 Agricultrual raw materials include timber, cotton, wool, rubber
and hides.
Table 3
2012 2013 2012 2013
Canadian Dollar 1.00 0.97 -1.1 -2.9
Japanese Yen/1 79.79 97.46 0.2 22.1
Great Britain Pound 1.59 1.56 -1.2 -1.3
Euro 1.29 1.33 -7.6 3.3
Real 0.51 0.47 -14.2 -9.5
Yuan 0.16 0.16 2.4 2.6
Mexican Peso 0.08 0.08 -5.8 3.0
Rupee 0.02 0.02 -12.8 -8.6Source: Bloomberg
1. Expressed as local currency per unit of US dollars (in accordance with international convention)
Annual Per cent Change
ADVANCED ECONOMIES: EXCHANGE RATES(Annual Average)
US Dollars per Unit of National Currency
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Downward price movements in Beverages largely
reflected a fall of 23.0 per cent in the price of
Arabica coffee due to strong production in Brazil
and Colombia, the world’s largest and second-
largest producers, respectively. The impact of
this decline was partly offset by an increase in
cocoa prices associated with excess demand for
the beans from the West African states of Ivory
Coast and Ghana, the two largest growers. The
rise in Food reflected increases in the prices of
vegetable oils and protein meals as well as meat amid greater demand from China and Japan.3
However, there were partially offsetting declines
3 Vegetable oils and protein meals include fish meal, olive oil ,
ground nuts.
in grains prices, particularly corn and soybean.
Corn prices reflected the impact of record
production levels in the USA due to favourable
weather conditions. Soybean prices declined in
the context of increased global supplies.
With respect to Metals, lower prices resulted from
an increase in the capacity of China’s aluminium
industry. This increased capacity contributed to
an excess of the commodity on the global market.
In this context, aluminium prices declined by 7.9
per cent in 2013, following a fall of 15.4 per cent
for 2012.
Table 4
SUMMARY OF WORLD COMMODITY PRICES Annual Average per cent change
2012 2013/1
All Primary Commodities - 3.2 - 1.6
1. Non-fuel Commodities - 10.0 - 1.2
1.1 Edibles - 4.2 - 0.1
(a) Food - 2.4 1.1
(b) Beverages - 18.5 - 11.9
1.2 Industrial Inputs - 15.5 - 2.3 (a) Agricultural Raw
Materials - 12.7 1.4
(b) Metals - 16.8 - 4.2
2. Energy 0.7 - 1.8
Petroleum/2 1.0 - 1.0
(a) WTI - 0.9 4.0
(b) Brent 0.9 - 2.9
(c) Dubai 2.7 - 3.2
Source: IMF 1/ Provisional 2/ Simple Average of West Texas Intermediate (WTI), Brent and Dubai Crude oil prices
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2.3. Balance of Payments
2.3.1. Overview
Provisional data indicate that Jamaica’s current
account deficit (CAD) improved by US$315.5
million to US$1 413.5 million or 10.0 per cent
of GDP for 2013 (see Chart 1 and Table 5).
This out-turn was relative to a CAD of 11.7
per cent of GDP in 2012. The improvement
for 2013 was reflected in all sub-accounts,
with the exception of the Income sub-account.
In particular, the current account outturn
largely reflected an improvement in the trade
balance, due to a sharp decline in imports. The
lower level of imports was in the context of
continued weak domestic demand conditions
and declines in the prices of international non-
fuel commodities (see International Economic
Developments and Production).
Net Private and Official Investment inflows
were insufficient to finance the deficits on the
capital and current accounts. Consequently,
the net international reserves (NIR) of the Bank
fell by US$77.8 million to US$1 047.9 million
at end-2013, with gross reserves representing
12.8 weeks of projected goods and services
imports.
2.3.2. Merchandise Trade
For 2013, the merchandise trade deficit
narrowed by US$181.9 million relative to
the deficit in 2012 (see Table 5). Within the
merchandise trade balance, the value of imports
(f.o.b.) declined by US$331.3 million or 5.6 per
cent, the impact of which was partly offset by a
reduction of US$149.4 million or 8.6 per cent in
earnings from exports.
The estimated contraction in imports primarily
reflected a reduction of US$150.8 million or
Chart 1: Jamaica: Current Account Deficit to GDP Ratio
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Table 5
2012 1/ 2013 2/ Change % Change
1. CURRENT ACCOUNT - 1 729.0 - 1 413.5 315.5 - 18.2
% of GDP 11.7 10.0
A. GOODS BALANCE - 4 158.0 - 3 976.2 181.9 - 4.4
Exports (f.o.b.) 1 746.7 1 597.3 - 149.4 - 8.6
Imports (f.o.b.) 5 904.7 5 573.4 - 331.3 - 5.6
B. SERVICES BALANCE 588.5 614.1 25.6 4.4
Transportation - 752.5 - 699.5 52.9 - 7.0
Travel 1 881.2 1 902.7 21.5 1.1
Other Services - 540.3 - 589.0 - 48.8 9.0
GOODS & SERVICES BALANCE - 3 569.5 - 3 362.0 207.5 - 5.8
C. INCOME - 207.3 - 267.3 - 60.0 29.0
Compensation of employees 65.6 29.9 - 35.7 - 54.4
Investment income - 272.9 - 297.2 - 24.3 8.9
D. CURRENT TRANSFERS 2 047.9 2 215.9 168.0 8.2
General Government 172.3 259.3 87.0 50.5
Other Sectors 1 875.5 1 956.6 81.1 4.3
2. CAPITAL & FINANCIAL A/C 1 729.0 1 413.5 - 315.5 - 18.2
A. CAPITAL ACCOUNT - 26.2 - 12.8 13.4 - 51.2
General Government 5.9 18.9 13.0 222.0
Other Sectors - 32.1 - 31.7 0.4 - 1.3
B. FINANCIAL ACCOUNT 1 755.2 1 426.3 - 328.9 - 18.7
Official Investment 238.6 503.4 264.7 110.9 Private Investment 3/ 676.1 845.2 169.1 25.0 Reserves 4/ 840.5 77.81/ Revised 2/ Provis ional 3/ Includes Errors & Omiss ions 4/ Minus Denotes increase
SUMMARY OF BALANCE OF PAYMENTS(US$MN)
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16.3 per cent in spending on Chemicals. There
were also declines in all non-fuel categories of
imports, with the exception of Crude Materials
and Food. These declines primarily reflected
the impact of increased global supplies on select
commodity prices, in particular, for Edibles and
Industrial Inputs (see International Economic
Developments and Production).
The performance of exports in 2013 largely
resulted from a contraction of US$123.8
million or 19.3 per cent in Non-Traditional
Exports. This contraction largely reflected
lower receipts from chemicals, primarily
ethanol. Specifically, there was a cessation of
ethanol exports due to unfavourable market
conditions. There was also a reduction of 3.8
per cent in earnings from Major Traditional
Exports, reflecting a contraction of 40.3
per cent in sugar export volumes as well
as a decline of 5.4 per cent in the average
realised price (ARP) of the commodity. Partly
offsetting the decline in earnings from sugar
was a 3.0 per cent increase in receipts from
alumina. This increase was influenced by
an expansion of 8.5 per cent in volumes as
prices fell by 5.0 per cent.
2.3.3. Services
Net earnings from Services increased by an
estimated 4.4 per cent to US$614.1 million for
2013. This outturn reflected a fall in the deficit
on Transportation as well as an improvement
in the surplus on Travel, the impact of which
was partly offset by a worsening in the deficit
on Other Services. The narrowing of the deficit
on Transportation was largely attributed to
lower freight and insurance payments given
the decline in imports. Higher earnings from
Travel reflected growth of 1.6 per cent in foreign
national stop-over visitor arrivals relative to
2012. With regard to Other Services, there was
an increase of US$48.8 million in the deficit due
mainly to respective contractions of US$55.4
million, US$14.3 million and US$13.6 million
in payments for Insurance; Personal, Cultural &
Recreational as well as Financial Services (see
Table 5).
2.3.4. Income
For 2013, the deficit on the income sub-account
widened by US$60.0 million or 29.0 per cent
to US$267.3 million. This deterioration
principally reflected a decline in the surplus
on Compensation of Employees due to higher
outflows by non-residents working in Jamaica
as well as higher investment income outflows
of deposit-taking institutions (see Table 5).
2.3.5. Current Transfers
The surplus on the current transfers sub-account
expanded by US$168.0 million or 8.2 per cent
in 2013, reflecting increases of US$87.0 million
in Official Transfers and US$81.1 million in
Private Transfers. Official Transfers reflected
an increase in gross inflows of US$81.9 million
and a decline of US$5.1 million in gross
outflows. Private Transfers reflected an increase
in gross inflows of US$40.1 million which was
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The improvement in Net Official Investments
stemmed from a rise of US$526.7 million
in Gross Official Inflows and was largely
underpinned by project loans of US$413.3
million from multilateral and bilateral
institutions (see Table 6). The impact of these
inflows was partly offset by an increase in Gross
Official Outflows in the context of a build-
up in the Bank of Jamaica’s liabilities during
the year, related to borrowing from the IMF.
Net Private and Official Investments were
insufficient to finance the deficits on the capital
and current accounts. As a result, the NIR of
the Bank fell by US$77.8 million to US$1 047.9
million at end-2013. Gross Foreign Assets at end-
2013 were US$1 817.6 million, representing 12.8
weeks of projected goods and services imports.
supported by a decline in gross outflows of
US$41.0 million. (see Table 5)
2.3.6. Capital and Financial Account
The Capital Account recorded a deficit of
US$12.8 million in 2013, relative to a deficit
of US$26.2 million in 2012. This improvement
reflected relatively large grants from mainly
the United States Agency for International
Development (USAID) and the European
Union. There was a decline of US$328.9
million in the surplus on the Financial Account
reflecting a lower drawdown of reserves.
Partially offsetting this impact were increases of
US$264.7 million and US$169.1 million in Net
Official Investments and Private Investment
inflows, respectively (see Table 5).
Table 6
20121/ 20132/ Change
GROSS OFFICIAL INFLOWS 941.3 1 468.0 526.7
Project Loan 127.0 413.3 286.3
Other Assistance [1] 814.3 1 054.7 240.4
GROSS OFFICIAL OUTFLOWS 720.3 955.7 235.3
Government Direct 576.6 415.9 - 160.8
Bank of Jamaica 93.2 453.3 360.1
Other Official 50.5 86.5 36.0
NET OFFICIAL INVESTMENTS 221.0 512.4 291.41/ Revised2/ Provisional
OFFICIAL INVESTMENT FLOWS(US$MN)
[1] This includes loan receipts from the IMF to the Bank of Jamaica.These are s imultaneous ly treated as an asset and a l iabi l i ty.
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2.4. Foreign Exchange Market
During 2013, foreign exchange market
developments were conditioned by the
uncertainty surrounding Jamaica’s near-term
macroeconomic outlook. Additionally, the
exchange rate continued to adjust in the context
of an unsustainable current account deficit. In
the March quarter, the Government concluded
discussions with the staff of the International
Monetary Fund for a four-year Extended Fund
Facility to support its medium-term economic
programme. One of the main objectives of the
programme is to correct Jamaica’s balance
of payments position, as the current account
deficit had expanded to an unsustainable level.
The foreign exchange market reflected
intermittent periods of volatility during 2013,
particularly during the March quarter, as the
demand for foreign currency outweighed
the supply to the system. The impact of this
imbalance on the foreign exchange market
was exacerbated by the relatively low net
international reserves, which limited the
capacity of the Bank to augment market supply.
Against this background, total purchases
reported by authorized foreign currency traders
declined to US$8 512.6 million for 2013 from
US$10 181.0 million for 2012. Concurrently,
total foreign currency sales declined to US$8
657.8 million from US$10 278.8 million for
2012 (see Table 7).
In the context of these developments, the
Jamaica Dollar reflected a point-to-point
depreciation of 12.6 per cent to $106.38 vis-
à-vis the US dollar for 2013, following a
depreciation of 6.9 per cent for 2012. The
Jamaica Dollar also depreciated against its
other major counterparts. Specifically, the local
currency depreciated by 6.4 per cent to $99.72
against the Canadian dollar and 13.2 per cent
to $175.84 against the Great Britain Pound for
2013.
Table 7
% Change % Change
Quarter 2012 2013 2012 2013
March 2 754.6 1 950.5 - 29.2 2 850.0 1 938.5 - 32.0June 2 686.0 2 243.8 - 16.5 2 738.1 2 463.3 - 10.0September 2 552.9 2 144.9 - 16.0 2 525.4 2 094.1 - 17.1
December 2 187.5 2 173.4 - 0.6 2 165.3 2 162.0 - 0.2Total 10 181.0 8 512.6 10 278.8 8 657.8
All Currencies converted to USD
Includes BOJ Intervention
Total Purchases and Sales of Foreign Exchange (US$ Million)2012 - 2013
Purchases Sales
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The March quarter was characterised by
relatively low US dollar supply, as the reported
purchases by authorised foreign currency
traders declined to US$1 950.5 million from
US$2 754.6 million for the corresponding period
of 2012. These lower supplies coincided with
a reduction in net private capital inflows and
reduced foreign currency earnings. Similarly,
the average daily earner inflows and sales to end
users declined to US$26.1 million and US$25.9
million, respectively, from US$29.5 million and
US$31.2 million for the corresponding quarter
in 2012 (see Table 8 & Table 9). Consequently,
the weighted average selling rate (WASR)
depreciated by 5.98 per cent for the March
quarter, representing the sharpest quarterly
adjustment in the exchange rate for 2013. For
the March 2012 quarter, the WASR depreciated
by 0.8 per cent. These developments occurred
in a context of the general uncertainty about
(i) the timeline for finalization of the country’s
medium-term economic programme with the
IMF and (ii) the possible impact of the fiscal
and structural adjustments which would be
implemented under the programme.
There was a slower pace of depreciation in
the ensuing quarters of 2013, following the
approval of the economic programme by
the Executive Board of the IMF on 01 May
2013 (see Box 1). This approval led to the
disbursement of foreign currency loans and Table 8
Table 9
QuarterFrom
EarnersInter-
Dealer TotalTo End-
usersInter-
Dealer Total
March 29.5 13.1 42.6 31.2 13.0 44.2June 28.6 11.0 39.6 29.4 11.0 40.4September 27.1 9.6 36.7 26.7 9.6 36.3December 26.3 7.8 34.1 25.9 7.9 33.8Daily Average 27.9 10.4 38.3 28.3 10.4 38.7All Currencies converted to USD
DAILY AVERAGE TRADING VOLUMES (US$ Million)Excluding Intervention 2012
Sales to: Purchases From:
QuarterFrom
EarnersInter-
Dealer TotalTo End-
usersInter-
Dealer Total
March 26.1 5.9 32.0 25.9 5.9 31.8June 28.4 6.5 34.9 31.7 6.6 38.2September 26.3 6.7 33.0 25.5 6.7 32.2December 27.4 6.0 33.4 27.4 5.8 33.2Daily Average 27.1 6.3 33.3 27.6 6.2 33.9All Currencies converted to USD
Excluding Intervention 2013DAILY AVERAGE TRADING VOLUMES (US$ Million)
Purchases From: Sales to:
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b. Time-bound structural reforms aimed at significantly
strengthening Jamaica’s external competitiveness
and generating higher levels of factor productivity;
c. Catalytic and strategic private/public investments;
and
d. The provision of appropriate safety nets to ensure
social stability during the period of economic
transformation.
Prior Actions
The GOJ and the IMF agreed on the need for front-
loading of policy actions and a focus on institutional
change in order to underpin the credibility of the
economic programme. The major prior actions included:-
a. The completion of a debt exchange for domestic
GOJ bonds to achieve savings of 8.5 per cent of GDP
consistent with a reduction in the public debt-to-GDP
ratio to below 100.0 per cent by 2020.
b. Approval by Cabinet to cease the granting of
discretionary waivers with some exclusions for
charitable organizations and purposes as well as to
cap total discretionary waivers with some exclusions
for charitable organizations and purposes. In
addition, the GOJ committed to not approving any
new waivers or renewing any waiver category or other
tax incentive;
c. The conclusion of a multi-year agreement with major
trade unions which limits nominal wage and merit
increases to public sector workers over FY2012/13 to
FY2014/15; and
d. Approval by Parliament of the Debt Law, which
consolidates various debt related acts and helps
strengthen debt management.
Policy & Structural Reforms
Under the EFF-supported programme, the GOJ
Box 1: Jamaica’s Medium-term Economic & Financial Programme - FY2013/14 to FY2017/18
IntroductionOn 01 May 2013, the International Monetary Fund’s
(IMF) Executive Board approved a request by the
Government of Jamaica (GOJ) for a 48-month Extended
Fund Facility (EFF) in an amount of Special Drawing
Rights (SDR) 615.38 million (US$1.25 billion) or 225.0
per cent of quota. In its Letter of Intent (LOI), the
GOJ indicated that an EFF was necessary to support
a comprehensive economic programme aimed at
progressively raising the rate of real GDP and per capita
income growth. This transformation was urgently
needed as, in the context of a cycle of low growth and
unsustainable public debt, Jamaica’s access to financial
markets had become severely impaired. The GOJ’s
Memorandum of Economic and Financial Policies
(MEFP), which accompanied the LOI, outlined the
policies and measures that the Government committed
to implement to address these economic issues.
Objective
Jamaica’s medium-term economic and financial
programme is underpinned by the recognition that fiscal
and debt sustainability are necessary conditions for
macroeconomic stability and economic growth. In this
regard, a sharp reduction in the country’s debt burden,
which will lead to a decline in the Government’s demand
for domestic financial resources, will allow for higher
private sector led growth. Such an environment will
facilitate an increase in targeted public sector spending
toward the catalytic development of infrastructure
to support growth. The overarching pillars of this
programme which are aimed at fostering investments
and sustainable growth are:-
a. Time-bound fiscal consolidation, supported by
fundamental fiscal and monetary policy reforms
aimed at creating a stable, predictable and resilient
macroeconomic environment;
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committed to critical reforms aimed at improving fiscal
and debt sustainability as well as growth. These reforms
include:-
(I) Fiscal Reforms
Institutional Reforms
a) Government to conceptualize and adopt a legally
binding fiscal rule to ensure a sustainable budgetary
balance;
b) Government to introduce a 5-year public sector
investment programme (PSIP), beginning with
FY2013/14;
c) Government to finalize the divestment of Clarendon
Alumina Partners or implement an asset lease
agreement; and
d) Government to finalize a review of public sector
employment and remuneration that serves to inform
policy reform.
Tax Reforms
e) Government to implement the Cabinet’s decision
stipulating the immediate cessation of granting of
discretionary waivers;
f) Parliament to adopt amendments to the relevant
tax acts to harmonize the tax treatment for charities
across tax types and remove ministerial discretion to
grant waivers for charities and charitable purposes;
and
g) Government to table an Omnibus Tax Incentive Act in
the House of Representatives and cease the granting
of tax incentives and any discretionary tax waivers
under the regime prior to the Omnibus Tax Incentive
Act.
Tax Administration Reforms
h) Parliament to adopt amendments to the Revenue
Administration Act to (i) provide access to third-party
information, to enhance compliance management,
and (ii) empower the Tax Administration Department
(TAJ) to require mandatory-filing for groups of
taxpayers and/or types of taxes; and
i) Government to increase the professional staff of the
Large Taxpayer Office (LTO) to 120 staff members.
(II) Financial Sector Reforms
j) Government to establish and operate a Central
Collateral Registry;
k) Government to reform the securities dealers sector
by implementing a legal and regulatory framework
conducive to Collective Investment Schemes in
consultation with Fund staff; and
l) Parliament to enact Omnibus Banking Law consistent
with Fund staff advice to facilitate effective supervision
of the financial sector.
(III) Growth-Enhancing Structural Reforms
m. Establish Jamaica as a logistics hub by including
expanding port, cargo and maritime facilities and
economic zones;
n. Implement energy sector initiatives to achieve fuel-
source diversification, facilitate energy conservation
and promote liberalization in delivery to achieve
progressive reductions in the cost of energy;
o. Strengthen the resilience of the country to natural
disasters through Climate Change Adaptation and
Disaster Risk Reduction initiatives and targeted
public infrastructure projects; and
p. Implement measures to improve the business
conditions and financing for micro-, small- and
medium-sized enterprises and address investment
issues pertaining to construction permits, trading
across borders and business registration.
Financing
In addition to IMF loan allocations, the programme
assumes financing from the Inter-American Development
Bank (IDB) and World Bank of approximately US$1.0
billion during the four-year EFF programme. The GOJ
will also receive bilateral grant flows from the European
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Union and access financing from the PetroCaribe
facility. Canada also pledged to provide technical and
bilateral assistance to support the programme. The GOJ
will source the remaining financing from the domestic
financial market. Following the implementation of
prior actions and successful reviews for the June and
September quarters, Jamaica received drawdowns of
SDR 176.7 million (approximately US$268.6 million)
from the IMF as well as funding of US$190.0 million
from the IDB and World Bank in 2013.
Programme Monitoring
The four-year EFF will be monitored through quarterly
assessments of quantitative performance criteria (QPC)
and structural benchmarks. The main QPCs for the
Central Government include the primary balance and
the overall balance of the public sector. In addition,
there are minimum social spending requirements to
mitigate the impact of the economic transformation on
the most vulnerable. There are also QPCs for the Bank
of Jamaica, which are the net international reserves and
the net domestic assets.
Performance under the EFF Programme to December
2013
Overall policy implementation under the programme
has been strong and structural reforms are progressing.
Specifically, all quantitative and associated indicative
performance criteria were attained for the June,
September and December 2013 quarters (see Table 1*).
In addition, all structural benchmark reforms for the
review period were implemented in a timely manner (see
Table 2).
The documentation of the GOJ’s performance under the
EFF to date as well as time-bound plans and specific
updates to some elements of the four-year economic
programme are outlined in a Letter of Intent and an
additional supplement to the April 17, 2013 MEFP which
are to be submitted to the Executive Board of the IMF in
March 2014.
2013
End-Dec End-Dec End-Dec End-Mar End-Jun End-Sep End-Dec
Prog. Actual 3/ Stock 4/ PC PC PC Proposed PC
Fiscal targets1. Primary balance of the central government (floor) 5/ 61.6 61.7 … 111.5 15.5 38.4 66.02. Tax Revenues (floor) 5/10/ 232.7 242.7 … 357.5 80.0 166.0 253.43. Overall balance of the public sector (floor) 5/ - 37.3 - 27.3 … - 7.4 - 19.3 - 30.2 - 37.04. Central government direct debt (ceiling) 5/6/ 92.9 53.7 1 672.0 70.3 15.7 23.2 26.55. Central government guaranteed debt (ceiling) 5/ - 13.0 - 13.0 … - 14.0 4.0 2.7 0.16. Central government accumulation of domestic arrears (ceiling) 7/13/14/ 0.0 - 0.3 21.6 0.0 0.0 0.0 0.07. Central government accumulation of tax refund arrears (ceiling) 8/13/14/ 0.0 - 2.7 24.6 0.0 0.0 0.0 0.08. Consolidated government accumulation of external debt payment arrears (ceiling) 7/13/ 0.0 0.0 … 0.0 0.0 0.0 0.09. Social spending (floor) 10/11/ 14.4 16.6 … 20.1 4.2 8.9 14.8
Monetary targets10. Cumulative change in net international reserves (floor) 9/12/15/ - 220.5 - 81.8 1 045.2 194.4 194.8 187.8 210.311. Cumulative change in net domestic assets (ceiling) 12/15/ 26.4 13.7 - 7.6 - 21.4 - 21.6 - 17.2 - 11.9
1/ Targets as defined in the Technica l Memorandum of Understanding.
2/ Including modi fied performance cri teria .
4/ Based on the origina l program exchange rates .
3/ Based on the revised program exchange rates (see the TMU).
5/ Cumulative flows from Apri l 1 through March 31.
6/ Excludes government guaranteed debt. The centra l government di rect debt excludes IMF credi ts .
7/ Includes debt payments , suppl ies and other committed spending as per contractua l obl igations .
8/ Includes tax refund arrears as s tipulated by law.
9/ In mi l l ions on U.S. dol l lars .
10/ Indicative target.
11/ Defined as a minimum annual expenditure on speci fied socia l protection ini tiatives and programmes.
12/ Cumulative change from end-December 2013 except the end December 2013 PC, which i s cumulative change from end-December 2012.
13/ Continuous performance cri terion.
14/ The data for the s tock are as of end-March 2013 rather than end-December 2013.
15/ The end-December 2012 NIR and NDA were US$1138.5 mi l l ion and J$-9.5 bi l l ion respectively.
Table 1*: Jamaica: Quantitative Performance Criteria 1/2/
(in Billions of Jamaican Dollars)
2013 2014
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MeasuresImplementation
Structural Benchmarks Timing Status
Institutional fiscal reforms
1a. Government to present to Fund staff a conceptual proposal for the design of a fiscal rule. 31-Aug-13 Met1b. Revise the relevant legislation for the adoption of a fiscal rule to ensure a sustainable budgetary balance, to be incorporated in the annual budgets startingwith the 2014/2015 budget. 31-Mar-142. Government to finalize a review of public sector employment and remuneration that serves to inform policy reform. 31-Mar-143. Cabinet to approve a detailed budget calendar consistent with top-down expenditure ceilings, for the 2014/15 budget. 30-Nov-13 Met4. Government to ensure there is: (i) no financing of Clarendon Alumina Production (CAP) by the government or any public body, including Petro Caribe; and(ii) no new government guarantee for CAP or use of public assets (other than shares in CAP and assets owned by CAP) as collateral for third-party financing ofCAP Continuous Met
5. Government to tablel in parliament a budget for 2014/15 consistent with the program. 30-Apr-146. Government to table in parliament a comprehensive Public Sector Investment Program (MEFP paragraph 17) 30-Apr-14
Tax Reform
7. Government to implement the Cabinet decision stipulating the immediate cessation of granting of discretionary waivers as stipulated in the TMU. Continuous Met8. Parliament to adopt amendments to the relevant tax acts to harmonize the tax treatment for charities across tax types and remove ministerial discretion togrant waivers for charities purposes as described in paragraph 34 of the April 17, 2013 MEFP. 31-May-13 Met
9a. Government to table a Charities Bill in the House of Representatives, guided by TA provided by the IDB and in consultation with Fund staff. 30-Sep-13 Met
9b. Government to cease the granting of waivers to charities other than under the Charities Bill. 30-Nov-13 Met10a. Government to table Omnibus Tax Incentive Act in the House of Representatives, guided by TA provided by the IDB and in consultation with Fund staff, toeliminate ministerial discretionary powers to grant or validate any tax relief, and put in place a transparent regime for limited tax incentives. 30-Sep-13 Met with delay
10b. Government to cease the granting of tax incentives under the regime prior to the Fiscal Incentives Legislation. 31-Dec-13 Met11. Broader tax reform to become effective, including the modernization of taxes, with limited exemptions, and lower tax rates (paragraphs 6, 7, 8 and 9 of theDecember 2013 MEFP) and as stipulated in the current MEFP. 31-Mar-14
12. Government to table in parliament amendments to the GCT as stipulated in paragraph 11 of the MEFP. 30-Jun-14
Proposed new structural
benchmark13. Government to conduct an entity by entity review of all grandfathered entities and of their specific tax incentives in the context of the new tax incentiveslegislation by end-2014/15. 31-Jan-15
Tax Administration
14. Government to make e-filing mandatory for LTO clients with respect to General Consumption Tax (GCT) and Corporate Income Tax (CIT) 31-Mar-14
Financial sector
15. Government to Establish and Operate a Central Collateral Registry. 31-Dec-13 Met16. Government to implement a legal and regulatory framework conducive to Collective Investment Schemes (Paragraph 45 of he MEFP of April 17, 2013) inconsultation with Fund staff. 31-Dec-13 Met
17. Government to table legislative changes regarding unlawful financial operations, consistent with Fund TA advice provided in July 2010. 31-Mar-14Revised structural
benchmark
18. Government to submit proposals for a distinct treatment for retail repo client interests in the legal and regulatory framework to the relevant financialindustry for consultation (MEFP Paragraph 25) in consultation with Fund staff. 31-Mar-14
Proposed new structural
benchmark19. Government to establish a distinct treatment for retail repo client interests in the legal and regulatory framework (MEFP Paragraph 25) in consultation withFund staff. 30-Jun-14
Reset from March 31, 2004
20. Government to table the Omnibus Banking Law consistent with Fund staff advice to facilitate effective supervision of the financial sector. 31-Mar-14Revised structural
benchmark
Growth enhancing structural reforms
21. Government to implement a new (AMANDA) tracking system to track approval of construction permits across all parish councils. 30-Dec-14
Proposed new structural
benchmark
22. Government to table in parliament the electricity Act. 30-Sep-14
Proposed new structural
benchmark
Table 2*: Jamaica: Structural Progam Conditionality
Status/Timing
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grants from multilateral institutions as well
as improvement in investor confidence. Tight
Jamaica Dollar liquidity conditions consequent
on the implementation of the NDX, greater
efficiency of the Government in managing its
revenue and expenditure activities through the
CTMS, as well as the Bank’s action of issuing
special OMO instruments to tighten JMD
liquidity also contributed to the slowdown in the
pace of depreciation. As a result, the average
quarterly depreciation for June to December
2013 was 2.4 per cent, compared to the average
quarterly depreciation of 2.1 per cent for June
to December 2012.
For the June 2013 quarter, the annual decline in
the total reported trading volumes was 16.5 per
cent and 10.0 per cent for purchases and sales,
respectively (see Table 7). This translated into
a slight recovery in foreign exchange market
supply, as the reported purchases from earners
increased by US$2.3 million to a daily average
of US$28.4 million. Consequently, the WASR
depreciated by 2.45 per cent for the quarter.
The tight Jamaica Dollar liquidity conditions
which underpinned moderation in the pace
of depreciation in the WASR during the June
quarter continued during the September
quarter. Additionally, the quarter was marked
by the positive feedback from international
agencies on Jamaica’s success in attaining
performance targets under the EFF for the
June quarter. Accordingly, the depreciation
in the WASR slowed to 2.1 per cent for the
September quarter. Total purchases reported by
authorised foreign exchange dealers declined
to US$2 144.9 million from US$2 552.9 million
while total sales fell to $2 094.1 million from
$2 525.4 million for the corresponding quarter
of 2012. In this regard, the market remained
generally stable for the quarter, which was
consistent with the marked improvement
in the trade balance on Jamaica’s external
accounts during the first six months of 2013.
During the December quarter, the market
remained generally stable, despite the seasonal
increase in demand for foreign currency
associated with the usual expansion in imports
during the quarter. The increased demand for
foreign exchange was primarily met by market
supply. This was reflected in the daily average
purchases from earners of US$27.4 million
and sales of the same amount to clients (see
Chart 2). Notwithstanding the general balance
in the market, the Bank sold US$70.0 million
to the market early in the quarter, which was
necessitated by the characteristically low
market supplies during that period. This action
was in addition to the continued monetary
policy initiatives that were being pursued from
the previous two quarters. Consequently, the
depreciation in the WASR was limited to 2.62
per cent for the December 2013 quarter, slowing
relative to the 3.27 per cent depreciation
for the corresponding quarter of 2012.
Notwithstanding the intervention sales
during the year, there were also periods
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Bank of Jamaica
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when the Bank purchased USD from the
market, mainly to alleviate tight Jamaica
Dollar liquidity conditions. In this regard,
the BOJ purchased a total of US$442.8
million from foreign exchange market traders
during 2013, resulting in net trading room
purchases of US$294.6 million for the year.
The distribution of market activity between the
main intermediaries was broadly unchanged
during 2013. Authorised dealers remained the
dominant market intermediary, with market
share of 54.0 per cent of total foreign exchange
sales compared with 54.3 per cent for 2012. For
cambios, the group’s market share was 46.0
per cent compared with 45.7 per cent for 2012.
Chart 2: Bank of Jamaica: Foreign Exchange Market Intervention (Spot Market) 2013
160 120 80 40 0 40 80 120 160
50 40 30 20 10 0 10 20 30 40 50
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
<----------------Purchases(US$mn)---------------->|<---------------Sales(US$mn)---------------->
Frequency (%)*
Frequency
Volume
*[(Number of days of FX intervention / Number of days per month ) X 100]
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2.5. Prices
2.5.1. Overview
Headline inflation, as measured by the point-
to-point change in the All Jamaica Consumer
Price Index (CPI), was 9.5 per cent for 2013
relative to 8.0 per cent for 2012 (see Chart 3).
The outturn was achieved in the context of a
targeted inflation range of 8.5 to 10.5 per cent
for FY2013/14. The acceleration in inflation
for the review year was largely influenced by
administrative increases in bus and taxi fares
as well as water and sewage rates. Inflationary
pressures also emanated from continued
depreciation of the domestic exchange rate
coupled with increased oil prices. The impact
of these impulses was, however, moderated by
reductions in international grains prices and
communication costs as well as generally weak
domestic demand conditions.
Of the three measures of core inflation
monitored by the Bank, two increased in 2013.
Specifically, the CPI excluding Food and Fuel
(CPI-FF) and CPI excluding Agriculture and
Fuel (CPI-AF) increased by 7.0 per cent and
7.4 per cent, respectively, compared to 1.8 per
cent and 5.4 per cent in 2012. In contrast, the
Trimmed Mean (TRIM) declined to 4.5 per cent
in 2013 from 6.0 per cent in 2012. The generally
higher levels of core inflation largely reflected
the non-recurrence of the significant reduction
in communication costs in 2012, coupled with
increases in the costs of water and sewage,
some household durables as well as health
services. In addition, the higher core measures
reflected the impact of some pass-through of
exchange rate depreciation.
For 2013, Other Urban Centres (OUC) and
Rural Areas (RA) recorded inflation of 10.1 per
Chart 3: Headline Inflation
Source: STATIN
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cent and 9.0 per cent, respectively, relative
to 6.9 per cent and 7.0 per cent for 2012.
In contrast, the rate of price increase in the
Greater Kingston Metropolitan Area (GKMA)
decelerated to 9.6 per cent from 10.0 per cent
for 2012. The relatively higher inflation across
the regions in 2013 was primarily reflected in
Transport (TRAN) and Communication (COM)
(see Chart 4 & Appendix A).
2.5.2. Component and Contributing Factors
to Inflation
The higher inflation in 2013 mainly reflected a
rise of 20.4 per cent in TRAN relative to 2.5 per
cent in 2012 (see Chart 5 & Appendix B). This
acceleration was due primarily to the increase in
bus and taxi fares. In addition, Housing, Water,
Electricity, Gas & Other Fuels (HWEG) and
Miscellaneous Goods & Services (MIS) rose
by 10.0 per cent and 10.3 per cent, respectively,
relative to 5.3 per cent and 6.0 per cent in
2012. The movement in HWEG reflected the
administrative increase in water and sewage
rates as well as the impact of higher electricity
rates. For MIS the increase mainly captured
price adjustments for personal care as well as
funeral related costs. Additionally, the higher
inflation in 2013 reflected a smaller reduction
in communication costs of 4.2 per cent during
the year, when compared to the 39.4 per cent
decline in 2012. Of note, FNB increased by 7.9
per cent relative to 14.3 per cent in 2012.
For 2013, FNB, TRAN and HWEG accounted
for approximately 73.6 per cent of the annual
inflation (see Chart 6). In particular, FNB
accounted for 31.8 per cent of inflation relative
to 77.6 per cent for 2012, when domestic food
prices reflected the impact of drought conditions
and Hurricane Sandy (see Appendix A). TRAN
and HWEG accounted for 28.1 per cent and
13.7 per cent relative to 4.6 per cent and 9.7 per
cent respectively, in 2012.
2.5.3. Domestic Agriculture Supply
Domestic agriculture supplies expanded in
2013, reflecting recovery from the contraction in
2012 when the agriculture sector was adversely
affected by Hurricane Sandy (see Production).
Consequent on the recovery in supplies, prices
of vegetables & starchy foods increased by only
5.7 per cent contributing 4.2 per cent to overall
inflation for 2013 (see Appendix A). This
reflected a deceleration relative to inflation of
28.4 per cent among vegetable & starchy foods
in 2012 (see Chart 7).
2.5.4. Imported Inflation
Imported inflation in 2013 was influenced
by rising fuel prices and an accelerated pace
of depreciation in the domestic currency. In
particular, the average price of crude oil as
measured by the West Texas Intermediate (WTI)
increased by 10.9 per cent, in contrast to a
decline of 10.5 per cent for 2012. The movement
in crude oil price in 2013 largely reflected the
impact of tensions in the Middle East (see
International Economic Developments).
Higher crude oil prices contributed to increased
prices within HWEG and TRAN.
- 27 -
Annual Report 2013
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Chart 4: Annual Inflation & YOY Change by Region
Source: STATIN
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Chart 5: YOY Percentage Change in Inflation
Chart 6: Inflation contribution by Division
7.9
11.0
9.2
11.5
7.3
5.9
20.4
4.25.9
4.0
7.8
10.3
FNB
ATB
CF
HWEG
FHERM
HLTH
TRAN
COM
R&C
ED
R&A
MIS
31.1
1.6
3.2
15.5
3.8
2.0
27.5
1.8
2.1
0.9
5.19.0
%Inflation (2013) All Jamaica %Share (2013)
Blue bars = positive and Red bars = negative
MIS= Miscellaneous Goods & Services, R&A=Restaurants & Accommodation, ED=Education, R&C=Recreation & Culture, COM=Communication, TRAN= Transport, HLTH=Health, FHERM=Furniture, Household Equipment & Routine Household Maintenance, HWEG=Housing, Water, Electricity, Gas & Other Fuels, C&F=Clothing & Footwear, ABT=Alcohol, Beverages & Tobacco, FNB=Food & Non-Alcoholic Beverages
7.9
11.0
9.2
10.0
7.3
5.9
20.4
4.2
5.9
4.07.8
10.3
FNB
ATB
CF
HWEG
FHERM
HLTH
TRAN
COM
R&C
ED
R&A
MIS
6.4
4.9
2.4
4.7
1.3
2.8
17.9
35.2
0.8
0.3
2.5
4.3
% Inflation (2013) All Jamaica Change (yoy %ppt)
Source: STATIN
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There was a decline of 20.9 per cent in the Bank’s
grains price index, relative to the increase of
11.6 per cent in 2012 (see Chart 8). Consistent
with the decline in international grain prices,
there were lower rates of price increases among
processed foods which contributed, in part, to
the lower inflation in FNB for 2013.
The weighted average selling rate (WASR)
of the Jamaica Dollar vis-á-vis the US dollar
Chart 7: Average Supplies of Agriculture Produce
depreciated by 12.6 per cent for 2013 compared
to 6.9 per cent for 2012. Despite an estimated
reduction in the pass-through of depreciation
to prices, some inflationary pressures were
evident in the energy and services segments,
in particular HWEG, Health, and Restaurants
& Accommodation Services. In addition, the
depreciation contributed to higher prices
among durable goods.
2012
Yellow Yam
Irish Potato
Ripe Plantains
Sweet Potato
Dasheen
Carrot
Cabbage
Red Peas
Tomato (Plummie)
Escallion & Thyme
Callaloo
Pumpkin
Lettuce
Star
ches
(Ton
nes)
Vege
tabl
es (T
onne
s)
Actual Avg. of previous 5-years2013
-4.8
75.3
-47.3
27.2
51.3
34.2
39.4
27.4
28.8
34.3
18.5
90.6
14.2
Actual (%)
Source: Rural Agricultural Development Authority (RADA)
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Chart 8: Trends in WTI Crude Oil Price and BOJ Grains Index
AVG EOP AVG EOP AVG EOPWTI Prices Grain Prices Exchange Rate
2012 94.21 88.27 380.87 397.12 89.01 92.982013 97.98 97.91 350.89 314.43 100.78 106.382012 (yoy%) -1.0 -10.45 2.4 11.6 3.4 7.42013 (yoy%) 4.0 10.92 -7.9 -20.8 13.2 14.4
-10
0
10
20
30
40
50
60
70
80
-50
0
50
100
150
200
250
300
350
400
2012
2013
2012 (yoy%)
2013 (yoy%)
2.5.5. Administered and Other Price
Adjustments
On 25 August 2013, bus and taxi fares
increased by 25.0 per cent. Consequently,
TRAN contributed approximately 71.7 per cent
of the inflation for September 2013 and was the
main contributor to the increase for the year.
Additionally, water and sewage rates were
increased by between 13.0 per cent and 18.0
per cent on 03 October 2013. Consequently,
Water Supply and Miscellaneous Services
related to the Dwelling contributed 4.1 per
cent to inflation for the year. There was also an
average increase of 6.0 per cent in wages for
artisans in February 2013 which had a minimal
impact on the CPI for the year.
2.5.6. Demand and Supply Conditions
Some short-term indicators of domestic
demand reflected mixed results throughout
the year. These indicators include PAYE
receipts and the values of debit & credit card
transactions, imports and non-business loans.
In real terms, PAYE receipts and imports
reflected declines of 6.6 per cent and 0.7 per
cent, respectively, relative to declines of 3.5 per
cent and 3.2 per cent in 2012. In contrast, the
real value of debit and credit card transactions
as well as non-business loans increased by
5.9 per cent and 13.9 per cent, respectively,
following increases of 2.9 per cent and 14.8
per cent for 2012. Despite the mixed outturn
for 2013, generally weak demand existed in
Sources: Bloomberg & BOJ
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the domestic economy indicated by declining
real wages and higher unemployment (see
Chart 9 & Production).
Despite a slight narrowing of the output gap,
actual output remained significantly below
potential reflecting continued excess capacity
conditions. This occurred in spite of an
estimated growth in output during the second
half of the year (see Chart 10). However, excess
capacity among industrial suppliers combined
with weak domestic demand continued to
restrain price adjustments during the year.
2.5.7. Inflation Expectations
The Bank’s survey of inflation expectations
indicated that the average expected annual
inflation among businesses for 2013 was 10.5
per cent, above the actual outturn of 9.5 per cent
for the year and inflation expectations of 8.2
per cent in 2012 (see Chart 11). During 2013,
average expectations for calendar year inflation
was generally stable and was mainly influenced
by the sharper depreciation in the domestic
exchange rate as well as the higher cost of
utility and transportation. Despite these factors,
the average gap between actual inflation and
inflation expectations by businesses narrowed.
A
15
20
25
30
35
40
Mar
-10
Jun-
10
Sep
-10
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
J$million deflated
Real PAYE
Polynomial Trend
B
120
140
160
180
200
220
240
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
J$million
Real DebitCredit Tran
Polynomial Trend
C
0123456789
10
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
US$Billion
Real Import Value
Polynomial Trend
D
450
500
550
600
650
700
750
800
850
900
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
J$million
Real NonBusiness Loans
Polynomial Trend
Chart 9: Domestic Demand Indicators (Import Value & PAYE)
Sources: MOF, JETS, STATIN, BOJ
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Chart 10: Trends in Domestic Output Gap
Chart 11: Headline Inflation versus Expectations
Sources: STATIN, BOJ
Source: STATIN
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Apr-12
May-12
Jun-12
Sep-12
Oct-12
Nov-12
Jan-13
Mar-13
Apr-13
May-13
Jun-13
Aug-13
Sep-13
Oct-13
Dec-13
Exp(all) 12.94 12 11.76 11.91 7.945 8.335 8.062 8.418 8.128 8.045 8.165 8.253 10.75 10.74 10.29 10.46 10.22 10.12 10.77 10.47Actual (Headline) 7.847 7.227 8.073 6.008 7.285 7.2 6.9 6.7 6.654 7.166 7.4 8.4 9.13 9.149 9.218 8.757 9.54 10.46 10.33 10.16
0
5
10
15
20
25
30
Ann
ual I
nfla
tion
(%)
Exp(all)
Actual (Headline)
Mar Jun Sep Dec2012 0.3% -0.2% -0.5% -1.2%2013 -1.5% -1.1% -1.1% -1.0%
-2.0%
-1.0%
0.0%
1.0%
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2.6. Money and Credit
2.6.1. Money Supply
For 2013, growth in broad Jamaica Dollar
money supply (M3J) accelerated to 4.8 per
cent from 0.6 per cent for 2012 (see Table 10).1
In real terms, there was a decline of 4.5 per
cent in M3J for 2013, following a contraction
of 6.9 per cent for 2012. The stronger nominal
growth in M3J for 2013 largely reflected the
impact of the merger of a building society with
its affiliate commercial bank in August 2013.
Without this transaction, the nominal growth in
money supply would have been 2.8 per cent.
Of note, the growth for 2013 was well below the
average expansion of 6.4 per cent for the last
five calendar years.
The increase in M3J for 2013 mainly reflected
growth of 7.1 per cent and 4.4 per cent in
currency in circulation and local currency
deposits, respectively.2 For local currency
deposits, the expansion of 4.4 per cent was well
above the increase of 0.1 per cent for 2012 and
reflected growth in all categories of deposits.
In particular, there were relatively strong
increases in savings and other deposits, which
reflected an expansion in savings deposits
held by business firms and the impact of the
aforementioned merger, respectively.
1 M3J is the measure of broad money which is comprised of currency
in circulation and local currency deposits which consist of demand,
savings, time and other deposits denominated in Jamaica Dollars.
2 Local currency deposits consist of demand, savings,
time and other deposits denominated in Jamaica Dollar.
At end-2013, the money multiplier
corresponding to M3J was 3.62 relative to 3.66
at end-2012. This decline mainly reflected an
increase in the currency to deposit ratio. The
higher ratio of currency to deposits reflected
the relatively sharp increase in currency in
circulation relative to the expansion in deposits.
However, in real terms, there was a decline of
2.3 per cent in currency in circulation for 2013
following to a contraction of 4.1 per cent for
2012. The continued contraction in currency
in circulation, in real terms, occurred in the
context of a fall in real incomes and a higher
level of unemployment.
For the review year, growth in the measure of
money supply that includes foreign currency
deposits, M3*, accelerated to 7.9 per cent from
5.4 per cent for 2012. Within M3* the Jamaica
Dollar value of foreign currency deposits grew
by 16.5 per cent, relative to 21.6 per cent in the
previous year. The expansion in the Jamaica
Dollar value of these foreign currency deposits
reflected an increase of 1.7 per cent in the US
dollar stock and a 12.6 per cent depreciation
in the weighted average selling rate (WASR)
of the Jamaica Dollar vis-à-vis the US dollar.
For 2012, there was growth of 13.4 per cent
in the US dollar stock and depreciation of 6.9
per cent in the WASR. The growth in the US
dollar stock of foreign currency deposits largely
reflected expansions in savings and demand
deposits held by business firms, particularly
in the March 2013 quarter, when their savings
deposits increased by 41.3 per cent. As a result
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Table 10
2012 2013 2012 2013Total Money Supply (M3)* 25 084.6 38 536.0 5.4 7.9
Money Supply (M3J) 2 135.9 17 191.5 0.6 4.8
Money Supply (M2J) 8 828.7 14 087.7 3.6 5.5Money Supply (M1J) 5 151.6 4 975.9 4.6 4.2
Currency with the public 1 880.9 3 906.7 3.6 7.1Demand Deposits 3 270.7 1 069.2 5.5 1.7
Quasi Money 3 677.1 9 111.7 2.8 6.7Savings Deposits 771.8 8 245.6 0.8 8.0Time Deposits 2 905.3 866.1 9.9 2.7
Other Deposits -6 692.8 3 103.8 - 6.1 3.0Foreign Currency Deposits 22 948.8 21 344.5 21.6 16.5
Sources of Change in Money Supply2012 2013 2012 2013
TOTAL 25 084.6 38 536.0 5.4 7.9
Net Foreign Assets -62 906.4 20 143.0 - 33.9 16.4
Bank of Jamaica -72 296.9 -1 928.1 - 41.8 - 1.9Commercial Banks 9 390.5 22 071.1 73.6 99.6
Credit to Private Sector 40 055.8 45 491.8 16.7 16.3Local Currency 38 739.1 40 827.7 24.0 20.4Foreign Currency 1 316.7 4 664.1 1.7 5.9
Net Claims on Public Sector 37 759.6 10 919.1 18.5 4.5Net Claims on Financial Institutions
21.2 -6 128.3 - 0.1 22.8
BOJ Open Market Operations/1 51 224.3 -2 272.7 - 51.8 4.8
Other Items (Net) -41 069.8 -29 616.8 100.2 36.1/1 A negative flow represents an increase in the stock.
COMPONENTS OF CHANGE IN MONEY SUPPLYFlows (J$MN) % Change
Flows (J$MN) % Change
of the increase in foreign currency deposits,
the ratio of foreign currency deposits to total
deposits was 32.3 per cent at end-2013, relative
to 29.9 per cent at end-2012 (see Chart 12).
The main source of the expansion in M3* for
2013 was an increase of $45.5 billion (16.3 per
cent) in private sector credit as well as growth of
$22.1 billion (99.6 per cent) in net foreign assets
of commercial banks, which largely reflected an
increase of 26.6 billion (31.5 per cent) in assets.
The impact of these expansionary impulses was
partially offset by an increase of $2.3 billion
(4.8 per cent) in the stock of OMO liabilities as
well as a decline of $1.9 billion (1.9 per cent)
in the net international reserves (see Monetary
Policy Management).
2.6.2. Private Sector Credit
For the year ended December 2013, the stock
of commercial bank credit to the private
sector grew by 16.3 per cent and was largely
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Chart 12: Foreign Currency Deposits to Total Deposits - December 2003 to December 2013
denominated in Jamaica Dollars (see Table 11).
The outturn for 2013 compares to the increase
of 16.7 per cent for 2012 and the average
growth of 11.2 per cent for the last five
calendar years. The increase in private sector
credit for 2013 primarily reflected significant
growth in personal loans as a consequence of
an expansion in unsecured consumer loans
in the first quarter and the transfer of the loan
portfolio of a building society to a commercial
bank in August 2013. Abstracting the transfer
of the loan portfolio of the building society,
commercial bank credit to the private sector
would have grown by 13.2 per cent for the
calendar year.
2.6.3. Loans and Advances
Loans and advances, the largest component of
private sector credit, expanded by 18.3 per cent
($51.1 billion) relative to growth of 15.9 per
cent ($38.4 billion) in 2012. This expansion was
reflected in both business and personal lending
(see Table 12). The expansion in private sector
credit for the review year reflected growth in all
quarters. In particular, robust increases were
observed in the March and September quarters.
The stock of loans to businesses increased by
12.0 per cent for 2013, following growth of 10.7
per cent for 2012 (see Table 12). For the review
year, the growth in business loans was reflected
in all sectors, in particular Distribution (9.7 per
cent), Electricity, Gas & Water (36.1 per cent) and
Professional & Other Services (14.7 per cent). The
expansion in credit to Distribution was mainly
observed in the March and June quarters and
reflected local currency denominated loans to
companies within the sugar industry and the
food and drink sub-sector. For Electricity, Gas &
Water, the expansion primarily reflected credit
extended in the fuel and energy industries.
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Table 12
Table 11
2012 2013Total Private Sector Credit 40 055.8 45 491.8
% Change 16.7 16.3of which
Loans and Advances to Domestic Residents 39 290.0 46 549.5Corporate Securities 767.2 (1 058.4)
TOTAL CREDIT TO THE PRIVATE SECTORfor Year Ended 31 December
(Flow J$MN)
2012 2013 2012 2013 2012 2013Public Sector 30 138.3 22 837.3 -3 760.0 -7 300.9 - 11.1 - 24.2Private Sector 279 882.6 330 990.5 38 353.8 51 107.9 15.9 18.3
Business Lending 146 039.9 163 619.5 14 140.0 17 579.6 10.7 12.0
Agriculture & Fishing 6 138.2 7 733.8 772.1 1 595.5 14.4 26.0
Mining & Quarrying 693.0 747.7 136.7 54.7 24.6 7.9
Manufacturing 12 041.4 12 608.8 4 270.1 567.4 54.9 4.7 Construction & Land Dev. 21 115.4 23 217.9 36.4 2 102.4 0.2 10.0 Transport, Storage & Comm. 11 886.5 13 338.3 - 25.1 1 451.8 - 0.2 12.2 Tourism 26 335.4 27 535.1 -5 057.4 1 199.7 - 16.1 4.6 Distribution 40 077.4 43 966.8 9 600.2 3 889.4 31.5 9.7 Electricity, Gas & Water 8 827.0 12 015.4 3 093.4 3 188.5 54.0 36.1 Entertainment 1 132.5 2 045.7 618.6 913.2 >100.0 >101.0 Professional & Other Services 17 793.1 20 410.0 695.1 2 616.9 4.1 14.7 Personal & Other Lending 133 842.6 167 371.0 24 213.7 33 528.4 22.1 25.1 Personal 127 342.8 156 312.7 25 150.0 28 969.9 24.6 22.7 Overseas Residents 6 499.9 11 058.3 - 936.2 4 558.5 - 12.6 70.1
COMMERCIAL BANKS'Distribution of Total Loans & Advances to the Private Sector (JM$MN)
For Year Ended 31 December 2013Stock Flows %
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Growth in Personal & Other Lending accelerated
by 25.1 per cent in 2013 relative to an increase
of 22.1 per cent in 2012 and represented the
largest annual expansion since 1997. Of this
expansion, personal loans to domestic residents
grew by 22.7 per cent. The robust growth in
personal lending was reflected in mortgage
loans, instalment credit and term loans which
increased by 148.7 per cent ($9.4 billion),
20.6 per cent ($8.9 billion) and 17.6 per cent
($7.0 billion), respectively. The performance
of mortgage loans was attributable to the
aforementioned transfer of a building society’s
mortgage loan portfolio. With respect to
instalment credit, the expansion primarily
reflected loans issued for motor cars and debt
consolidation which increased by 38.1 per cent
and 23.8 per cent, respectively. For 2012, there
were respective increases of 34.2 per cent and
52.0 per cent in loans for motor cars and debt
consolidation.
Foreign currency loans to the private sector
declined by 1.0 per cent for 2013, following a
reduction of 9.6 per cent for 2012 (see Table
13). Notable net repayments were observed
in Distribution, Tourism and Construction &
Land Development. To a large extent, the fall
in foreign currency loans was due to significant
write-offs by the commercial banks.
Table 13
2012 2013 2012 2013 2012 2013
Private Sector 908 795 899 736 -96 887 -9 059 - 9.6 - 1.0
Business Lending 792 058 730 926 -63 176 -61 132 - 7.4 - 7.7
Agriculture & Fishing 15 514 18 406 -6 104 2 892 - 28.2 18.6
Mining & Quarrying 934 102 929 - 832 >100.0 - 89.1
Manufacturing 44 009 37 297 16 537 -6 712 60.2 - 15.3
Construction & Land Dev. 142 556 135 907 -24 388 -6 649 - 14.6 - 4.7
Transport, Storage & Comm. 73 559 72 267 -4 682 -1 292 - 6.0 - 1.8
Tourism 260 494 239 885 -68 073 -20 609 - 20.7 - 7.9
Distribution 132 759 108 751 29 112 -24 008 28.1 - 18.1
Electricity, Gas & Water 68 995 69 099 15 279 104 28.4 0.2
Entertainment 3 485 4 296 2 156 811 >100.0 23.3
Professional & Other Services 49 753 44 916 -23 942 -4 837 - 32.5 - 9.7
Personal & Other Lending 116 737 168 810 -33 711 52 073 - 22.4 44.6
Personal 69 221 78 876 -5 385 9 655 - 7.2 13.9
Overseas Residents 47 516 89 934 -28 326 42 418 - 37.3 89.3
Stocks Flows %
COMMERCIAL BANKS'Distribution of Foreign Currency Loans & Advances to the Private Sector (US$MN)
For Year Ended 31 December 2013
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2.6.4. Non-performing Loans
At end-2013 there was an improvement in the
quality of the commercial bank loan portfolio
relative to end-2012 (see Chart 13). This
improvement was consistent throughout the
calendar year. In this regard, the ratio of non-
performing loans to total loans declined to 5.4
per cent at end-2013 from 7.0 per cent at end-
2012.3 Similarly, non-performing loans as a
ratio of total private sector loans declined to
5.6 per cent at end-2013 from 7.5 per cent at
end-2012. The improvement in the commercial
banks’ business loans portfolio largely reflected
loan write-offs and to a lesser extent net
repayment of non-performing business loans
by some sectors. Net loan write-offs amounted
3 Non-performing loans refers to loans overdue for 3 months
and over.
to $6.1 billion in 2013 and represented 2.0
per cent of average outstanding private sector
loans. For 2012, net loan write-off was $3.2
billion, the equivalent of 1.0 per cent of average
outstanding private sector loans.
2.6.5. Interest Rates
For 2013, there was a trend decline in the
weighted average interest rate on commercial
banks’ foreign and local currency denominated
loans to the private sector. The overall spread
on local currency loans declined, while there
was an increase in the spread on foreign
currency loans for 2013.
2.6.5.1. Interest Rates- Domestic Currency
The overall weighted average lending rate on
local currency denominated loans declined by
Chart 13: Loan Quality - Ratio of Non-performing Loans to Total & Private Sector Loans
1.62.22.83.44.04.65.25.86.47.07.68.28.89.4
10.0
Per
Cen
t
Year
Non-performing to Total Loans Non-performing to Private Sector Loans
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95 basis points (bps) to 17.49 per cent at end-
2013, in contrast to the increase of 41 bps in
2012 (see Table 13A). The movement in the rate
during 2013 reflected a decline of 102 bps in the
weighted average lending rate to the private
sector, the impact of which was partially offset
by an increase of 15 bps in the rate to the public
sector. With respect to the change in the overall
private sector loan rate, there were declines in
all loans categories. In particular, there was a
reduction of 115 bps in the weighted average
interest rate on instalment credit following the
decline of 124 bps for 2012, despite the overall
increase in rates to the private sector for that
year.
For the review year, the overall interest rate
spread on local currency denominated loans
declined by 89 bps to 15.45 per cent, in contrast
to the increase of 75 bps for the preceding year
(see Table 13B). The reduction in the overall
interest rate spread occurred in the context of
a fall of 95 bps in the weighted average loan
rate as well as a slight decline in the weighted
average deposit rate. The lower interest rate
spread was solely reflected in the private sector
loans as there was an increase in the spread on
public sector loans.
Table 13A
2008 2009 2010 2011 2012 2013
Overall 21.65 21.06 20.43 18.03 18.44 17.49
Public Sector 20.76 17.12 10.79 9.98 9.94 10.09
Local Govt. & Other Public Entities 19.64 16.37 10.16 10.61 10.69 10.99Central Government 23.45 17.89 11.07 9.77 9.72 9.96
Private Sector 21.77 21.40 20.92 18.31 18.64 17.62
Instalment 20.56 21.58 20.96 19.20 17.96 16.81
Mortgage 7.57 8.10 16.93 12.36 9.90 9.88
Personal 26.37 25.31 25.90 21.66 25.21 24.77
Commercial 18.44 17.72 16.29 14.63 12.87 12.76
COMMERCIAL BANKS Local Currency Weighted Average Interest Rates (%)
End of Period
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Table 13B
2008 2009 2010 2011 2012 2013
Weighted Average Local Currency Deposit Rate
6.87 6.32 2.95 2.44 2.10 2.04
Overall Spread 14.78 14.74 17.48 15.59 16.34 15.45
Spread by Sector Public Sector 13.88 10.80 7.84 7.54 7.84 8.05 Local Govt. & Other Public Entities 12.77 10.05 7.21 8.17 8.59 8.95 Central Government 16.58 11.56 8.12 7.33 7.62 7.92
Private Sector 14.90 15.07 17.97 15.87 16.54 15.58 Instalment 13.69 15.25 18.01 16.76 15.86 14.77 Mortgage 0.70 1.78 13.98 9.92 7.80 7.84 Personal 19.49 18.99 22.95 19.22 23.11 22.73 Commercial 11.57 11.40 13.34 12.19 10.77 10.72
End of Period
COMMERCIAL BANKS Local Currency Interest Rate Spreads
2.6.5.2. Interest Rates- Foreign Currency
The weighted average interest rate on foreign
currency denominated loans declined by 16
bps to 7.39 per cent at end-2013 (see Table
14). This decline was reflected in respective
reductions of 34 bps and 11 bps in the weighted
average interest rates on public and private
sector loans. The change in the weighted
average interest rate on private sector loans
was reflected in lower rates for mortgage and
commercial loans as there were increased rates
for instalment credit and personal loans.
The overall interest rate spread on foreign
currency denominated loans increased by 6 bps
to 6.33 per cent at end-2013 (see Table 15). This
increase occurred in the context of a decline of
22 bps in the weighted average deposit rate to
1.06 per cent. The higher spread was reflected
in all categories of private sector loans except
mortgage loans. Notwithstanding an overall
decline in the spread on public sector loans,
there was an increase in the spread on Central
Government loans.
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Table 14
Table 15
2008 2009 2010 2011 2012 2013
Weighted Average Foreign Currency Deposit Rate
3.02 2.70 1.41 2.71 1.28 1.06
Overall Spread 5.94 6.31 7.20 5.22 6.27 6.33
Spread by SectorPublic Sector 5.96 6.57 4.80 4.63 5.56 5.44 Local Govt. & Other Public Entities 5.96 6.30 6.85 4.86 5.54 5.35 Central Government 5.94 7.24 5.39 4.17 5.60 5.95
Private Sector 5.93 6.24 7.67 5.75 6.45 6.55 Instalment 6.31 7.36 7.70 7.25 6.56 7.53 Mortgage n/a n/a n/a n/a 8.16 5.87 Personal 11.01 11.36 11.52 11.05 14.12 14.56 Commercial 5.43 5.81 7.35 5.33 5.87 5.95
End of Period
COMMERCIAL BANKS Foreign Currency Interest Rate Spreads (%)
2008 2009 2010 2011 2012 2013
Overall 8.96 9.01 8.61 7.93 7.55 7.39
Public Sector 8.98 9.27 6.21 7.34 6.84 6.50
Local Govt. & Other
Public Entities 8.98 9.00 8.26 7.57 6.82 6.41
Central Government 8.96 9.94 6.80 6.88 6.88 7.02
Private Sector 8.95 8.94 9.08 8.46 7.73 7.62
Instalment 9.33 10.06 9.11 9.96 7.84 8.59
Mortgage n/a n/a 9.65 8.66 9.44 6.93
Personal 14.03 14.06 12.93 13.76 15.40 15.63
Commercial 8.45 8.51 8.76 8.04 7.15 7.02
COMMERCIAL BANKS Foreign Currency Weighted Average Interest Rates (%)
(End of Period)
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2.7. Production
2.7.1. Overview
The domestic economy recorded growth of 0.2
per cent for 2013, following a contraction of 0.5
per cent for 2012 (see Chart 14). The expansion
in economic activity was largely driven by
greater external demand, the impact of which
was partly offset by weak domestic demand.
Improvement in international economic
conditions facilitated modest increases in
tourism and remittance inflows relative to
2012. Domestic demand conditions were
underpinned by increased unemployment, a
fall in real wages as well as low business and
consumer confidence, reflecting uncertainty
about the achievement of the targets under the
four-year Extended Fund Facility supported
programme with the IMF. In addition, drought
conditions in the first half of the year had an
adverse impact on economic activity.
Economic growth for 2013 was reflective of
increases of 0.3 per cent and 0.2 per cent in
the tradable and non-tradable industries,
respectively, relative to contractions of 1.6 per
cent and 0.3 per cent for 2012. The growth
in the review year was recorded in Mining
& Quarrying, Construction & Installation,
Hotels & Restaurants, Transport, Storage &
Communication and Finance & Insurance
Services (see Table 16). There were declines in
Agriculture, Forestry & Fishing, Manufacture
and Electricity & Water Supply.
Chart 14: Real GDP Growth Rates: 2000 - 2013
0.81.3
0.7
3.7
1.30.9
2.9
1.4
-0.8
-3.4
-1.4
1.4
-0.5
0.2
-4
-3
-2
-1
0
1
2
3
4
5
-23
-18
-13
-8
-3
2
7
12
17
22
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Per c
ent
Per c
ent
Real GDP Growth (R.H.S.)Tradable Sectors (L.H.S.)Non-Tradable Sectors (L.H.S.)
Source: STATIN
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2.7.2. Performance by Industry
Mining & Quarrying recorded an expansion of
3.8 per cent for 2013 following contraction of 8.7
per cent for the previous year. The performance
of the industry reflected an increase of 2.4 per
cent in total bauxite production in contrast
to a contraction of 8.8 per cent for 2012. The
expansion in total bauxite production was
reflected in an increase of 5.5 per cent in alumina
production as crude bauxite production fell by
1.7 per cent relative to the previous year. Higher
capacity utilization contributed to the increase
in alumina output. During the review period,
the capacity utilisation rate for the alumina
industry increased to 40.4 per cent from 38.3
per cent for 2012. On the other hand, the
capacity utilisation rate for the bauxite industry
fell to 89.6 per cent from 91.2 per cent for the
previous year. Lower capacity utilization in the
bauxite industry was attributed to disruptions
in production due to problems partly associated
with a dredging project which affected dock
space at Port Rhoades. Additionally, slower
ship rotation, a decline in the volume of bauxite
ordered by refineries and rainfall adversely
affected production.
Table 16
Source: STATIN
Growth (%) Contribution Growth (%) Contribution
GOODS -1.8 100.4 0.4 60.5
Agriculture, Forestry & Fishing 2.5 -28.1 -0.5 -12.8
Mining & Quarrying -8.7 76.4 3.8 81.1
Manufacture -1.0 18.0 -0.8 -38.0
Construction -4.4 76.2 1.8 78.0
SERVICES -0.2 31.3 0.1 36.6
Electricity & Water -2.2 14.3 -2.0 -31.8
Wholesale & Retail Trade, Repairs & Installation -1.6 62.9 -0.1 -7.9
Hotels & Restaurants 1.8 -17.4 0.9 22.2
Transport, Storage & Communication -0.1 1.3 0.2 14.4
Financing & Insurance Services 0.9 -18.7 0.5 27.6
Real Estates, Renting & Business Activities -0.4 7.6 0.3 16.2
Producers of Government Services -0.1 3.2 -0.2 -11.1
Other Services 1.1 -15.5 0.1 2.6
INANCIAL INTERMEDIATION SERVICES INDIRECTLY MEASURED
-2.9 -13.8 -0.3 -8.2
TOTAL VALUE ADDED -0.5 100.0 0.2 100.0
INDUSTRIAL CONTRIBUTION TO GDP GROWTH (%)2012 2013
INDUSTRIES
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There was an estimated expansion of 1.8 per
cent in Construction & Installation in contrast
to a decline of 4.4 per cent for 2012. The
industry’s performance reflected increases in
both residential and non-residential projects.
The expansion in residential projects was
inferred from data from the National Housing
Trust which indicated an increase of 9.4 per cent
in housing starts, following a decline of 30.1
per cent for 2012. Non-residential construction
expanded based on the implementation of
projects under the Major Infrastructural
Development Programme, several hotel projects
and the continuation of Highway 2000. Growth
in residential and non-residential projects was
supported by an increase in cement production.
Hotels & Restaurants increased by 0.9 per cent
compared to growth of 1.8 per cent for 2012,
mainly reflected in Hotels. The expansion in
Hotels was inferred from increases of 1.1 per
cent and 0.2 per cent in stop-over visitor arrivals
and expenditure, respectively, relative to the
previous year. Visitor arrivals benefited from
additional flights from the United Kingdom,
Russia, Costa Rica, Cuba and Canada as well as
inaugural flights from Germany and Sweden.
Stop-over visitor arrivals for the review period
was also bolstered by marketing activities by
the Jamaica Tourist Board and an influx of
visitors for the Jamaica Diaspora Conference.
However, there was some offsetting impact from
flight rationalization by Caribbean Airlines
and adverse winter conditions in the USA and
Canada which affected air travel in the first half
of the year.
Transport, Storage & Communication grew by
0.2 per cent for 2013, following five consecutive
years of decline averaging 2.2 per cent. With
the exception of the June 2013 quarter which
was flat, the industry’s value-added expanded
consistently throughout the year. Improvement
in the industry’s output reflected the
performance of Communication as Transport
declined. Expansion in Communication was
inferred from growth in telecommunications
activities due to the reduction in call rates,
which led to an increase in the average revenue
per mobile user. The performance of Transport
reflected declines in water and air transport.
Reduction in water transport was primarily
attributed to a contraction of 2.5 per cent in the
number of ships calling, including cruise liners
at Jamaican ports. The fall in ship calls was
primarily attributed to a shift in the itinerary of
selected cruise lines away from the Caribbean
given high cost of fuel as well as passengers’
desire for new destinations, during the first part
of the year. Air transportation was negatively
affected by flight rationalization by Caribbean
Airlines.
Financing & Insurance Services recorded an
expansion of 0.5 per cent in the context of the
National Debt Exchange in February 2013.
This was relative to growth of 0.9 per cent for
2012. The resilience of the industry was largely
influenced by portfolio diversification. In
addition, growth in the industry was reflective
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of increased service charges, fees & commission
as well as foreign exchange gains.
Following two consecutive years of growth due
largely to enhanced productivity, Agriculture,
Forestry & Fishing contracted by 0.5 per cent
for 2013. This outturn reflected an average
decline of 8.8 per cent in the first half of the
year as there was average growth of 7.7 per cent
in the second half of the year. The industry’s
performance reflected a fall in traditional
export crops as domestic crop production
increased. The contraction in export agriculture
predominantly reflected lower output for cocoa,
sugar and pimento as there were improvements
in citrus and coffee exports (see Table 17).
For the review period, domestic crop production
reflected recovery from the impact of Hurricane
Sandy in October 2012 and subsequent
drought conditions in the March and June 2013
quarters (see Table 18). This performance was
influenced by improved weather conditions
which allowed for a greater level of planting
and reaping of crops. Additionally, there were
several support programmes including the
Hurricane Sandy Recovery Programme, the
Irish Potato Programme and the Jamaica Agro-
Park Development Programme.1 The impact of
these positive developments was partially offset
by a marginal fall in productivity as measured
by output per hectare relative to 2012 (see
Chart 15).
In a context of weak demand and higher input
cost, Manufacture recorded a contraction of
1 The Jamaica Agro-Park Development Programme is aimed at
expanding the production of agricultural products which have viable
domestic and export markets and for which Jamaican farmers have
the competitive advantage. Nine agro-parks are planned, of which
four have been established and are at various stages of development.
Table 17
Sources: Sugar Corporation of Jamaica; and Bank of Jamaica estimates
CROP 2012 2013 % Change
Exports (‘000 tonnes)
Sugar 136.6 121.1 - 11.3
Citrus 4.7 13.1 179.4
Cocoa 1.0 0.5 - 50.9
Coffee 0.8 0.8 1.7
Pimento 0.3 0.2 - 29.1
Production (000’ tonnes)
Sugar cane 1 557.6 1 305.3 - 16.2
SELECTED AGRICULTURAL EXPORTS
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Chart 15: Output per Hectare 2000 - 2013
0.8 per cent for 2013, following a decline of 1.0
per cent for 2012. Value added for the industry
is estimated to have declined consistently
throughout the review period and reflected
contractions of 1.8 per cent and 0.1 per cent in
Other Manufacturing and Food, Beverages &
Tobacco, respectively.
Source: Ministry of Agriculture
Table 18
The decline in Other Manufacturing largely
reflected reductions in Refined Petroleum and
Chemical Products as Non-Metallic Mineral
Products increased for 2013. Chemical
Products largely mirrored a fall in ethanol
production, primarily influenced by higher
price for feedstock compared to that faced by its
12.0
12.2
12.4
12.6
12.8
13.0
13.2
13.4
13.6
13.8
14.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Per c
ent
%
Crop Group Change
2012 2013
Yams 145.1 138.8 -4.3
Vegetables 224.1 233.2 4.1
Other tubers 45.7 41.7 -8.8
Fruits 45.0 46.3 2.9
Condiments 46.9 52.3 11.6
Plantains 36.2 30.9 -14.5
Potatoes 57.6 61.6 7.1
Legumes 5.3 5.5 4.5
Cereals 3.1 3.0 -4.0
Total 610.1 614.9 0.8
(‘000 tonnes)
SELECTED DOMESTIC CROP Production
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Table 19
competitor in Brazil, rendering local production
unprofitable. The expansion in Non-Metallic
Mineral Products mainly reflected growth of
8.5 per cent in cement production, relative to a
decline of 0.8 per cent for 2012, influenced by
increased activities in the Construction industry
and higher external demand.
With the exception of poultry meat, all
categories within Food, Beverages & Tobacco
are assessed to have declined for 2013 when
compared with the outturn for 2012 (see Table
19). The reduction in sugar, in particular, was
attributed to several factors, including the
late start of reaping activities and industrial
disputes at one sugar factory.
Electricity & Water Supply declined by 2.0 per
cent for 2013, reflecting average contraction
of 2.9 per cent in the first three quarters and
expansion of 1.0 per cent for the December
2013 quarter. Both electricity consumption and
water production are assessed to have declined
for the year. The reduction in electricity
consumption was influenced by disruptions in
transmission due to technical losses and theft.
Water production was affected by drought
conditions in the first half of the year.
2.7.3. Labour Productivity & Wages
Labour market conditions continued to
deteriorate in 2013 with the unemployment
rate (UR) increasing to 15.3 per cent from
ITEM 2012 2013 % Change
Production (‘000 kgs)
Poultry Meat 101 509.0 103 263.3 1.7
Sugar 136 645.0 121 138.0 -11.3
Molasses 58 870.0 42 923.0 -27.1
Edible Oil 21 102.0 19 027.0 -9.8Non-Metallic Minerals
760 316.0 824 828.0 8.5
Animal Feeds 408 139.0 401 241.0 -1.7
Production (‘000 litres)Non-Alcoholic Beverages
166 848.3 180 078.7 7.9
Petroleum Products 1 328 546.2 1 281 526.2 -3.5
Alcoholic Beverages 72 972.9 67 107.0 -8.0
000 gallons
Ethanol Volume 64 055.2 47 168.2 -26.4
Source: Planning Institute of Jamaica
SELECTED MANUFACTURING ITEMS
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Source: STATIN
13.9 per cent and 12.7 per cent in 2012 and
2011, respectively. The increase in UR was
reflective of a 2.1 per cent increase in the
labour force, which outweighed growth of 0.5
per cent in employment. This outturn was
associated with a 1.0 percentage point increase
in the job-seeking rate relative to the previous
year. Manufacture, Hotels & Restaurants,
Financial Intermediation and Transport,
Storage & Communication were the industries
that recorded declines in employment, as
employment increased in all other industries
(see Table 20).
For 2013, real wages declined by 4.7 per cent
following a contraction of 4.8 per cent for 2012.
This reduction was observed in all industries
with the exception of Mining & Quarrying and
Wholesale & Retail Trade.
There were no inflationary pressures
emanating from the labour market in 2013,
as the movement in real wages was below
both measures of productivity (see Chart 16).
Specifically, labour productivity, measured
as output per hour worked, improved by
0.7 per cent for 2013 when compared to the
Table 20
2012 2013 % Change
Total Labour Force ('000) 1281.9 1308.7 2.1
Employed Labour Force ('000) 1103.4 1109.1 0.5
Unemployment Rate (%) 13.9 15.3 9.5
Job Seeking Rate (%) 8.8 9.8 10.5
Agriculture, Forestry & Fishing 201.2 202.4 0.6
Mining, Quarrying & Refining 4.9 5.4 10.8
Manufacture 77.0 71.9 -6.6
Electricity, Gas & Water 7.7 8.5 9.4
Construction & Installation 81.1 83.0 2.4
Wholesale & Retail, Hotels & Restaurants Services 221.4 221.5 0.1
Hotels & Restaurants Services 76.3 75.8 -0.7
Transport, Storage & Communications 73.1 72.7 -0.5
Financial Intermediation 26.3 26.0 -1.0
Real Estate, Renting and Business Activities 57.7 65.9 14.2
SELECTED LABOUR FORCE INDICATORS
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Chart 16: Labour Productivity vs. Real Wages 2000 - 2013
contraction of 3.5 per cent for the previous
year. In contrast, output per worker, another
measure of labour productivity, declined by
0.3 per cent. The fall in output per worker was
primarily concentrated in Agriculture, Forestry
& Fishing, Mining & Quarrying, Electricity,
Gas & Water, Construction and Finance &
Insurance Services.
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2.8. The Stock MarketAll indices of the Jamaica Stock Exchange
(JSE) declined for 2013, with the exception of
the JSE Junior Market Index. In particular, the
JSE Main Index fell by 12.5 per cent for 2013
following a decline of 3.4 per cent recorded
for the previous year (see Chart 17). Similarly,
the All Jamaica Composite and Select indices
declined by 10.2 per cent and 12.6 per cent,
respectively, in comparison to declines of 10.8
per cent and 13.4 per cent for 2012. On the other
hand, the JSE Junior Market Index increased
by 17.0 per cent in contrast to a decline of 13.5
per cent for 2012.
The performance of the JSE indices for 2013
occurred against the background of a weak
domestic economy and low investor confidence.
Furthermore, the average monthly returns on
foreign currency and domestic fixed income
investments exceeded the average monthly
returns on equities. In particular, the monthly
returns on the JSE Index averaged negative
1.1 per cent while those on the money market
securities and average monthly depreciation
gains on foreign currency investments were
0.6 per cent and 1.1 per cent, respectively (see
Foreign Exchange Market & Chart 18).
Chart 17: Annual Growth of the JSE Index: 2004-2013
Chart 18: Average Monthly Returns from Equities, Fixed Income Investments & US Dollar Positions: Comparative Indicators
66.7
-7.2-3.7
7.2
-25.8
4.0 2.3
11.8
-3.4-12.5
-40.0-30.0-20.0-10.0
0.010.020.030.040.050.060.070.080.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Chan
ge in
Inde
x (%
)
Year
-4.5-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.5
Mar-13 Jun-13 Sep-13 Dec-13
Retu
rn (%
)
Equities 30-day Repo USD Position
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On a quarterly basis, all JSE indices declined
except for the June quarter when there was the
signing of an EFF between the IMF and the
GOJ. The quarterly performance of the indices
was consistent with the general uncertainty
in the domestic economy.1 Notably, the three
major JSE indices recorded average quarterly
contraction of 2.6 per cent for 2013 relative to
average quarterly decline of 2.3 per cent for
2012 (see Chart 19). Conversely, the JSE Junior
Market Index recorded an average quarterly
increase of 4.8 per cent for 2013 in contrast to an average quarterly decline of 3.4 per cent for
the previous year.
There were several new listings on both the JSE
Main Market and Junior Market during 2013
(see Table 21).2 The new listings and offerings
on the Main Market aided in countering the
impact of low investor appetite that prevailed
throughout the year. Regarding the Junior
1 The quarterly performance of the stock market indices was also
partially impacted by the mixed earnings performance of the listed
companies throughout the year.
2 In 2013, the depth of the Junior Market increased with the
issue of two notes.
Market, the increase in activity and new listings
coincided with the plan by the Government to
phase out the special income tax incentives
provided to listed companies.3
For the review period, the poor outturn of the
JSE Index was reflected in the performance
of all market indicators. Specifically, the
number of transactions declined by 6.3 per cent
following a reduction of 16.3 per cent for the
previous year. In addition, the volume of stocks
traded decreased by 3.1 per cent following a
decline of 7.7 per cent for the prior year (see
Table 22). Furthermore, the value of stocks
traded decreased by 22.3 per cent relative to
growth of 1.1 per cent in 2012.
3 Specifically, companies that list on the Junior Market before
January 1, 2014 have full relief from income tax during the first five
years of listing, in addition to a 50.0 per cent relief from applicable
taxes in the next five years and would benefit from such schemes
for the remainder of their incentive period. However, companies
that list between January 1, 2014 and December 31, 2016, will only
be entitled to full relief from income tax for a period of five years
from the date of listing.
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Chan
ge on
Junio
r Mark
et Ind
ex (%
)
Chan
ge in
Indic
es (%
)
Main JSE Index All Jamaica Composite JSE Select Juniour Market
Chart 19: Quarterly Growth of the JSE Indices: 2011 – 2013
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Table 22
Sectoral Performance
The performance of stocks in Manufacturing
was mixed for 2013. Manufacturing accounted
for two of the top ten declining stocks with an
average price decline of 32.0 per cent. On the
other hand, the sector recorded an average
Table 21
JSE New Listings Other DevelopmentsMain Market Junior Market Listing J$bn
Jamaica Stock Exchange Limited Caribbean Cream Limited Jamaica Money Market Brokers Limited7.25% Preference Shares 1.4
Sagicor Real Estate X Fund Limited Eppley Limited 7.50% Preference Shares 38.4
Sagicor Group Jamaica Limited Caribbean Flavours & Fragrances Limited Access Financial Services Limited 9%Unsecured Short Term Notes 0.1
Derrimon Trading Company LimitedJamaica Public Service Company Limited 9.5% 2.5
Knutsford Express Services Limited Cumulative Non-redeemable 'F' Series 0.1Preference Shares 0.4
Medical Disposables & Supplies Limited'
STOCK MARKET DEVELOPMENTS IN 2013
price appreciation of 94.8 per cent for three
of the top advancing stocks, mainly reflecting
stocks of companies with improved earnings
performance. In particular, Caribbean Cement
Company Limited largely benefited from
stronger local sales due to increased domestic
Values (J$mn)
Volumes (mn)
No. of Transactions
Mar-12 3 398.3 272.7 5 466.0
Jun-12 7 101.5 439.0 5 686.0
Sep-12 4 811.5 486.9 4 278.0
Dec-12 2 983.7 232.6 4 062.0
Total 18 295.1 1 431.3 19 492.0
Mar-13 3 591.0 340.7 4 836.0
Jun-13 2 153.6 305.6 4 524.0
Sep-13 2 997.8 316.2 4 552.0
Dec-13 5 465.2 424.0 4 352.0
Total 14 207.7 1 386.4 18 264.0
Annual Change % 2012 2013
Values 1.1 - 22.3
Volumes - 7.7 - 3.1
No. of Transactions - 16.3 - 6.3
2012-2013TRADING ACTIVITIES OF THE MAIN JSE
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market share as well as higher export sales and
had an increase of 250.0 per cent in stock price
to $3.5 relative to $1.0 in 2012. Communications
also accounted for two of the top declining
stocks with an average price depreciation of
28.1 per cent. However, it should be noted that
Table 23
Table 24
Price( $)
(e.o.p)Price Change
(%)
COMMUNICATIONS
Radio Jamaica 1.3 -34.7
Gleaner Company 10.5 -21.4
MANUFACTURING
Seprod 10.5 -32.3
Berger Paints (Jamaica) 1.8 -31.6
RETAIL
Carreras Limited 36.1 -27.8
FINANCE
National Commercial Bank 16.4 -31.5
Sagicor Investments Jamaica 16.0 -27.7
Mayberry Investments Limited 2.0 -20.0
Scotia Investments Jamaica 25.2 -17.5
OTHER
Pulse Investments 0.9 -13.0
TOP TEN DECLINING STOCKSfor 2013
Price ($)
(e.o.p)Price Change
(%)
MANUFACTURING
Caribbean Cement 3.5 250.0
Kingston Wharves 6.1 21.2
Desnoes & Geddes 5.1 13.3
RETAIL
Hardware & Lumber 6.1 79.4
TOURISM
Ciboney Group 0.1 66.7
CONGLOMERATE
GraceKennedy Limited 55.1 10.1
Jamaica Producers Group 19.0 6.7
FINANCE
Sagicor Group Jamaica 10.2 0.6
OTHER
Palace Amusement 95.0 58.3
Kingston Properties Limited 4.5 19.0
TOP TEN ADVANCING STOCKSfor 2013
the large capitalization stocks, especially those
in Finance were among the top declining stocks
for the period, hence the low outturn in market
activity for the year (see Table 23 & Table 24).
Overall, the advance-to-decline ratio was 10:20
in comparison to 6:24 for 2012.
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2.9. Public Finance
2.9.1. Introduction
The budgets for Central Government and
the Public Bodies (PBs) for FY2013/14
were formulated within the context of the
macroeconomic objectives of the 4-year EFF
programme. Consistent with the Government’s
commitment to achieve an overall public sector
surplus of just over 1.0 per cent of GDP by
FY2016/17, the overall public sector deficit was
targeted to improve to a deficit of 0.1 per cent
of GDP at end-FY2013/14 from 4.3 per cent
of GDP for FY2012/13. Central Government
is programmed to achieve a primary surplus
of 7.5 per cent of GDP for FY2013/14, relative
to 5.2 per cent of GDP for FY2012/13, which
is to be maintained over the medium term.
There are also associated indicative targets for
tax revenue and social spending. Achieving
these objectives will require a combination of
corrective revenue and spending measures as
well as structural reforms. The programme also
envisages that the public bodies will achieve
surpluses over the medium term averaging
0.15 per cent of GDP.
The Fiscal Policy Paper (FPP) tabled in April
2013 articulated the Government’s commitment
to comprehensive tax reform, a critical plank
of Jamaica’s economic reform programme.
Tax reform is expected to result in a reduction
of tax expenditures to 2.5 per cent of GDP by
FY2015/16 from around 6.0 per cent of GDP in
FY2012/13. In this regard, key components of
the reform were advanced during the review
year, including the structural benchmarks under
the EFF. Critical among the benchmarks, was
the development and submission to the IMF
in August, of a conceptual framework for the
design of legally binding fiscal rules to enhance
fiscal transparency, ensure a sustainable
budget balance and lock in the gains of fiscal
consolidation. Legislation to enable adoption of
the rules will be enacted by end-March 2014.
In accordance with its plan to improve financial
management within the public sector, the
central treasury management system (CTMS)
with a single treasury account at BOJ (a
structural benchmark) was operational by mid-
2013, well ahead of the March 2014 deadline.
The Charities Bill and the Omnibus Incentives
Tax Bill (the Fiscal Incentives Bill and Income
Tax Relief in relation to Large-scale Projects and
Pioneer Industries) were approved by Parliament
in September 2013. Cabinet also approved the
detailed budget calendar for FY2014/15 on 30
November.
Other structural benchmarks achieved by end-
December 2013 were the legal & regulatory
framework for Collective Investment Schemes
as well as for the Central Collateral Registry.
Based on the forgoing actions, all the structural
benchmarks to 31 December 2013 were
achieved.
The quantitative targets for end-December
2013 were also met. Of note, the primary
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surplus marginally exceeded the target while
the overall public sector balance to end-
December reflected a lower than targeted fiscal
deficit which more than compensated for the
underperformance of the public bodies.
2.9.2. Central Government Performance
For April-December 2013, Central Government
operations resulted in a fiscal deficit of $19.6
billion, relative to the budgeted deficit of
$24.8 billion (see Tables 25)1. This outturn
1 The C-Efficiency ratio is the share of value-added tax (VAT)
revenue in consumption.
represented a significant contraction relative
to the fiscal deficit of $47.5 billion for April -
December 2012. The primary surplus of $61.7
billion for April - December 2013 exceeded the
EFF target by $89.6 million and was also well
above the primary surplus achieved for April
- December 2012. The current deficit of $4.5
billion for the review period was in contrast
to the implied current surplus target of $4.6
billion, a significant improvement relative to
the outturn for April - December 2012.
Table 25
FY 2012/13 Q1-Q3
FY 2013/14 Q1-Q3
Budget Q1-Q3
Variance %
Revenue & Grants 240 105.7 274 619.4 285 547.2 -10 927.8 - 3.8
Revenue 238 483.9 266 331.5 282 513.3 -16 181.8 - 5.7
Tax Revenue 224 840.5 242 653.2 255 161.3 -12 508.1 - 4.9
Non-Tax Revenue 12 259.1 22 264.7 25 728.8 -3 464.1 - 13.5
Bauxite Levy 882.5 884.2 1 030.2 - 146.0 - 14.2
Capital Revenue 501.7 529.4 593.0 - 63.6 - 10.7
Grants 1 621.8 8 287.9 3 033.9 5 254.0 173.2
Expenditure 287 618.3 294 235.0 310 328.8 -16 093.8 - 5.2
Recurrent Expenditure 265 100.8 270 252.8 277 290.5 -7 037.7 - 2.5
Programmes 66 037.9 69 160.9 69 894.3 - 733.4 - 1.0
Wages & Salaries 112 787.2 119 786.7 121 014.8 -1 228.1 - 1.0
Interest 86 275.7 81 305.2 86 381.4 -5 076.2 - 5.9
Domestic 53 411.1 46 980.0 51 360.9 -4 380.9 - 8.5
Foreign 32 864.6 34 325.2 35 020.5 - 695.3 - 2.0
Capital Expenditure 22 517.5 23 982.2 33 038.3 -9 056.1 - 27.4
Fiscal Balance -47 512.6 -19 615.6 -24 781.6 5 166.0 - 20.8
Current Balance -27 118.6 -4 450.7 4 629.8 -9 080.5 - 196.1
Primary Balance 38 763.1 61 689.6 61 599.8 89.8 0.1
Source: Ministry of Finance
CENTRAL GOVERNMENT SUMMARY ACCOUNTS(J$MN)
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Revenue & Grants for April - December 2013
was $10.9 billion below budget but $34.5
billion above the outturn for April – December
2012. The weaker than budgeted performance
over the review period was largely reflected in
a shortfall in Tax Revenue, the impact of which
was partly offset by higher than budgeted grant
receipts consequent on earlier than expected
inflows from the European Union. Within Tax
Revenue, shortfalls were recorded in all sub-
categories. In particular, International Trade
reflected weaker SCT, Custom Duty and GCT
receipts, consistent with lower than expected
imports, the impact of which was partly offset
by higher than budgeted travel tax receipts.
Lower than budgeted Income & Profits
primarily reflected shortfall in PAYE receipts
due to higher than anticipated unemployment
as well as a lower than anticipated compliance.
Production & Consumption largely reflected
lower than budgeted receipts from Education
tax, Betting, Gaming & Lottery and Stamp Duty.
The improvement in Tax Revenue relative
to April – December 2012, largely reflected
stronger receipts from GCT, telephone call tax
and education tax consequent on tax measures
implemented in the year as well as higher travel
tax receipts. In this regard, for April - December
2013, the C-Efficiency (GCT&SCT excluding
arrears) ratio was 60.5 per cent, 1.3 percentage
points above the corresponding period of 2012
but lower than the implied budgeted ratio of
60.9 per cent (see Chart 20)2. Non-Tax Revenue
for the review period exceeded receipts for
April – December 2012 largely due to transfers
from the National Housing Trust.
Expenditure for April - December 2013 was
2 The C-Efficiency ratio is the share of value-added tax (VAT)
revenue in consumption
Chart 20: C-Efficiency Ratios
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14
%
Year
C-Efficiency (GCT/SCT) Linear ( C-Efficiency (GCT/SCT))
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Source: Planning Institute of Jamaica
Table 26
$16.1 billion below budget, reflected in both
Capital and Recurrent Expenditure. Although
higher in nominal terms by 6.6 per cent, the
outturn for the review period represented a real
cut of 2.9 per cent relative to April - December
2012. Lower than budgeted Capital Expenditure
primarily reflected slower than anticipated
execution of capital projects. Recurrent
Expenditure reflected lower payments in all
categories. In particular, domestic interest
payments were $5.2 billion below budget
consequent on greater than expected savings
from the National Debt Exchange. Lower than
budgeted wages and salaries largely reflected
timing factors associated with the health sector
reclassification.
2.9.3. Financing
For April - December 2013, financing of
the deficit as well as debt amortization of
approximately $35.5 billion was sourced mainly
from the external market. In this regard, the
Government utilized net foreign financing of
$14.4 billion, primarily reflecting loan inflows
of US$130 million, US$90 million and US$60
million from the World Bank, IMF and IDB,
respectively. Additionally, there was net use of
domestic financing of $5.2 billion, reflecting
loan inflows from PetroCaribe as well as a draw-
down in bank balances.
2.9.4. Public Bodies Performance
For April - December 2013, the Public Bodies
recorded a net use of financing of $7.8 billion,
relative to the budgeted $6.1 billion (see Table
26) and $2.2 billion for April - December 2012.
The net use of financing over the review period
was largely reflected in foreign financing, the
impact of which was partly offset by a build-up
in deposits with commercial banks and other
domestic financial institutions.
Q1 Q2 Q3 Q1 - Q3 Q1 - Q3 Variance
6 421.5 -1 887.1 3 268.6 7 803.0 6 100.0 1 703.0
309.0 - 557.7 - 965.5 -1 214.3
1 406.8 635.4 -10 751.0 -8 708.9
-7 984.1 -5 707.8 -8 345.6 -22 037.6
12 689.9 3 743.1 23 330.8 39 763.7
Net use (+) /Net build-up ( -)
ANALYTIC PROFILE OF PUBLIC BODIES FINANCING OUTTURN (J$MN)
FY 2013/14Budget
Public Bodies
BOJ
Comm. Banks
Other Domestic
Foreign
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Selected Public Bodies (SPBs)3
The SPBs utilised financing of $17.3 billion (net)
for the period April – December 2013 relative to
the budget of $12.2 billion and in contrast to a
net build-up of $3.5 billion for April- December
2012. This performance mainly reflected net
use of financing from commercial banks, net
amortization in foreign loans and net use of
financing from other domestic institutions (see
Table 27). The main users of commercial bank
financing were National Water Commission
(NWC) and Petrojam; Clarendon Alumina
Partners (CAP) and NWC were the major users
of foreign financing. The overall net use of
financing reflected significantly lower than
anticipated operating surplus by Petrojam as
well as the inclusion of payments related to
prior year operating losses by CAP. The impact
of these excesses was, however, partly offset
by lower than expected use of financing by the
3 Includes: Petrojam, National Water Commission (NWC),
National Housing Trust (NHT), NROCC, National Insurance Fund
(NIF), Port Authority of Jamaica (PAJ).
National Housing Trust (NHT) in a context of
lower than anticipated operational expenses.
Other Public Bodies (OPBs)4
The OPBs recorded a net build-up of $9.5 billion
for April - December 2013 relative to a budget
of $6.1 billion and in contrast to a net use of
financing of $5.7 billion for April - December
2012 (see Table 28). The outturn for the
review period largely reflected the activities of
PetroCaribe and the Road Maintenance Fund.
In this regard, there was a build-up of balances
in commercial banks and other domestic
financial institutions, the impact of which was
partly offset by a net use of foreign financing.
2.9.5. Total Debt Stock
Jamaica’s total stock of debt grew by 6.9 per
cent to $1 938.2 billion for April to December
2013 relative to an increase of 6.0 per cent
in the stock for April to December 2012. (see
4 Includes: PetroCaribe, Road maintenance Fund (RMF), Student
Loan Bureau (SLB), Civil Aviation Authority (CAA)
Table 27
Q1 Q2 Q3 Q1 - Q3 Q1 - Q3 Variance
Selected Public Bodies 10 878.7 -1 423.7 7 882.8 17 337.9 12 219.2 5 118.7
BOJ -0.1 - 4.9 5.1 0.1
Comm. Banks 4 998.0 6 110.3 1 132.1 12 240.4
Other Domestic 730.7 9 225.3 -8 327.2 1 628.8
Foreign 5 150.1 -16 754.3 15 072.8 3 468.7
Net use (+) /Net build-up ( -)
ANALYTIC PROFILE OF SELECTED PUBLIC BODIES FINANCING OUTTURN (J$MN)FY 2013/14
Budget
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The
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Table 29). The increase in the total debt stock
reflected expansions in domestic and external
debt. At end-2013, the total debt stock reflected
growth of 0.3 per cent in real terms relative to
end-March 2013, compared to a real decline
of 0.1 per cent for the corresponding period in
2012 (see Chart 21).
External Debt
At end-2013, the stock of external debt was
$884.0 billion (US$8 310.0 million) compared
to $804.3 billion (US$8 133.4 million) at end-
March 2013, an increase of $79.7 billion
(US$176.6 million). There was an increase in
the US dollar value of the external debt which
reflected receipt of US$130.0 million and
US$60.0 million from the World Bank and the
IDB, respectively. In addition, there was an
expansion of 9.9 per cent in the Jamaica Dollar
value of the external debt stock relative to end-
March, primarily reflecting the impact of a 7.0
per cent depreciation in the exchange rate over
the nine-month period. The stock of external
debt at end-2013 exceeded the stock at end-
2012 by $767.6 billion (US$54.5 million).
Table 28
Table 29
Q1 Q2 Q3 Q1 - Q3 Q1 - Q3 Variance
Other Public Bodies -4 457.3 - 463.4 -4 614.3 -9 534.9 -6 119.2 -3 415.7
BOJ - 690.9 1 505.9 6 797.0 7 612.0
Comm. Banks -3 591.2 -5 474.9 -11 883.1 -20 949.2
Other Domestic -7 714.8 -16 991.8 -7 786.2 -32 492.8
Foreign 7 539.7 20 497.4 8 258.0 36 295.1
Net use (+) /Net build-up ( -)
FY 2013/14Budget
ANALYTIC PROFILE OF OTHER PUBLIC BODIES FINANCING OUTTURN (J$MN)
December FY-Dec 2012 December FY-Dec 2013
2012 Growth 2013 Growth
(J$MN) % (J$MN) %
Domestic Debt 995 230.9 9.0 1 054 174.0 4.5
External Debt 767 580.3 2.4 884 002.2 9.9
Total Debt 1 762 811.2 6.0 1 938 176.2 6.9
*Source: Ministry of Finance
JAMAICA'S TOTAL PUBLIC SECTOR DEBT
- 60 -The Economy & Monetary Policy Review
Bank of Jamaica
The
Eco
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y
Chart 21: Jamaica’s Total Public Sector Debt (J$Mn.)
Table 30
Central Government accounted for 76.2 per
cent of total external debt at end-2013, relative
to 72.9 per cent at end-March-2013 (see Table
30). The ratio of external debt service to exports
declined to 18.5 per cent at end-2013 from
26.4 per cent at end-2012 mainly due to lower
external amortization. Concurrently, the ratio
of external debt service to actual revenue (less
grants) was 21.3 per cent at end-2013 relative
to 31.7 per cent at end-2012. The lower ratios
indicate continued improvement in external
debt sustainability.
-2-1.5-1-0.500.511.522.533.5
0.0
500,000.0
1,000,000.0
1,500,000.0
2,000,000.0
2,500,000.0
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
Per c
ent (
%)
J$ m
n
Total Debt (LHS) Real Growth in Total Debt (RHS)
Dec-11 Dec-12 Mar-13 Dec-13
Central Government 6 376.6 5 985.8 5 931.0 6 291.7
Government Guaranteed 1 399.5 1 419.7 1 368.3 1 269.5
BOJ 850.0 850.0 834.1 748.8
Total 8 626.1 8 255.5 8 133.4 8 310.0
EXTERNAL DEBT BY BORROWER CATEGORYDecember 2011 - December 2013
(US$ MN)
Source: Ministry of Finance
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Domestic Debt
At end-2013, the stock of domestic debt was
$1 054.2 billion reflecting an increase of 4.5 per
cent relative to end-March 2013. This growth
largely reflected an increase in the foreign
currency component of domestic debt to 23.2
per cent from 20.0 per cent at end-March 2013,
due mainly to the impact of depreciation of
the exchange rate (see Table 31). The fixed
rate portion of domestic debt increased to 67.9
per cent at end-2013 from 66.3 per cent and
56.0 per cent at end-March 2013 and end-
2012, respectively. Despite a shortening of the
maturity profile of the domestic debt at end-
2013, whereby 31.9 per cent was scheduled to
mature within 5 years relative to 23.4 per cent at
end-March 2013, this profile was significantly
better than the profile at end-December 2012
when 53.2 per cent was scheduled to mature
within 5 years, prior to the NDX. Concurrently,
the duration of the GOJ’s domestic debt market
instruments reflected an improvement to 3.15
years at end-2013 relative to 1.55 years at end-
2012 despite falling from 3.69 years at end-
March 2013 (see Chart 22).
Table 31
Chart 22: Duration of the Domestic Debt Portfolio
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Jan
Feb
Mar Ap
rM
ay Jun Jul
Aug
Sep
Oct
Nov De
cJa
nFe
bM
ar Apr
May Jun Jul
Aug
Sep
Oct
Nov De
cJa
nFe
bM
ar Apr
May Jun Jul
Aug
Sep
Oct
Nov De
c
2011 2012 2013
yrs
Total Duration VR Duration FR Duration
Dec-11 Dec-12 Mar-13 Dec-13
Fixed Rate Debt 56.5 56.0 66.3 67.9
Debt maturing in 1-5 years 53.4 53.2 23.4 31.9
Debt maturing in 1-5 years 50.7 53.8 53.2 53.2
Foreign Currency Debt 12.3 18.7 20.0 23.2
Source: Ministry of Finance
STRUCTURE OF DOMESTIC DEBT(Per cent)
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Bank of Jamaica
The
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2.10. Monetary Policy & Interest Rates
2.10.1. Overview
During 2013, the Bank of Jamaica (BOJ)
reduced the interest rate payable on its 30-day
Certificate of Deposit (CD) on one occasion,
25 February. This policy action was effected
in a context of continued weak domestic
demand conditions and a relatively favourable
inflation outlook. In addition, the Bank’s policy
stance was consistent with the lower domestic
interest rates which followed the successful
implementation of the National Debt Exchange
(NDX) by the Government of Jamaica (GOJ)
and revenue measures aimed at improving
fiscal sustainability. For the remainder of the
calendar year, the BOJ’s focus on meeting the
monetary targets in the economic programme
and efforts to contain inflation expectation, led
to the Bank maintaining its policy rate. Of note,
the rate on the Bank’s overnight instrument
was held at 0.25 per cent and the local currency
cash reserve and liquid assets requirement
were maintained at 12.0 per cent and 26.0 per
cent, respectively, for 2013. However, the Bank
continued to augment its liquidity management
operations, by offering a suite of special open
market operations (OMO) instruments with
varying tenors.
The BOJ’s liquidity management framework
was further enhanced by the introduction
of special repurchase agreements in the
September quarter, to alleviate periodic
liquidity constraints faced by deposit-taking
institutions (DTIs). These special repurchase
operations were conducted with two-week
and overnight tenors. These enhancements
were formalized on 16 December, with the
introduction of a Standing Liquidity Facility
(SLF) and a Bi-Monthly Repurchase Operation
(BMRO) under which DTIs have access to
overnight and fortnightly funding through
repurchase arrangements (see Box 2). The
interest rate on the SLF and BMRO were set at
150 basis points (bps) and 25 bps, respectively,
above the rate on the Bank’s 30-day CD. There
is an aggregate limit for each facility with
each institution having a limit on the amount
of liquidity accessible. During 2013, the Bank
also intervened in the foreign exchange market
to smooth supply and demand conditions and
continued its intermediation through the Public
Sector Entities (PSE) facility.
2.10.2. Developments and Challenges
On 25 February, the Bank reduced the interest
rate payable on its 30-day CD by 50 basis points
(bps) to 5.75 per cent in the context of generally
weak domestic demand conditions and the
expectation of a continuation of favourable
inflation trends (see Chart 23). The decision to
reduce the signal rate was also consistent with
the rates on domestic instruments following the
GOJ’s successful implementation of the NDX
between 12 and 28 February. In particular,
there were declines in interest rates on selected
domestic GOJ securities by between 1.0
percentage point (pp) and 5.0 pps.
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of institutions and their use of the SLF will also be
continuously monitored. Institutions that access the
facility for more than 15 business days within each
calendar month or for 5 consecutive days will be subject
to enhanced monitoring by the Bank.
Bi-Monthly Repurchase Operation (BMRO)
In order to provide longer term financing to smooth
cyclical monthly liquidity needs, the Bank augmented
the SLF with a Bi-Monthly Repurchase Operation
(BMRO). Under this facility, the BOJ invites bids
from the DTIs every two weeks for a quantum of
repurchase transactions with a tenor of 14 days. The
rate on this facility is set at 25 bps above the rate on
BOJ’s 30-day CD. However, similar to the SLF, this
rate may be adjusted if necessary. The total available
funding through the BMRO is determined in each
period by the BOJ through its projection of the daily
liquidity needs of the system. In addition, the quantum
allocated is guided by the BOJ’s monetary policy
objectives. Following the projected liquidity need, the
Bank invites bids from institutions and then may adjust
the allocation based on the total demand for liquidity
versus its projected supply. The allocation of liquidity to
individual institutions at each operation is determined
by its relative asset size. The collateral required for the
facility is the same as the SLF and each transaction will
be settled in the JamClear®-CSD.
Box 2: Enhancements to the Liquidity Management Framework
Introduction
On 16 December 2013, the Bank of Jamaica (BOJ)
formalized an enhanced liquidity management
framework (ELMF) for deposit-taking institutions
(DTIs). The ELMF was designed to help to alleviate
the effects of liquidity swings on financial institutions
in order to ensure stability in the system. The principal
components of the ELMF are an overnight and a
bi-monthly financing facility through repurchase
arrangements.
Standing Liquidity Facility (SLF)
Overnight financing is available under the ELMF
through the Standing Liquidity Facility (SLF). Under
this facility, DTIs can access liquidity automatically
and on a continuous basis for overnight funding from
the Bank. The interest rate on the SLF is initially
set at 150 basis points above the rate on BOJ’s 30-
day certificate of deposit (CD), but this spread may
be adjusted if necessary. The total available funding
under the SLF was set initially at $3.5 billion, with each
institution able to access a portion based on its relative
asset size. Acceptable securities for the SLF are GOJ
and BOJ securities and all transactions will be settled
in the JamClear®-CSD. In order to manage potential
credit risk, the BOJ will continuously review and refine
the conditions for access to the facility as well as the
allocation limits of the DTIs. In addition, the conduct
- 64 -The Economy & Monetary Policy Review
Bank of Jamaica
The
Eco
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Following the implementation of the NDX
and other prior actions, the GOJ’s economic
programme was approved by the IMF under a
four-year Extended Fund Facility (EFF) on 01
May 2013. The approval resulted in Jamaica
receiving loan inflows totaling Special Drawing
Rights (SDR) of $136.8 million (US$207.2
million) from the IMF, of which SDR$58.0
million (US$87.9 million) was allocated for
budgetary support to the GOJ. The inflow to the
Government contributed to an overall build-
up in its accounts at the BOJ and an increase
in the net international reserves (NIR). In a
context where the Bank also net purchased
foreign currency from the market, the NIR and
net domestic assets (NDA) targets outlined in
the programme for the June 2013 quarter were
comfortably met.
Throughout the calendar year, the Central
Bank remained focused on meeting the
monetary targets outlined in the economic
programme. Given this commitment and in
an effort to contain inflation expectation, the
Bank maintained the rate on its 30-day CD
and overnight instrument at 5.75 per cent and
0.25 per cent, respectively, for the remainder of
2013, despite a relatively favourable inflation
outlook. However, the Bank continued to
augment its liquidity management operations
by offering a suite of special instruments of
varying tenors in excess of one year. This
action, coupled with the impact of the NDX,
fiscal consolidation and the implementation
of the CTMS resulted in increased liquidity
absorption from the system. In order to smooth
the distribution of liquidity, the BOJ introduced
special repurchase agreements which included
Chart 23: Interest rate on BOJ 30-day Certificate of Deposit
5.006.007.008.009.00
10.0011.0012.0013.0014.0015.0016.0017.0018.00
Dec-
08
Mar
-09
Jun-
09
Sep-
09
Dec-
09
Mar
-10
Jun-
10
Sep-
10
Dec-
10
Mar
-11
Jun-
11
Sep-
11
Dec-
11
Mar
-12
Jun-
12
Sep-
12
Dec-
12
Mar
-13
Jun-
13
Sep-
13
Dec-
13
(%)
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a BMRO commencing in September and the
SLF which began in December 2013. In the
context of generally tight Jamaica Dollar
liquidity conditions, some financial institutions
sold foreign currency to the Bank which
contributed to an increase in the NIR. The Bank
also intervened in the foreign exchange market
to smooth supply and demand conditions and
continued its intermediation through the PSE
facility.
2.10.3. Base Money Management
In the context of these developments, the
monetary base expanded by 6.1 per cent for
2013, relative to an expansion of 6.5 per cent
for 2012 (see Table 32). The deceleration was
reflected in a sharp slowdown in the growth
of the commercial banks’ local currency cash
reserves as well as a decline in the banks’
current account relative to an expansion for
2012. The impact of these developments on
base money was partially offset by acceleration
in the growth of currency issue to 7.9 per cent
from 3.3 per cent for 2012. An increase in the
Bank’s holdings of GOJ securities was the
main source of expansion in the monetary
base. At end-2013, the monetary base was
largely in line with the programme projections.
Accordingly, the NIR and NDA targets outlined
in the programme were comfortably met (see
Table 33).
Table 32
2012 2013
Total Jan - Mar Apr - Jun Jul - Sep Oct - Dec Total
Net International Reserves (US$) - 840.5 - 241.3 119.0 - 93.1 137.7 - 77.8
NET INT'L RESERVES (J$) -75 101.1 -17 328.0 11 199.9 -8 761.8 12 961.8 -1 928.1
Assets -75 021.3 -15 215.7 15 320.4 -15 778.1 9 795.0 -5 878.4
Liabilities - 79.8 -2 112.3 -4 120.4 7 016.3 3 166.7 3 950.3
NET DOMESTIC ASSETS 81 039.5 10 974.0 -12 272.5 10 623.2 -1 411.7 7 913.0
Net Claims on Public Sector 41 042.2 25 288.1 -1 581.2 6 996.5 -5 193.5 25 509.9
- Central Government Deposits 30 389.0 -9 969.4 -4 626.2 5 555.2 -9 893.2 -18 933.6
- Government Securities - 377.6 7 060.0 844.2 - 158.9 - 39.3 7 706.1
- Other Public Sector 11 030.9 22 806.0 2 494.0 1 306.9 4 739.0 31 345.9
Net Credit to Banks -2 246.0 -3 356.9 - 618.8 - 735.0 - 376.1 -5 086.8
Open Market Operations 51 224.3 -6 623.5 -5 797.4 6 789.9 3 358.3 -2 272.7
Other -9 030.3 -4 333.7 -4 275.1 -2 428.2 799.6 -10 237.4
MONETARY BASE 5 938.4 -6 354.0 -1 072.6 1 861.4 11 550.1 5 984.9
- Currency Issue 2 037.4 -7 032.2 35.8 495.3 11 618.6 5 117.6
- Cash Reserve 2 986.2 637.1 - 104.7 348.0 904.1 1 784.4
- Current Account 914.8 41.1 -1 003.7 1 018.1 - 972.6 - 917.1
Memo:
NIR Stock (US$MN) e.o.p 1 126.1 884.2 1 003.2 910.1 1 047.8 1 047.8
Growth in Monetary Base (%) 6.5 - 6.5 - 1.2 2.1 12.5 6.1
Inflation (%) 8.0 2.7 1.1 3.7 1.9 9.7
SUMMARY ACCOUNTS OF THE BANK OF JAMAICAFLOWS - J$ MILLION
2013
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Bank of Jamaica
The
Eco
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During the first quarter of 2013, the monetary
base contracted by 6.5 per cent, reflective of
the seasonal decline in currency issue. The
main influences on the monetary base were
a decline of $17.3 billion (US$241.9 million)
in the NIR, net build-up of $10.0 billion in
Central Government deposits at the Bank and
an increase of $6.6 billion in OMO liabilities.
There was a contraction of 1.2 per cent in the
monetary base, during the June 2013 quarter.
This contraction was influenced largely by
an increase of $5.8 billion in OMO liabilities
and a net build-up of $4.6 billion in Central
Government deposits at the Bank. The
increased placement in OMO instruments
was predominantly reflected in the Bank’s
special instruments offered during the period,
particularly a USD Indexed Note. Given
a tightening in Jamaica Dollar liquidity,
institutions sold foreign currency to the Bank.
In this context, the Bank’s overall operations
injected liquidity in the system while GOJ
operations were aborbtive. The funds sold to
the BOJ along with the proceeds from the loan
received from the IMF for budgetary support
contributed to an increase of $11.2 billion
(US$119.0 million) in the NIR for the June
2013 quarter.
The Bank continued to augment its liquidity
management operations with the offer of special
OMO instruments during the September 2013
quarter. These instruments facilitated increased
absorption of liquidity from the system. However,
the impact of this liquidity absorption was offset
by net unwinding of the Bank’s regular menu
of OMO instruments. In addition, in order to
smooth the distribution of domestic liquidity,
the Bank provided funds to deposit-taking
institutions via special repurchase operations
with two-week and overnight tenors. The net
injection of liquidity, which resulted from the
Bank’s OMOs, underpinned an expansion
of 2.1 per cent in the monetary base for the
September quarter.
For the December 2013 quarter, the monetary
base expanded by 12.5 per cent, reflecting
the typical increase in currency demand
associated with the Christmas holiday period.
The expansion in the monetary base was
Table 33
Criteria Outturn
Cumulative change in NIR (floor) - US$Mn - 301.7 - 81.8
Cumulative change in NDA (ceiling) - J$Mn 34.0 13.7
QUANTITATIVE PERFORMANCE CRITERIA* Monetary Targets
for the December 2013 Quarter
*Quantitative Performance Criteria relative to December 2012 quarter and valued at IMF programme rate, reflecting appropriate adjusters for specified flows.
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The
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Table 34
influenced by an increase of $13.0 billion
(US$137.7 million) in the NIR as there was a
decline of $1.4 billion in the NDA. Within the
NDA, there was a decline in OMO liabilities,
the proceeds of which facilitated net build-up in
Central Government deposits at the Bank. The
net injection through OMOs occurred despite
the continuation of the Bank’s offer of special
instruments. In order to alleviate periods
of domestic liquidity challenges, the Bank
continued to provide funds to deposit-taking
institutions via special repurchase agreements.
On 16 December, the Bank introduced the SLF
under which DTIs have automatic access to
overnight liquidity.
2.10.4. Interest Rates
The Bank reduced the interest rate on
its 30-day CD on one occasion in 2013
but maintained the rate on it’s overnight
instrument at 0.25 per cent. Similarly,
there were mix movements in the weighted
average yields on GOJ Treasury Bills for
the year (see Table 34 & Chart 24). In
particular, the weighted average yields
on GOJ 30-day and 90-day instruments
declined by 6 basis points (bps) and 14
bps to 6.25 per cent and 7.53 per cent,
respectively, for 2013. On the other hand,
there was an increase of 107 bps to 8.25
per cent, in the weighted average yield on
GOJ 180-day instrument. The movements
30-day WATBY
90-day WATBY
180-day WATBY
January 6.34 7.32 7.47
February 5.25 5.50 5.75
March 5.37 5.82 6.22
April 5.63 6.68 6.39
May 5.79 6.62 6.64
June 6.02 6.76 7.12
July 6.20 7.35 7.88
August 6.37 7.34 8.13
September 6.32 7.42 7.96
October 6.28 7.37 7.84
November 6.26 7.57 7.82
December 6.25 7.53 8.25
WEIGHTED AVERAGE TREASURY YIELDS(per cent) - 2013
- 68 -The Economy & Monetary Policy Review
Bank of Jamaica
The
Eco
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in the market-determined Treasury Bill
yields reflected investors’ preference for
shorter-term investments in the context of
Chart 24: Weighted Average Treasury Bill Yields (WATBY)
0.001.002.003.004.005.006.007.008.009.00
(%)
30-day WATBY 90-day WATBY 180-day WATBY
an accelerated pace of depreciation of the
Jamaica Dollar.
- 69 -
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2.11. Economic Outlook
2.11.1. Overview
Economic activity is expected to accelerate
in 2014, given continued improvements in
Jamaica’s external competiveness and a
strengthening of growth in the global economy.
This forecast assumes continued expansions
in Mining & Quarrying, Agriculture, Forestry
& Fishing, Construction and Hotels &
Restaurants. Growth is expected to be driven
by increased external demand as domestic
demand conditions are anticipated to remain
weak, albeit improving relative to 2013, due
to the protracted decline in real wages and
sustained fiscal constraint. In this context,
headline inflation for 2014 is projected to
decelerate relative to the rate recorded in 2013.
The outlook for inflation is also predicated on
the non-recurrence of administrative price
adjustments that took place in 2013, a decline in
international commodity prices and continued
excess domestic capacity conditions.
2.11.2. International Economy
The pace of expansion in the global economy
is projected to increase to 3.8 per cent in 2014
relative to 3.1 per cent in 2013. Growth is
expected to accelerate in the economies of the
USA, UK, Euro Area and Canada primarily
driven by reduced fiscal drag and continued
monetary easing. However, China is expected
to record lower growth in 2014 reflecting the
impact of policy measures aimed at restraining
the expansion of credit. A deceleration is also
anticipated for Japan due to fiscal consolidation.
Average crude oil prices for 2014, as measured
by the West Texas Intermediate (WTI), are
forecast to moderate relative to the increase of
4.0 per cent for 2013. This projection reflects
the impact of high US supplies, the anticipated
tapering of the US Federal Reserve’s stimulus
programme, the interim resolution of Iran’s
nuclear programme as well as easing
geopolitical tensions in the Middle East.
The prices of food-related raw materials are
projected to decline within the range of 1.5 per
cent to 3.5 per cent in 2014. This compares with
an average increase of 3.5 per cent recorded for
the last two years. The outlook for 2014 reflects
anticipated declines for wheat and corn prices,
reflecting increased global supplies resulting
from favourable weather conditions in some of
the major producing countries. Wheat prices
are expected to decline within the range of 2.0
per cent to 4.0 per cent while a contraction of
12 per cent to 15.0 per cent is anticipated for
corn prices. Benchmark Thai rice prices are
also expected to decline within the range of 5.0
per cent to 7.0 per cent reflecting the impact of
high stockpiles and increased competition from
Vietnam.
2.11.3. Domestic Economy
2.11.3.1. Growth
The Jamaican economy is expected to expand
within the range of 0.5 per cent to 1.5 per cent
for 2014, outpacing the growth of 0.2 per cent
- 70 -The Economy & Monetary Policy Review
Bank of Jamaica
The
Eco
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recorded in 2013. The major contributors to
output growth are expected to be Mining &
Quarrying, Agriculture, Forestry & Fishing,
Construction and Hotels & Restaurants. Growth
in Mining & Quarrying should reflect increased
capacity utilization within the alumina
industry following production problems
experienced during 2013. Agriculture, Forestry
& Fishing is expected to benefit from increased
cultivation under the Government’s Agro Parks
initiative as well as more favourable weather
conditions relative to 2013. Construction
is expected to be buoyed primarily by on-
going infrastructural projects. For Hotels &
Restaurants, the expansion is premised on
an anticipated increase in stopover arrivals
largely associated with continued economic
recovery in major source markets. The main
risks to the forecast include adverse weather,
slower than anticipated global growth, delays
in key infrastructural projects and lower than
expected consumer and business confidence.
2.11.3.2. Inflation
Domestic inflation, as measured by the change
in the consumer price index (CPI), is projected
to be lower than the outturn of 9.7 per cent in
2013. This projection reflects expected declines
in international commodity prices and the non-
recurrence of administrative price adjustments
that took place in 2013. In addition, domestic
demand conditions are expected to remain
weak, albeit improving relative to 2013. These
factors are expected to temper the lagged
impact of some pass-through of exchange rate
depreciation. The main risks to the forecast
include the impact of fiscal adjustments
and higher than anticipated international
commodity prices.
2.11.3.3. Monetary Policy
Current projections suggest that output growth
should exceed levels attained in 2013 while
inflation should decelerate. In this regard, the
Bank will remain focussed on maintaining
single digit inflation and the monetary targets
outlined under the country’s EFF with the
IMF while ensuring adequate liquidity in the
financial system. In addition, the Bank will
begin to position itself for the implementation
of full-fledged inflation targeting (FFIT) over
the medium term pending a decision by the
Government.
- 71 -
3. Financial System Surveillance and Policy
drafted and have been the subject of extensive
discussions with sector representatives. The
Draft Regulations, once amended to reflect the
current agreements arising from discussions
with the sector, are expected to be presented
by the Minister of Finance to Parliament (see
Section 3.1.2.2 and Section 3.1.5).
Bank of Jamaica’s supervisory responsibilities
for deposit-taking institutions are discharged
through the Financial Institutions Supervisory
Division. The principal aims of supervision are
to promote the safety and soundness of banks
and banking groups as well as the stability
of the financial system. The supervisory
methodology combines annual risk-focussed
on-site examinations of each licensee with on-
going off-site monitoring facilitated primarily
by prudential reporting requirements. This
allows for continuous and timely review of
developments in the financial condition of
supervised entities both at the institutional and
the systemic levels. Feedback from the on- and
off-site assessments is provided by Bank of
Jamaica to licensees’ management and Boards.
This is provided through a composite of formal
meetings, official correspondence and written
reports on examination findings, highlighting
issues of concern and those requiring remedial
actions within specified time frames. Where
there is evidence of ‘unsafe and unsound’
practices, the Bank of Jamaica utilizes sanction
3.1. Supervision of Deposit-taking
Financial Institutions
3.1.1. Introduction
Bank of Jamaica’s responsibility for supervision
of deposit-taking financial institutions derives
from Section 34A of The Bank of Jamaica Act1.
The supervised population comprises:
• Commercial banks licensed under The
Banking Act;
• Merchant banks licensed under The
Financial Institutions Act (hereafter,
FIA licensees); and
• Building societies governed by The
Building Societies Act and The Bank
of Jamaica (Building Societies)
Regulations.
Additionally, credit unions have been
designated by the Minister of Finance as
‘specified financial institutions’ under The
Bank of Jamaica Act, as a preliminary step
towards placing these institutions under the
supervisory oversight of the Bank of Jamaica.
This specification currently enables the Central
Bank to obtain information on their operations.
Regulations to establish a formal supervisory
framework for these entities have been
1 Regulatory responsibility for non-deposit-taking financial institutions rests with the Financial Services Commission which has supervisory oversight of the securities, insurance and private pensions industries.
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measures as provided under the respective
financial legislation and in accordance with its
supervisory “Ladder of Enforcement” which
sets out the graduated series of supervisory
actions in response to specific prudential
concerns. Underpinning the entire supervisory
process is a constant review of the legal and
policy framework as well as supervisory
practice to ensure that these remain relevant
as financial markets evolve domestically and
internationally.
3.1.2. Current Priorities in Banking
Supervision
3.1.2.1 Development of the Omnibus Banking
Bill
During 2013, one of the policy focus of the
Bank continued to be the development of the
Omnibus Banking Bill which will serve to
consolidate three pieces of existing deposit-
taking legislation, i.e. The Banking Act, The
Financial Institutions Act and the Bank of
Jamaica (Building Societies) Regulations,
as well as certain provisions of the Building
Societies Act. The Omnibus Banking Bill
will also incorporate enhanced supervisory
standards in keeping with developments
in international standards in recent years
as outlined in the Basel Committee’s Core
Principles for Effective Banking Supervision
(BCPs). 2
2 The Basel Core Principles are international best practice standards for Banking Supervision which are established by the Basel Committee on Banking Supervision.
Based on feedback received from the industry
stakeholder consultation process during the
first quarter of 2013 and discussions with the
IMF in the context of recommendations from
the 2005 FSAP, detailed drafting instructions
for the legislation were developed during
2013. At year end, drafting of the legislation
was in progress and it is expected that the Bill
will be tabled in Parliament by 31 March 2014
for enactment by end-May 2014, pursuant to
timelines under the country’s agreement with
the IMF.
Significant enhancements/provisions proposed
for incorporation in the Omnibus Banking Bill
include: -
i. Supervisory Autonomy
In keeping with recommendations of the IMF
as well as international best practice standards
regarding supervisory autonomy, it is proposed
that provisions be included in the Omnibus
Banking Bill to effectively transfer critical
supervisory functions and responsibilities from
the Minister of Finance. Among the specific
powers proposed for transfer from the office of
the Minister of Finance to the BOJ are issuance
and revocation of deposit-taking licenses;
approval of ownership changes; and fitness
and propriety determinations.
Notably, supervisory determinations made with
respect to issuance of deposit-taking licenses
and approval of ownership changes will only
include, as part of the assessment process,
consultation with the Minister of Finance in
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relation to considerations involving matters
of national interest. Concomitant with the
granting of increased supervisory autonomy,
the Omnibus Banking Bill will:
a. Include provisions to strengthen the
governance and accountability structure of the
Supervisory Authority;
b. Codify in law, timelines for supervisory
determinations in relation to licence
determinations, applications for new businesses
or products, new delivery channels for existing
businesses or products, strategic alliances, joint
ventures and co-branding initiatives; and
c. Provide for the establishment of an
independent body, the Supervisory Appeals
Board, to hear appeals arising from supervisory
determinations in relation to fit and proper
assessments, external auditors’ appointments
and alleged breaches of the Enforceable Code
of Conduct to be established under the Bill.
A key tenet of independence is also, the power
of the Supervisory Authority to set binding
prudential rules to promote the stability of
the deposit-taking sector and to appropriately
address the specific nature of the sector’s
intermediation activities. These include
rules related to minimum capital adequacy,
liquidity requirements, loan classification and
provisioning, among others. The Omnibus
Banking Bill therefore proposes to include
provisions that confer on the Supervisor the
power to issue binding Supervisory Rules to
treat with these operational and prudential
aspects of deposit-taking operations. The
BOJ will continue to provide guidance to the
industry through issuance of Standards of
Sound Practice.
ii. Counterparty Exposure Limits
In keeping with standards established under the
BCPs, the Supervisory Authority has proposed
a comprehensive treatment of large exposures
to more effectively contain risks within the
context of a DTI’s capital resources.
This includes:
a. Revision of large exposure limits which are
established in relation to credit facilities to
now incorporate all ‘counterparty exposures’.
In that regard, the proposed definition of a
large exposure will include all direct and
indirect credit exposures (as captured under
the existing definition of credit facilities),
as well as investments (debt and equity)
and any other counterparty exposure of the
licensee, whether reflected on or off balance
sheet;
b. Standardization of counterparty exposure
limits for all deposit-taking institutions
and the introduction of these limits on a
consolidated basis for the financial holding
company (FHC) and its subsidiaries; and
c. The power to exercise supervisory discretion
in applying the definition of a group of
connected counterparties to ensure that
any connection and association that tie the
fortunes of a group of counterparties will be
accurately reflected within the computation
of the single counterparty exposure.
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It is also proposed that licensees notify
the Supervisor within three months of the
enactment of the Bill of all counterparty
exposures to persons and borrower groups in
excess of statutory limits and the measures
(which may include capital injection) that
the licensee will undertake to reduce such
exposures to applicable limits within a
prescribed transitional period.
iii. Consolidated Supervisory Framework
The Omnibus Banking Bill will include
provisions to further strengthen the existing
framework for the licensing, regulation
and supervision of FHCs and empower the
Supervisor to adequately monitor and, as
appropriate, apply prudential standards to the
FHC for its financial group operations. These
enhancements were dealt with extensively
in the Consultation Paper on “Proposals for
Enhancement of the Legislative Framework for
the Deposit-taking Sector.” 3
iv. Enforceable Code of Conduct
In recognition of the need for principles to guide
licensees in regard to their responsibilities to
customers, the Omnibus Banking Bill proposes
the implementation of an enforceable Code of
Conduct. The Code, details of which will be
developed subsequent to the enactment of the
Bill, will outline specific obligations of DTIs
to their customers on matters relating to the
disclosure of relevant information regarding
3 A copy of the Consultation Paper is available on Bank of Jamaica’s website at: http://www.boj.org.jm/uploads/news/omnibus_consultation_paper_final_311212.pdf
product and service offerings. The Code will,
for example, address the need for (a) clear
language for contracts and communication
with customers; (b) customers’ attention to
be drawn to key terms; (c) notification and
related notice periods for new or changes in
fees; (d) publication of standard competition
information (e.g. fees and charges); and (e)
formal customer dispute resolution processes.
Oversight of compliance with the Code will
be monitored through the Central Bank
supervision and examination processes (i.e.
on- and off-site assessments). Accordingly, the
Supervisory Authority will be appropriately
empowered to obtain information necessary to
establish whether the Code has been breached
as well as impose administrative sanctions
for breaches of, or non-compliance with the
Code. The Bank of Jamaica will also have the
express power to publish statistics on customer
complaints.
It should be noted that the Code will cover only
a sub-set of customer-related issues, that is,
those which may arise if there are breaches of
the Code by DTIs. Other issues and grievances
of consumers of financial services will remain
to be dealt with under substantive consumer
protection mechanisms and agencies, including
the Court where there are contractual issues.
A comprehensive regime treating with the
broader matter of safeguarding of consumer
interests with respect to the offer of financial
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services by both deposit-taking and non-
deposit-taking institutions is being considered
by the Authorities. 4
v. Agent Banking
As a means to achieving greater financial
inclusion and widening access to financial
services, the Omnibus Banking Bill includes
provisions to allow for the extension of
permissible banking services through agents
who meet the requirements for authorisation.
This enhancement is anticipated to allow
DTI customers to conduct certain banking
transactions such as cash deposits and
withdrawals, from third party locations,
including retail outlets or through the use of
mobile technology. The range of permissible
activities in which agents may engage are
proposed to include funds transfers between
accounts, loan repayments, bill payments
and balance inquiries. In recognition of the
significant impact to the stability of the financial
system of such agency banking arrangements,
provisions in the Omnibus Banking Bill will
allow for the issue of guidance on these
arrangements and enforceable prudential rules.
3.1.2.2 Draft Credit Unions Regulations
The Bank of Jamaica has been involved in
the drafting of Regulations that will establish
the supervisory regime for credit unions
4 The Minister of Finance has mandated the Bank of Jamaica to undertake research to inform the development of a framework that would incorporate such a comprehensive approach for the protection of consumers of financial services and make appropriate recommendations.
(see Section 3.1.1 and Section 3.1.4). These
regulations will, among other things, prescribe
prudential criteria covering essential areas such
as capital adequacy, liquid assets, credit limits,
non-accrual and provisioning requirements,
submission of financial statements and
minimum solvency standards. In addition, the
Regulations will outline remedial action that
can be taken by the supervisory authorities
with respect to unsafe and unsound practices
as well as insolvency. At year-end, the draft
Regulations were being revised to reflect
agreements reached with the credit union sub-
sector during the year. Most significantly, this
included an upward revision of the proposed
unsecured lending limit informed within the
context of two key developments which were
deemed to have long term positive impact on
the country’s overall credit risk framework,
namely:
a) The operationalization of the credit
reporting regime with licensing of two
credit bureaux pursuant to passage and
implementation of the Credit Reporting
Act (2010); and
b) The impending implementation
of enhancements to the secured
transactions framework with the
proposed Security Interest in Personal
Property Act (SIPPA), including the
establishment of a Central Registry for
the registration of security interests in
non-realty assets.
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3.1.2.3 Survey of Fees & Charges
With a view to promoting transparency and
access by consumers to comparative information
on fees and charges offered by DTIs, Bank of
Jamaica has published annually, information on
fees and charges of commercial banks, building
societies and FIA licensees on its website since
December 2010. During the review year, the
Bank undertook a special survey on “Fees
and Charges of Deposit-Taking-Institutions”
pursuant to a Resolution of the Honourable
House of Representatives on 05 November
2013, which required that the Bank submit to
the Economy and Production Committee of
Parliament, within 60 days of the Resolution,
a report on the charges being levied by banks
and credit unions as at 31 October 2013. The
Resolution also required that where any of the
supervised banks “operate in other Caribbean
territories and/or any other jurisdiction outside
the Caribbean,” the report should provide the
charges being levied by those banks for the
same or similar services.
The survey was conducted on 55 service items
covering a range of transactions which would
commonly affect the general public relating
to “Current Accounts”, “Savings Accounts”,
“E-banking”, “Credit Card Services” and
certain “Miscellaneous Charges”.5 At year-
end, there were a number of outstanding
survey responses relating to credit unions and
regional and international commercial banking
5 “Miscellaneous Charges” included cost for manager’s cheque and cheque encashment fees.
counterparts. Nonetheless, on 06 January
2014, the Bank submitted an Interim Report to
Parliament to facilitate Parliament proceeding
with its discussions. Thereafter, a further 60
days was granted by Parliament for submission
of the Final Report. This report was submitted
on 14 March 2014. The Interim Report as at
31 October 2013 was published on the BOJ’s
website as was done for the earlier special study
undertaken as at 31 August 2010. 6,7
3.1.3 Supervisory Cooperation and
Interaction
3.1.3.1 Financial Regulatory Council
The Financial Regulatory Council (FRC) was
established in 2000 with the mandate to develop
policies and strategies to facilitate greater co-
ordination and information sharing between
the various supervisory and related agencies
operating in the Jamaican financial sector. The
Council comprises the following members:
• The Governor of the Bank of Jamaica,
Chairman;
• The CEO, Financial Services
Commission;
• The CEO, The Jamaica Deposit
Insurance Company; and
• The Financial Secretary.
The conduct of the FRC is guided by a
Memorandum of Understanding signed by
each member that addresses a range of common
issues, including information sharing.
6 http://www.boj.org.jm/uploads/news/boj_website_copy_interim_report.pdf
7 http://www.boj.org.jm/uploads/news/introduction_to_fees,_charges_tables_31_august_2010.pdf
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The FRC continued to meet during 2013 to
examine issues affecting the financial industry
as well as issues specific to corporate groups
comprising financial entities which are
supervised by the Bank of Jamaica and the
FSC.
3.1.3.2 The Caribbean Group of Banking
Supervisors
During 2013, the Bank continued to serve
as Administrator for the Secretariat of the
CGBS. 8 In May 2013, the Bank also assumed
Chairmanship of the Group for a two-year term.
In 2013, the Secretariat coordinated two
administrative meetings, three Supervisory
Colleges (see Section 3.1.3.3) and in conjunction
with the Banque de la République d’Haiti, the
“XXXI Annual Conference.”9 Five training
programmes were organized and held for the
region with international facilitators from the
Toronto Centre for Leadership Development
(Canada); Federal Reserve System (USA); the
Financial Stability Institute; and the Caribbean
8 The CGBS was established in 1983 under the aegis of the Central Bank Governors of member countries of the Caribbean Community (CARICOM), with the specific mandate to co-ordinate the enhancement of bank supervisory practices in the English speaking Caribbean, consistent with internationally accepted standards. The CGBS was later extended to banking supervisors from non-CARICOM Caribbean territories and now comprises membership from sixteen regional jurisdictions, ten of which are currently core members of CARICOM.
9 A regulatory or supervisory college generally refers to a working group of national banking supervisors (that have supervisory responsibility for entities in cross border group) that is formed for the collective purpose of enhancing effective consolidated supervision of a cross border banking group on an ongoing basis.
Regional Technical Assistance Centre
(CARTAC).10,11,12 The Bank also participated
in and contributed to the discussions of two
Technical Working Groups on the “Development
of a Regional Crisis Management Plan” and
“Basel II/III”.
3.1.3.3 Information Sharing
The Bank is one of 14 signatory jurisdictions
to a regional Information Sharing Agreement
under a Memorandum of Understanding
(MOU), to facilitate cross border cooperation
between home and host supervisory authorities
for regional banking entities. During 2013,
the Bank, under powers of the MOU, engaged
in discussions and exchanged relevant
information with regional jurisdictions with
common banking group presence. Bank
of Jamaica also participated in regional
regulatory colleges organised by CGBS and
Canada’s Office of the Superintendent of
Financial Institutions (OSFI) to discuss matters
of mutual interest pertaining to three cross
border banking groups.
10 The Toronto Centre which was established in 1998 with the support of the Government of Canada, the World Bank, the Schulich School of Business and the IMF, provides leadership training in financial sector supervision.
11 The Financial Stability Institute was jointly established by the Bank for International Settlements and the Basel Committee on Banking Supervision to assist supervisors around the world in improving and strengthening their financial systems.
12 CARTAC is one of eight IMF Regional Technical Assistance Centers (RTACs) located around the world. These Centres were created to help countries strengthen human and institutional capacity to design and implement sound macroeconomic policies that promote growth and reduce poverty. During 2013, CARTAC conducted two programmes.
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3.1.3.4 Association of Banking Supervisors of
the Americas (ASBA)13
Bank of Jamaica is a member of the hemispheric
group, the ASBA. During 2013, the Bank
remained an active contributor to the work of
ASBA as a member of its Technical Committee,
sitting as an invited observer at the Board
meetings, participating in a Working Group on
AML/CFT as well as its Training Committee.
The Bank also presented a paper on challenges
in the implementation of the new Liquidity
Coverage Ratio at the Annual Plenary.
3.1.3.5 Caribbean Financial Action Task Force
(CFATF)
In another area of regional involvement, the
Bank participated in CFATF plenaries and
contributed to the dialogue on enhancing AML/
CFT frameworks of member countries.
3.1.3.6 Financial Stability Board
The Bank participated in Regional Working
Group meetings of the Financial Stability
Board’s Regional Consultative Group for the
Americas on Home-Host Co-operation and
Information Sharing.14
13 ASBA is a regional grouping of 37 Banking Supervisory Authorities whose membership spans 35 jurisdictions encompassing North, Central and South America and the Caribbean, with one non-regional member, Spain.
14 The Financial Stability Board (FSB) was established to coordinate at the international level, the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. The FSB Secretariat is hosted by the Bank for International Settlements, in Basel, Switzerland.
3.1.4 The Supervised Environment
As at 31 December 2013, there were 12 deposit-
taking licensees operating in Jamaica, down
from 13 at end-2012. During the year, the
assets and liabilities of FirstCaribbean Building
Society (FCIBS) were transferred to its parent,
FirstCaribbean International Bank (Jamaica)
Limited (FCIB) under a scheme of arrangement
effective 16 August 2013. Consequently, FCIBS
surrendered its deposit-taking license issued
under the Building Societies Act, thereby
reducing the number of building societies in
operation to three from four (see Table 35).
Additionally, pursuant to the acquisition of
Capital and Credit Merchant Bank (CCMB) by
JMMB during 2012, the name of CCMB was
changed to JMMB Merchant Bank (gazetted
21 May 2013). The DTIs in operation at 31
December 2013 are reflected in Table 36. These
licensees offered services through 166 physical
branches during the year relative to 172 at
end-2012, as well as through the internet and
Automated Banking Machines (ABMs).
During 2013, the balance sheets of local DTIs
were impacted by several developments in
the domestic economy. These included the
Government’s implementation of the National
Debt Exchange (NDX), which resulted in a
decline in market interest rates.15, 16 There were
15 Under the NDX the tenors of short- to medium-term GOJ debt securities were extended at lower coupon rates.
16 Bank of Jamaica Weighted Average Selling Rates: December 2011: US$1.00 = J$86.6008; December 2012: US$1.00 = J$92.9776; December 2013: US$1.00 = J$106.3777
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**The proposal by the Minister of Finance for the assumption of full supervisory responsibility for the 38 credit unions by the Bank will result in a significant expansion of the supervised deposit-taking population in the future.
also liquidity challenges in the system due to
the NDX as well as the impact of the increased
pace of the implementation of the Central
Treasury Management System (CTMS) by the
Government. The Central Bank responded
to these liquidity challenges by introducing
a Standing Liquidity Facility and Bi-monthly
Repurchase Operations. Licensees’ balance
sheets were also impacted by the depreciation
of the Jamaica Dollar which led to revaluation
gains on foreign currency portfolios. Against
this background, the aggregated assets of DTIs
increased by 10.7 per cent or $94.4 billion to
$977.2 billion as at 31 December 2013, relative
to an expansion of 7.6 per cent or $62.2 billion
for 2012.17 Of the increase for 2013, $51.4
billion was as a result of the expansionary
effects of revaluation gains on foreign currency
portfolios.
17 Assets include acceptances, guarantees and letters of credits and are shown net of provisions for losses under the International Financial Accounting Standards
Table35
Table 36
Sub-sector Institution Name Related Deposit-taking InstitutionBank of Nova Scotia Jamaica Limited (BNSJ) Scotia Jamaica Building Society
Citibank N. A. (CBNA)
FirstCaribbean International Bank (Jamaica) Limited (FISD)First Global Bank Limited (FGB)
National Commercial Bank Jamaica Limited (NCB)
Sagicor Bank (Jamaica) Limited (formerly PanCaribbean Bank Limited)RBC Royal Bank (Jamaica)Limited
JMMB Merchant Bank Limited (formerly Capital & Credit Merchant Bank Limited)
MF&G Trust and Finance Limited
Jamaica National Building Society (JNBS)
Scotia Jamaica Building Society (SJBS) Bank of Nova Scotia Jamaica Limited
Victoria Mutual Building Society (VMBS)
LICENSED DEPOSIT-TAKING INSTITUTIONSas at 31 December 2013
Commercial Banks
FIA Licensees
Building Societies
Supervised Entities 2009 2010 2011 2012 2013
Commercial Banks 7 7 7 7 7
FIA Licensees 3 2 2 2 2
Building Societies 4 4 4 4 3
Total 14 13 13 13 12
MARKET COMPOSITIONNumber of Licensed Deposit-taking Entities*
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Commercial bank assets grew by 12.2 per cent
compared to 7.5 per cent for 2012. The sub-
sector accounted for 75.8 per cent of market
share relative to 74.8 per cent for 2012 (see
Table 37). The growth in assets was largely
reflective of the transfer of assets from FCIBS,
as well as revaluation gains.
NCBJ and BNSJ remained the two largest
commercial banks, with combined market
share of 74.3 per cent at end-2013 relative to
74.7 per cent at end-2012. FCIB’s market share
increased to 8.4 per cent from 7.1 per cent at
end-2012 due to the transfer of assets from
FCIBS.
Notwithstanding the amalgamation of FCIBS
with its parent, the building societies sub-
sector’s asset base grew, albeit by a slower 4.8
per cent for 2013 relative to 8.6 per cent for
2012. The sub-sector’s market share fell to 21.6
per cent at end-2013 from 22.8 per cent at end-
2012. The combined market share of JNBS and
VMBS, the dominant players in the sub-sector,
increased to 90.6 per cent at end-2013 from
87.2 per cent at end- 2012.
The asset base of the FIA sub-sector expanded
by 19.0 per cent during 2013 in contrast to
the contraction of 0.6 per cent for 2012. This
expansion resulted in an improved share of the
DTI market to 2.6 per cent from 2.4 per cent at
the end-2012.
3.1.4.1 Balance Sheet Profile
The growth in the system’s assets was
primarily reflected in loans and advances
which expanded by 14.1 per cent or $57.6
billion to $466.6 billion. This compared with
an increase of 12.9 per cent or $46.7 billion for
2012. New loans and advances grew by $45.9
billion compared to $47.8 billion for 2012 and
were predominantly in domestic currency. The
remaining $11.7 billion reflected the effects
of revaluation gains on the reduced stock of
foreign currency loans. Loan and Advances
continued to be the largest share of system
assets at end-2013, representing 46.7 per cent
relative to 45.1 per cent at end-2012 (see Chart
25).
Investments (including repurchase
transactions) declined by 0.8 per cent or
Table 37
Sub-sector J$BN % J$BN % J$BN %
Commercial Banks 613.6 74.8 659.8 74.8 740.7 75.8
Buildings Societies 185.5 22.6 201.4 22.8 211.1 21.6
FIA licensees 21.4 2.6 21.3 2.4 25.4 2.6System Total 820.5 100.0 882.5 100.0 977.2 100.0
MARKET SHARE OF LICENSED DEPOSIT TAKING INSTITUTIONS
Dec-2011 Dec-2012 Dec-2013As at 31 December
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$2.1 billion to $255.3 billion. This stock of
investments represented a reduced 26.1 per
cent of total assets at end-2013 relative to 29.2
per cent at end-2012. Government of Jamaica
securities continued to account for the largest
portion of the portfolio, being 67.0 per cent
relative to 70.5 per cent for the previous year.
DTI’s holdings of Cash and Bank balances
increased by 21.4 per cent or $32.9 billion at
end-2013 compared to the increase of 5.9 per
cent or $8.6 billion at end-2012. As such, total
Cash and Bank balances of $186.7 billion
represented 19.1 per cent of total assets at end-
2013, relative to 17.4 per cent at end-2012.
Accretion for 2013 was reflected in an increase
of $28.1 billion (US$175.0 million) in balances
held at overseas banks and growth of $6.7
billion (including foreign currency component
of US$15.0 million) in till cash and local
placements.
Deposits expanded by 9.6 per cent or $55.9
billion compared to 10.5 per cent or $55.6
billion for 2012 and were the principal funding
source for growth in system assets. The increase
in deposits primarily reflected an expansion of
19.2 per cent or $43.7 billion in foreign currency
Chart 25: Profile of System Assets 31 December 2011- 2013
31 Dec. 2011 31 Dec. 2012 31 Dec. 2013
Other, 8.0% Other, 8.4% Other, 8.0%
Cash & Bank 17.7%
Cash & Bank, 17.4%
Cash & Bank, 19.1%
Investment(inclu.Repos),
31.3%
Investment(inclu.Repos),
29.2%
Investment(inclu.Repos),
26.1%
Loans43.0%
Loans45.1%
Loans46.7%
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deposits, largely due to the depreciation of the
Jamaica Dollar as the foreign currency stock
grew by US$100.0 million. This compares
to growth of 17.5 per cent or $34.0 billion,
including an expansion of US$217.0 million,
for 2012. Domestic currency deposits grew
by 3.4 per cent or $12.1 billion, relative to an
increase of 6.5 per cent or $21.7 billion for the
previous year.
New borrowings and equity also provided
supplementary funding for the increase in
assets during 2013. DTIs’ borrowings increased
by 14.2 per cent or $16.4 billion compared to 8.4
per cent or $8.9 billion for 2012. In particular,
commercial banks borrowed a total of $18.0
billion from local institutions as well as under
Repurchase Agreements with the BOJ.18 In
contrast, building societies’ borrowings declined
by $1.5 billion due to the amalgamation of
FCIBS with FCIB. In relation to shareholders’
equity, there was an increase of 9.4 per cent
or $12.3 billion, mainly in commercial banks.
Of this amount, $10.7 billion reflected foreign
currency capital injections, including US$80.0
million in two banks. This was in contrast to a
contraction of 4.1 per cent or $5.6 billion for
2012 due to reported losses as well as dividend
payments.
For 2013, the system’s foreign currency
denominated assets declined by 1.3 per cent or
18 The BOJ introduced a special liquidity arrangement under the Standing Liquidity Facility in addition to the Bi-monthly Repurchase Operations to provide liquidity support to DTIs.
US$49.0 million to US$3.7 billion in contrast to
the increase of 0.9 per cent or US$32.0 million
for 2012. The contraction was largely due to
the sale and maturities of investment securities
(US$164.0 million), a decline in loans and
advances (US$47.0 million) and a reduction
in miscellaneous assets (US$28.0 million). The
impact of these movements was partially offset
by increased overseas placements of US$190.0
million. Foreign currency liabilities grew
marginally by 0.3 per cent or US$12.0 million
compared to an increase of 2.3 per cent or
US$77.0 million for 2012. Additionally, there was
capital injection amounting to US$80.0 million
in two commercial banks. The combined effects
of the net contraction in foreign currency assets
and growth in foreign currency liabilities and
equity resulted in a narrowing of the system’s
long position to US$63.0 million at year-end
relative to US$216.2 million at end-2012. The
reduction was mainly reflected in the decline of
commercial banks’ long position by US$122.0
million to US$21.8 million at end-2013.
3.1.4.2 Liquidity
The respective required ratios for domestic
currency liquid assets held in relation to
domestic currency prescribed liabilities were
maintained by all sub-sectors.19 However,
19 The requirements are differentially applied to societies not meeting the prescribed threshold of residential mortgage lending in relation to savings funds. Societies that meet the prescribed ‘qualifying assets’ threshold attract the lower reserve requirements of 1 per cent and 5 per cent for cash reserve and liquid assets ratios respectively. Societies which do not are requested to meet the cash reserve and liquid assets requirements which apply to banks and FIA licensees which are 12% and 26% respectively.
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the system’s liquid assets ratio fell to 25.3 per
cent at end-2013 from 26.7 per cent at end-
2012, reflecting a tightening of liquidity in the
system. The lower average domestic liquidity
ratio reflected the impact of the NDX and the
CTMS. 20
With regard to foreign currency liquid
assets, the system’s US dollar liquid assets
ratio increased by 2.4 percentage points to
41.1 per cent at end-2013. This outturn was
reflective of increased placements in foreign
currency at both local and overseas banks vis-
à-vis balances held in domestic currency. All
licensees, including building societies, which
continued to qualify for the lower preferential
liquid assets ratio, maintained ratios in excess
of the required minima throughout the year.
In addition, the system maintained ratios in
excess of the minimum requirements of 12.0
per cent and 9.0 per cent in relation to domestic
currency and foreign currency prescribed
liabilities, respectively. There were, however,
a few instances of breaches of the requirements
arising from individual DTIs’ lateness in
ensuring that their respective cash reserve
balances were met on the first day of the month
as required by law. These shortfalls incurred
penalty charges imposed in accordance with
the applicable statutes.
20 The Government’s establishment of a single treasury account under the CTMS served to periodically transfer Government deposits from DTI’s into a central treasury account held at the Bank of Jamaica.
3.1.4.3 Asset Quality
There was an improvement in asset quality for
DTIs at end-2013. The improvement in 2013 was
reflected in a fall in the ratio of non-performing
loans (NPLs) to total loans to 5.4 per cent at end-
2013, from 7.0 per cent at end December 2012,
well within the tolerable prudential benchmark
of 10.0 per cent. For the review year, non-
performing loans (NPLs) declined by 12.9 per
cent or $3.7 billion, following the contraction of
10.8 per cent or $3.5 billion for 2012 (see Chart
26). This decline was mainly influenced by
write-offs and sale of NPLs totalling $8.1 billion,
relative to a fall of $5.0 billion during 2012. The
contraction in the NPLs was primarily reflected
in the tourism and construction sectors.
At end-2013, the coverage of provisions to
NPLs (without adjustment for collateral) was
95.6 percent compared to 90.3 per cent at
end-2012.21 The ratio increased in spite of a
decline of 7.8 per cent or $2.0 billion in loan
loss provisions, in the context of a contraction
in NPLs. This was in contrast to an increase of
7.0 per cent or $1.7 billion in loan loss provision
for 2012. Similarly, regulatory capital plus
provisions increased to 531.1 per cent of the
value of NPLs at end-2013 compared with
414.3 per cent at end-2012.
21 Provisions for Loan Losses represent a combination of assessments under International Financial Reporting Standards and incremental amounts required in accordance with the Central Bank’s prudential guidelines.
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3.1.4.4 Capital
For 2013, licensees strengthened regulatory
capital through transfers from realised profits
to statutory reserve funds as well as via external
capital injections. Accordingly, the capital base
(net of accumulated losses) increased by 17.0
per cent or $15.9 billion for 2013 compared
to 4.2 per cent or $3.8 billion for 2012, with
all sub-sectors recording growth in capital.
Commercial banks recorded the most notable
growth of 21.1 per cent or $13.7 billion, relative
to 2.1 per cent or $1.4 billion for 2012, as four
of the seven banks bolstered their respective
capital bases. For the system as a whole, the
capital ratios remained adequate, with the
primary ratio (regulatory capital to total assets)
moving to 11.1 per cent relative to 10.5 per
cent at end-2012. Similarly, the risk-weighted
capital ratio (regulatory capital to risk-weighted
assets and foreign exchange exposures) rose to
15.1 per cent from 14.1 per cent at end-2012.
All licensees maintained primary and risk-
weighted capital adequacy ratios above the
minimum requirements of 6.0 per cent and 10.0
per cent, respectively.
3.1.4.5 Profitability
For the year ended December 2013, the system
reflected positive operating results based on
unaudited prudential data. Total pre-tax profits
amounted to $19.0 billion, a decline of $1.7
billion relative to end-2012. This outturn was
reflective of a pre-tax profit margin of 19.0 per
cent, down from 21.4 per cent for 2012, and a
return on average assets (ROAA) of 2.0 per cent
relative to 2.4 per cent for 2012.
Gross income increased by 3.2 per cent or $2.7
billion to $86.2 billion, as the net interest income
(NII) improved to $55.6 billion from $52.3 billion
at end-2102. The increase in the NII was due
to a higher level of interest income, principally
from loans and advances, which contributed
$5.2 billion. Contribution from net non-interest
Chart 26: System Annual Change in Loans and NPLs (3mths & over)
16.4
46.7
57.6
9.8
-3.5 -3.7
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Dec-11 Dec-12 Dec-13
Billio
ns ($
)
YearsChange in Loans Change in NPLs
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income for the year declined by $0.6 billion
largely due to reduction in dividend income at
one commercial bank which tempered income
from fees and charges of $2.6 billion and
foreign exchange gains of $1.4 billion. The
latter offset investment portfolio losses.
Non-interest expenses were higher by 12.7
per cent or $8.0 billion relative to 2012. Of this
increase, other operating costs and staff costs
accounted for $3.2 billion and $2.1 billion,
respectively, and represented growth. The
increase in non-interest expenses was largely
reflected at commercial banks.
3.1.5 Credit Unions
3.1.5.1 Oveview of the Credit Union Sector
The Bank of Jamaica continued to collect
and review information from credit unions
during 2013, pursuant to their designation as
“specified financial institutions” under Section
2 of the Bank of Jamaica Act in July 1999. In
the absence of Regulations which will establish
the framework for prudential oversight by the
Bank, oversight responsibility for these entities
remain vested in the Department of Co-
operatives and Friendly Societies (Registrar) as
statutory oversight agency. The Jamaica Co-
operative Credit Union League (League) also
undertakes a self-regulatory role for the sector.
During the year, the Bank and the League
reached agreement on the provisions to
be contained in the draft Bank of Jamaica
(Credit Unions) Regulations, in the context
of enhancements to the credit framework.
These enhancements relate to implementation
of the new credit reporting framework and
the impending implementation of a secured
transactions framework under the proposed
SIPPA which will include establishment of a
Central Registry for the registration of security
interests in non-realty assets. The League
also agreed to the Bank’s proposals relating
to the strengthening of the draft Regulations
including:
(a) The definitions of unsecured credits,
past due credits, non-performing credits
and non-accrual credits; provisioning
requirements for unsecured non-
performing credits; and
(b) Certain licensing requirements
pertaining to corporate governance
and risk management frameworks,
including transition arrangements.
With the League’s formal sign-off on these
issues, the process for finalization of the draft
Bank of Jamaica (Credit Unions) Regulations
may commence. Once these Regulations are
promulgated in Parliament, statutory oversight
authority for credit unions will be transferred to
the Bank of Jamaica.
3.1.5.2 Credit Union Sector Developments
Reports submitted to the Bank of Jamaica as at
end-2013 indicated an increase in membership
over the year by 3.3 per cent or 31 902 to 1 003
079. Concurrently, there was an increased level
of merger activity during 2013, as the sector
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continued to position itself to benefit from
the consolidation of capital bases, economies
of scale and a streamlining of operations
in anticipation of the imminent passage of
the Regulations. The sector contracted to 38
constituent members at end-2013, from 43 at the
start of the year, consequent on the mergers as
permitted by Section 53 (1) of the Co-operative
Societies Act. 22 The mergers were:-
(i) First Regional Credit Union Limited
with Hospitality Industries (formerly
SuperClubs) Cooperative Credit Union
Limited and Round Hill Cooperative
Credit Union Limited (effective 01 June
2013);
(ii) JPS & Partners Cooperative Credit Union
Limited with Kirkvine Cooperative
Credit Union Limited and Ewarton
Works Cooperative Credit Union
Limited (effective 02 August 2013 and
01 September 2013, respectively); and
(iii) C&WJ Credit Union Limited with
Westmoreland Co-operative Credit
Union Limited (effective 02 September
2013).
Consequent on these mergers, the credit unions
were represented by nine “Parish” based (24.0
per cent of sector assets); 25 “Employee” based
(66.0 per cent), and four in the ‘Other’ category
(10.0 per cent).23 Of note, the 20 largest credit 22 Palisadoes Cooperative Credit Union Limited merged with Petroleum Industries Cooperative Credit Union Limited, effective 31 December 2013. In that regard, effective 2 January 2014, the sector comprised 37 credit unions.
23 The “Other’ credit unions being: COK Sodality CCUL, C&WJCCUL, Church of the First Born CCUL and First Heritage CCUL.
unions represented 89.0 per cent of the sector’s
assets of $76.5 billion as at 31 December 2013.
3.1.5.3 Credit Union Performance Highlights
Based on unaudited prudential returns
submitted to the Bank, the net profits for the
credit union sector grew by $0.3 billion (37.5 per
cent) to $1.1 billion for the financial year ended
31 December 2013. This represented a reversal
of the $0.3 billion contraction reported in 2012
and resulted in an increase in the sector’s net
profit margin to 11.0 per cent from 8.9 per cent
posted a year earlier. This strengthening was
primarily driven by the combined effects of a
$0.4 billion (5.8 per cent) increase in revenues
earned on the sector’s expanded loan portfolio,
coupled with higher income of $0.2 billion (18.1
per cent) from fees and service charges which
together outpaced the growth of $0.3 billion
(3.4 per cent) in aggregate expenses.
The sector reported aggregate assets of $76.5
billion at end-2013, reflecting annual growth
of $5.3 billion (7.4 per cent), compared to the
$4.5 billion (6.7 per cent)) for 2012. Most of
this growth was reflective of an increase of $4.5
billion (9.4 per cent) in the loan portfolio to
$52.4 billion at end-2013. Although the rate of
increase in the loan portfolio slowed from the
$5.6 billion (13.2 per cent) reported in 2012,
growth of $3.4 billion (8.4 per cent) in Consumer
Lending was similar to that recorded for the
prior year. In contrast, growth in mortgage
loans slowed to $0.8 billion (13.0 per cent) from
the expansion of $2.2 billion (55.8 per cent) for
2012.
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Funding for growth in assets was primarily
provided by an increase of $3.8 billion (6.9 per
cent) in members’ savings to $58.6 billion. In
addition, the sector’s capital base increased
by $0.4 billion (4.8 per cent) to $8.7 billion
and borrowings from the League grew by $0.3
billion (25.0 per cent) to $1.5 billion (see Table
38).
At end-2013, total assets held by the credit
union sector represented 7.3 per cent of the
$1 053.7 billion in assets held by all DTIs as at
end-2013 compared to 7.7 per cent at end-2012
(see Chart 27).
3.1.6 Credit Reporting
During 2013, the Bank continued the
implementation of the operational and
supervisory framework for the credit reporting
system, in order to facilitate the effective
discharge of its oversight mandate under the
Credit Reporting Act (CRA).
3.1.6.1 Licensed Credit Bureaus
The two entities which were granted licences
under the CRA by the Minister of Finance
during 2012, commenced the issue of credit
reports during the latter half of 2013. The
two licensed entities are Creditinfo Jamaica
Limited and CRIF NM Credit Assure Limited.
At year end, the licensees were continuing
efforts to conclude contracts with eligible
Table 38
INDICATORS Dec-2011 Dec-2012 Change Change Dec-2013 Change Change
(%) (%)
Number of Credit Unions (Actual) 44 43 (1) -2.3% 38 (5) -11.6%
Membership (Actual) 948 869 971 177 22,308 2.4% 1 003 201 32,024 3.3%
Total Assets ($BN) 66.7 71.2 4.5 6.7% 76.6 5.4 7.6%
Total Loans ($BN) 42.3 47.9 5.6 13.2% 52.4 4.5 9.4%
PDL (>3months) ($BN) 1.2 1.5 0.3 25.0% 1.7 0.2 13.3%
Capital ($BN) 7.7 8.3 0.6 7.8% 8.7 0.4 4.8%
Borrowings from JCCUL ($BN) 0.7 1.2 0.5 71.4% 1.5 0.3 25.0%
Total Savings Fund ($BN) 51.6 54.8 3.2 6.2% 58.6 3.8 6.9%
Share Savings ($BN) 23.8 25.4 1.6 6.7% 26.9 1.5 5.9%
PDL:Total Loans 2.8 3.0 3.2
Loans:/Savings Ratio 82.1 87.3 89.4Capital: Assets Ratio 11.5 11.7 11.4
COMPARATIVE KEY CREDIT UNION INDICATORSDecember 2011 - December 2013
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credit information providers (CIPs) as a means
of building the critical mass in terms of the
volume of credit information in their respective
credit reporting databases (see Table 39).
3.1.6.2 Unlicensed Credit Reporting Entities
The Credit Reporting Act restricts the use of the
words “credit bureau” or any other words which
could reasonably be construed as indicating
that a person carries on the business of a credit
bureau [Section 4(7)]; and the disclosure of
credit information about a consumer in return for
monetary payment or other reward or as part of
any business or undertaking whether for profit or
otherwise [Section 3(1)]. In this regard, during
2013, the Bank continued its investigations
aimed at ensuring full transparency and a level
playing field in the credit reporting market, in
relation to determining whether entities whose
existence may or may not have pre-dated the
advent of the CRA, were either using words in
their business names, or otherwise undertaking
activities that were in conflict with the Act.
Arising from investigations and the contacts
made by BOJ with companies, three entities
advised the Bank that they had discontinued
aspects of their respective operations that
would be in breach of the CRA. This in some
instances also involved the discontinuation of
listings as credit reporting agencies in physical
and online contact information directories.
Up to year-end, the Bank had conducted
confirmatory site visits at one entity with three
pending for 2014. While the Bank successfully
Chart 27: Profile of Assets Held by Deposit Taking Sector - December 2013
Credit UnionJ$76.5Bn.
7.3%
Merchant BankJ$25.4Bn.
2.4%
Commercial BankJ$740.7Bn.
70.3%Building SocietyJ$211.1Bn.
20.0%
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made contact with a number of entities to
clarify activities or request corrective actions
as relevant, there were instances of mail being
returned undelivered suggesting inactivity
of operations. This assessment was generally
corroborated by dated filings for these entities
with the Companies Office of Jamaica.
3.1.6.3 Public Education
The public education programme to sensitize
stakeholders and the general public of the
implications of the new Credit Reporting Act
was expanded during 2013. In addition to
pamphlet distribution, presentations at public
fora and media appearances, the Bank held a
seminar for consumer advocate groups as well
as credit information providers and advertised
in both the print and electronic media.
Table 39
Activity Area Total
Number of licensed credit bureaus 2
Number of eligible CIPs who have signed contracts with licensed credit bureaus* 45
Number of data subjects in databases of licensed credit bureaus 304,207
CREDIT REPORTING STATISTICSat 31 December 2013
* Includes agreements to enter into discuss ions with credi t bureaus as wel l as to actively share credi t information with credi t bureaus
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3.2. Supervision of Cambios and
Remittance Companies
During 2013, the Bank continued to discharge
its regulatory function in respect of Cambios
and Remittance Service Providers (RSPs).
In fulfilling this mandate, focus was placed
on monitoring the Anti-Money Laundering
(AML) policies and procedures of licensees in
the context of a dynamic financial landscape
where the adequacy of AML risk mitigating
measures is critical. In this regard, the Bank
continued to employ its two-pronged tool of on-
site inspection supported by rigorous in-house
monitoring of the operations of these entities,
to assess adherence to the Bank’s Operating
Directions and the AML regulations of the
Proceeds of Crime Act (POCA). Additionally,
licensees were required to comply with reporting
requirements to facilitate the achievement of
the Bank’s objective of providing timely and
accurate information to its stakeholders.
The supervisory process continued to include
on-going assessment of the probity and fitness
of Operators, in line with the Bank’s ‘Fit and
Proper’ criteria.1 This assessment informs and
guides the issuance and renewal of licences. In
this regard, 287 persons were assessed in 2013.
3.2.1 Cambios
During the review year, ten new cambio
licences were issued while five were voluntarily
surrendered. Five new companies entered the
cambio market while three ceased offering
cambio services. Consequently, the number
of companies which offered cambio services
increased to 73 from 71 at end-2012. The total
number of cambio locations at end-2013 was
168, compared to 163 at end-2012 (see Table
40).
1 Operators are directors and shareholders of Cambios and RSPs as well as their sub-agencies and the managers with responsibility for the operation of each service point. Shareholders as defined as persons holding 10.0 per cent or more of shares of the relevant company.
Table 40
2012 2013
New Locations Licensed 6 10
Locations Closed 4 5
Number of Locations 163 168
Number of Companies 71 73
STATUS OF CAMBIO LICENCESas at 31 December
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At the end of the review year, the parishes of
Kingston and St. Andrew continued to account
for the largest concentration of cambio locations,
followed by St. James, St. Catherine and St. Ann
(see Chart 28). Cambios commanded a market
share of 46.6 per cent of total market sales of
foreign currency in the review year, an increase
of 0.7 percentage point relative to 2012. 2
3.2.2 Remittance Service Providers (RSP)
The number of RSPs (Primary Agents) remained
at nine relative to end-2012. These Primary
Agents continued to offer inbound, outbound
and intra-island services.3 Inbound remittances
continued from four main countries namely, the
2 Foreign exchange sales by cambios, relative to total market sales reported during the period.
3 Companies licensed in Jamaica to offer remittance services as agents of these remittance companies domiciled overseas. They are authorised to offer the service in Jamaica through sub-agents.
USA, UK, Canada and the Cayman Islands.
The USA remained the major source for these
inflows in 2013.
For 2013, 102 new licences were issued
thereby authorising remittance operations at
an additional 69 locations through a network
of branches and sub-agents (see Table 41).
Concurrently, 128 licences representing 110
locations were relinquished. As a result, the
number of licensed locations declined to 444 at
end-2013 from 485 at end-2012. The Kingston
& St. Andrew region continued to have the
largest concentration of remittance locations at
end-2013, accounting for 27.0 per cent relative
to 23.7 per cent at the end of 2012 (see Chart
29).
Chart 28: Geographic Distribution of Cambio Outlets at end-December
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
%
Parish
2012 2013
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Table 41
Chart 29: Geographic Distribution of Remittance Outlets at end-December
0.00
5.00
10.00
15.00
20.00
25.00
30.00
%
Parish
2013 2012
2012 2013
New Locations Licensed 31 69
Locations Cancelled 59 110
Number of Locations 485 444
New Licences Issued 50 102
Licences Relinquished 70 128
Number of Licences 625 599
Number of Primary Agents 9 9
STATUS OF REMITTANCE LICENCESas at 31 December
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3.3. Financial System Stability
Assessment of DTIs
3.3.1. Overview
During 2013, DTIs remained largely resilient
to macro-prudential stress tests due to
continued strong capital positions.1,2 The
DTIs performed creditably in response to the
hypothetical shocks despite weak economic
activity, depreciation of the Jamaica Dollar
and lower earnings performance due to the
implementation of the National Debt Exchange
(NDX) during the first quarter of 2013. In
particular, the stress test results revealed that
the average post-shock capital adequacy ratios
(CARs) for the banking system largely remained
above the 10.0 per cent minimum benchmark,
in response to hypothetical market, credit and
liquidity shocks.
As it relates to credit risk, stress test results
showed that the system was resilient to
hypothetical shocks to non-performing loans
(NPLs). This performance reflected the impact
of continued improvements in loan quality,
particularly as it relates to the FIA Licensees
sub-sector. Specifically, the CARs of all DTIs
remained above the prudential 10.0 per cent
benchmark, subsequent to a hypothetical
increase of 30.0 per cent in NPLs. However,
1 DTIs include commercial banks, FIA Licensees and building societies.
2 The objective of stress testing by the BOJ is to determine the impact of extreme but plausible shocks to various risk factors such as credit quality, foreign exchange rates, domestic interest rates and liquidity on the capital adequacy ratios of the DTIs.
DTIs were adversely impacted by hypothetical
shocks to performing loans due to these
institutions’ continued strong concentration in
the personal loan category.
Regarding market-related stress tests, DTIs
remained generally resilient to these shocks
during the review period. Nonetheless, DTIs
showed increased susceptibility to interest rate
shocks, largely due to the impact of the NDX
transaction on these institutions’ investment
profile. Of note, FIA Licensees showed greater
susceptibility to hypothetical increases in
interest rates relative to the commercial banks
and building societies compared to the results
for 2012. With respect to foreign exchange
shocks, DTIs net open position declined
sharply during 2013, increasing the sector’s
susceptibility to depreciation in the exchange
rate. Nonetheless, the sector remained robust
to contemplated depreciation or appreciation
in the exchange rate.
Despite relatively tighter liquidity conditions
during 2013, DTIs also remained robust
to liquidity stress tests during the year. In
particular, the post-shock CARs of the DTIs
were above the minimum benchmark in
response to a hypothetical reduction of 40.0 per
cent in deposits.
The Bank’s macro-financial index (MaFI) for
DTIs, which comprises 18 key macroeconomic
indicators, worsened during 2013.3 This
3 The macroeconomic indicators are categorized as follows: 12-Month Measures - 12-month growth in CPI,
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performance reflected deterioration in the
12-month growth in the JSE Main Index and
volatility in the exchange rate over the review
period. On the other hand, the Bank’s micro-
prudential index (MiPI) for DTIs, comprising
21 key financial ratio indicators, showed
favourable results for the review period.4 Of
note, there were strong declines in the MiPI
across all DTI sub-sectors, largely due to
improvements in the balance sheet structure,
profitability and asset quality indicators.
3.3.2. Credit Risk Stress Tests
Despite weak economic conditions, there was
an improvement in the DTIs’ loan quality
during 2013. The improvement in the DTIs’
loan quality for 2013 was primarily reflected
in construction, tourism, distribution and
personal loan categories which together
accounted for approximately 71.2 per cent of
12-month growth in GDP, 12-month growth in stock market index,12-month growth in private sector credit; Fiscal Measures - central government deficit/GDP, credit to public sector/ GDP, National debt/GDP, external debt /GDP, volatility in inflation; Other Economic Prices - volatility in interest rates, volatility in exchange rates, real lending rate minus real deposit rate, U.S./Jamaica interest rate differential, real T-bill rate, real effective interest rate and BOJ Variables - BOJ credit to banking sector/GDP, M2/net international reserves, money multiplier.
4 The financial ratios are categorized as follows: Balance Sheet Structure - Capital/assets, loans/capital, deposits/loans, deposits/total assets, liquid assets/total assets, deposits & repos/assets, public sector loan/assets, financial inst. Loans/loans, investments/assets; Asset Quality - non-performing loans/assets, non-performing loans/total loans, reserve for loan losses/total assets, loan & sec. loss prov./assets; Profitability - implicit deposit rates, employee salaries/assets, non-interest income/assets, interest income/assets, net income/assets and Other Indicators - FX liabilities/FX assets, FX deposits/FX assets, 12-month growth in deposits.
total loans. In particular, the ratio of NPLs to total loans for DTIs decreased to 5.4 per cent at
end-2013, relative to 7.0 per cent at the close
of the prior year. Overall, the DTIs were also
generally resilient to the contemplated shocks
to NPLs. However, the building societies’ and
commercial banks’ CARs fell more sharply in
response to hypothetical shocks to performing
loans relative to that of the FIA Licensees.
Regarding shocks to NPLs, the commercial
banks were most vulnerable to the contemplated
100.0 per cent increase in NPLs during 2012
(see Chart 30). As a result of this shock, the CAR
for FIA licensees would fall by 1.1 percentage
points to 11.8 per cent at end-2012. Building
societies remained the most resilient to the
same level of shock. Of note, for the commercial
banks, a 10.0 per cent increase in NPLs would
result in the first bank breaching the 10.0
per cent CAR benchmark, while an increase
of 180.0 per cent was required for the first
building society and the FIA licensee to breach
this prudential minimum. Commercial banks
and building societies were most vulnerable
to a hypothetical 30.0 per cent deterioration in
performing loans. Subsequent to this shock,
the post-shock CARs for the commercial bank
and building societies sectors breached the
prudential minimum.
Sectoral shocks to performing loans showed
that at end-2013, the CARs of building societies
and commercial banks were most impacted
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by the shock to the personal loan categories.5
Following a hypothetical shock of 30.0 per cent
to this loan category, the CARs of the building
societies and commercial banks fell by 12.5 and
6.3 percentage points to 7.5 per cent and 7.7
per cent, respectively, at end-2013.
3.3.3. Foreign Exchange Risk Stress Test
Results
Against the background of tight Jamaica
Dollar liquidity conditions in 2013, DTIs’ net
open position declined sharply, relative to
2012, increasing the sector’s susceptibility to
depreciation in the exchange rate.6 In particular,
the average quarterly DTIs’ foreign currency
net open position fell sharply to the equivalent
of J$3.1 billion at end-2013 relative to the
equivalent of J$9.8 billion at emd-2012 (see
Chart 31). Despite the increased susceptibility
5 Mortgage loans are included in the personal loan category for building societies.
6 The US$:J$ exchange rate depreciated by approximately 14.0 per cent for 2013.
to depreciation, stress test results showed that
the banking system’s CAR was unchanged at
15.0 per cent in response to the hypothetical
depreciation or appreciation in the exchange
rate due to strong levels of capitalization.
3.3.4. Interest Rate Risk Stress Tests
DTIs’ susceptibility to interest rate shocks, as
measured by the dollar value of a basis point
(DVBP) to capital base, showed an increase
in 2013, reflecting the impact of the NDX
transaction on DTIs’ balance sheets (see Chart
32).7,8,9 Specifically, the average quarterly ratio
7 DVBP is the loss in net interest income generated from 100 bps shocks to the system’s foreign and domestic securities portfolio and reported as a percentage of the system’s capital base. Loss in net interest income is utilized as this is more reflective of realized losses.
8 The NDX had the effect of lowering coupon rates and extended the maturities on GOJ domestic bonds. Consequently, DTIs were impacted as a result of their negative maturity gap position, especially in the shorter tenors.
9 Shocks of 1 400 bps applied to domestic currency securities portfolio. Shocks of 150 bps applied to foreign currency securities portfolio.
0.0
5.0
10.0
15.0
20.0
25.0
DTIs Commercial Banks FIAs Building Societies
Actual
After 100.0% shock toNPLs
After 30.0% Reduction inPerforming PersonalLoans
Regulatory MinimumCap
ital a
dequ
acy
ratio
(%
)
Chart 30: Banking Sector: Impact on CAR of an Increase in NPLs and Reduction in PLs
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Chart 31: Banking Sector Quarterly Foreign Exchange Risk Stress Test Results
Chart 32: Banking System Quarterly Interest Rate Risk Stress Test Results
-5.0
0.0
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Mar Jun Sep Dec Mar Jun Sep Dec
2012 2013
Net
Ope
n Po
sitio
n (J$
BN)
Capi
tal A
dequ
acy
Ratio
(%)
NOP (J$BN) (right axis) Regulatory minimum CAR (%) Post-shock CAR (50.0% Depreciation)
0.0
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Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Bank
ing
Syst
em's
Dolla
r Va
lue
of a
Per
cent
age
Poin
t Ch
ange
in B
ond
Yiel
ds t
o Ca
pita
l (%
)
Capt
ial A
dequ
acy
Ratio
(%)
Commercial Banks' Post-Shock CAR (%) FIAs' Post-Shock CAR (%) Building Societies' Post-Shock CAR (%)
System's Post-Shock CAR (%) (Right Axis) Regulatory Minimum Required CAR (%) DVPP (%) (Right Axis)
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increased to 12.4 per cent for 2013 from an
average ratio of 9.1 per cent for 2012. Despite
this increase, the banking system’s buffer
capital was sufficient to absorb the impact of the
contemplated shocks. Specifically, in response
to respective increases of 1400 bps/400 bps and
150 bps/20 bps in interest rates on domestic/
foreign currency rate-sensitive assets and
liabilities, respectively, the CAR for DTIs was
unchanged at 15.1 per cent.10,11 This result was
similar to that obtained at the end of the previous
10 Interest rate shocks of increases ranging from 1 100 bps to 1 400 bps and 275 bps to 350 bps are applied to domestic and foreign investment holdings, respectively, for fair value assessment. Similar interest rate increases are applied to domestic and foreign investments for the net interest income impact. Increases of 100 bps to 400 bps and 15 bps to 70 bps are applied to the domestic and foreign non-investment component, respectively.
11 Re-pricing net gap positions are computed for each re-pricing/maturity bucket as the assets minus liabilities. The change in the market value of net re-pricing assets is evaluated by applying the interest rate shock and duration factor to each re-pricing gap position. The impact on capital adequacy is then evaluated.
year. Additionally, at end-2013, it would take
shocks of as much as 4.5 times the magnitudes
used in the stress tests for the system’s CAR to
fall below the regulatory benchmark.
3.3.5. Liquidity (Funding) Risk Stress Tests
At end-2013, the banking system remained
resilient to a hypothetical sudden withdrawal of
deposits. Following a contemplated reduction
of 40.0 per cent in deposits, the CAR for the
banking system was unchanged. 12 This result
was similar to that obtained at end-2012
(see Chart 33). The liquid assets to average
prescribed liabilities ratio averaged 26.1 per
cent for 2013 relative to an average of 27.7 per
cent in the previous year. This decline was in
12 Hypothetical reductions are applied directly to the deposit base of the bank. Assets are assumed to be liquidated, in order of liquidity, so as to satisfy the demand. Haircuts are applied to non-liquid assets to satisfy further declines in deposits. The resulting impact on capital adequacy is then evaluated.
Chart 33: Banking System Quarterly Funding Risk Stress Test Results
0.00
5.00
10.00
15.00
20.00
25.00
30.00
capi
tal a
dequ
acy r
atio
(%)
Regulatory Minimum Required CAR
Building Societies -Post-shock
System-Post Shock
Commercial Banks - Post-shockFIAs- Post-Shock
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the context of a tightening of liquidity in the
banking system. In addition, the quarterly
average liquid assets to deposits ratio for FIA
Licensees declined by 3.3 percentage points to
31.7 per cent for 2013. However, for the review
period, the quarterly average liquid assets
to deposits ratio of commercial banks and
building societies increased by 8.4 percentage
points and 0.9 percentage point, respectively,
to 36.6 per cent and 23.8 per cent.
3.3.6. Aggregate Stress Test Results
The aggregate stress tests assessed the
simultaneous impact of increases in interest
rates, currency depreciation, credit quality
deterioration as well as deposit outflows on
banking sector CAR. The aggregate stress test
assumptions were:
• Increases of 1 100 bps and 100 bps in
interest rates on domestic currency
investment assets & liabilities and other
assets & liabilities, respectively;
• Increases of 100 bps and 10 bps in
interest rates on foreign currency
investment assets and liabilities and
other assets & liabilities, respectively;
• 10.0 per cent depreciation in the JMD/
USD exchange rate;
• 100.0 per cent of past due performing
loans (1 month to under 3 months)
becoming non-performing; and
• 10.0 per cent reduction in deposits.
In response to the abovementioned shocks, the
CARs of the DTIs declined by an average of 4.1
percentage points per quarter for 2013 relative
to the average decline of 3.6 percentage points
for 2012 (see Chart 34). Of note, however,
the CAR of DTIs at end-2013 was above the
prudential minimum benchmark mainly due
to significant improvements in the capital
positions of two institutions during the year
(see Table 42).
Chart 34: Banking Sector: Impact on CAR after the Aggregate Stress Test Scenarios
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5.0
10.0
15.0
20.0
25.0
Mar-13 Jun-13 Sep-13 Dec-13
Baseline After shocks Prudential Minimum
Capita
l adeq
uacy r
atio (%
)
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3.3.7. Early Warning System (EWS) Results13
The Bank’s macro-financial index (MaFI)
increased by 8 points to 17.0 points at end-
2013, relative to end-2012, but remained well
below the 1996-1998 financial crisis threshold
13 The BOJ Early Warning System (EWS) for financial stability monitors macro- and micro-economic indicators of the banking sector via a non-parametric approach to signal banking sector vulnerability. The signal is based on EWS scores for each indicator, which is computed based on the number of standard deviations of each indicator from its ‘tranquil period’ mean value. The tranquil period refers to an eight quarter period of relative stability that precedes the beginning of a signalling window. The scores range from 0 to 5 with a score of 5 representing the most severe signal. Banking sector vulnerability at a point in time is determined by the trend in the aggregate EWS score (or index) over the previous eight quarters (signalling window).
value of 44.0 points (see Chart 35). This outturn
largely reflected deterioration in the 12-month
growth in the stock market and volatility in
the exchange rate indicators. The signal from
the stock market indicator increased to 5.0
points at end-2013 from to 0.0 point at end-
2012, reflecting low investor appetite for equity
investments throughout 2013. Additionally,
the continued depreciation of the exchange
rate resulted in the indicator for the volatility in
exchange rate increasing to 5.0 points at end-
2013 from no signal at end-2012.
Table 42
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Original CAR (%) 15.4 14.7 14.5 14.1 14 14.2 15.1 15.6Post-shock CAR (%) 12.8 11.2 10.5 9.6 9.5 10.1 11.2 11.9Change in CAR (pp.) -2.6 -3.5 -4 -4.5 -4.5 -4.2 -3.9 -3.7
DTIs QUARTERLY AGGREGATE STRESS TEST RESULTS
Chart 35: Macro-Financial Index & Sub-Components: 2012 – 2013
5.02.0 2.0
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Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Index Points
BOJ variables
Volatilityindicators &other economicprices
Fiscal measures
12-monthmeasures
Crisis Threshold
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On the other hand, the micro-prudential
indices (MiPIs) for the commercial banks, FIA
Licensees and building societies declined to
11.0 points, 9.0 points and 3.0 points from 29.0
points, 32.0 points and 44.0 points, respectively,
at end-2012. The decrease in the indices for the
three sectors was largely due to improvements
in balance sheet structure, profitability and
asset quality indicators.
The outturn of the MiPI for commercial banks
for 2013 primarily reflected improvements in
weighted ratios of non-performing loans to
assets, non-performing loans to total loans, net
income to assets and interest income to assets
(see Chart 36).14 However, the impact of the
performances of these indicators was partially
offset by deterioration in the deposits to total
loans indicator.
14 Indicators included in the micro-prudential indices are weighted by asset size.
With respect to the building societies, the
MiPI mainly reflected improvement in the
performance of balance sheet indicators
(see Chart 37). In particular, there were
improvements in the weighted ratios of loans to
capital, deposits as a share of assets, deposits
and repos to total assets, investments to assets
and liquid assets to total assets for the review
period. For the FIA licensees, the improvement
reflected lower signals for all four broad
categories of indicators (see Chart 38).
Chart 36: Micro-Prudential Index & Sub-Component for Commercial Banks: 2012 - 2013
8.0 10.0 10.0 10.0 10.0
12.0 6.0 2.0 2.0
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5.0 2.0 1.0
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Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Index Points
Other indicators
Profitability
Asset quality
Balance sheet structure
Crisis Threshold
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Chart 37: Micro-Prudential Index & Sub-Component for Building Societies: 2012 - 2013
Chart 38: Micro-Prudential Index & Sub-Components for FIA Licensees: 2012 – 2013
25.0 23.0 21.0
7.0 6.01.0
4.0 9.03.0
3.0 3.0
3.02.0
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Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Index Points
Other indicators
Profitability
Asset quality
Balance sheet structure
Crisis Threshold
11.0 9.04.0 5.0 2.0
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Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Index PointsOther indicators
Profitability
Asset quality
Balance sheet structure
Crisis Threshold
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3.4. Financial Legislation
3.4.1. Financial Legislation Passed in 2013
There were no legislative amendments to the
financial legislation in 2013.
3.4.2. Pending Amendments to Financial
Legislation
3.4.2.1. The Bank of Jamaica Act
The third draft of the Bill (entitled “An Act to
Amend the Bank of Jamaica Act”) has been
circulated to stakeholders for feedback.
In December 2010, Cabinet approved the
decision for the institutional responsibility
for the stability of Jamaica’s financial system
to be assigned to the Bank of Jamaica. This
decision is consistent with the international
response to the 2007/2008 financial crisis and
the route taken by most jurisdictions to locate
this function within the respective central
banks. This reform also comprises the set
of legislative reforms that underpinned the
Stand-By Arrangement with the IMF in 2010.
The amendments to the Act will:
1. Outline the mandate of the Bank of
Jamaica in relation to this role of
maintaining financial system stability;
2. Mandate the establishment of a
Financial System Stability Committee
to coordinate the activities pursuant
to the objective of financial system
stability;
3. Expand the regulatory oversight of the
Bank of Jamaica to financial institutions
whose operations are deemed to be of
systemic importance;
4. Grant the necessary powers to the Bank
of Jamaica to obtain information from
these financial institutions that will
allow for the assessment of risks to the
financial system (including the powers
of inspection; powers to demand
information);
5. Give the Bank of Jamaica the necessary
powers to direct and impose measures
to mitigate and control these risks
(including the extension of liquidity;
and powers to issue Prescriptive Rules,
Standards and Codes pertinent to this
oversight of the stability of the financial
system);
6. Mandate the establishment of a Central
Financial System database; and
7. Mandate the publication of a financial
stability report within three months
after the end of each financial year.
3.4.2.2. The Cooperative Societies
(Amendment) Bill
This amendment to the Cooperative Societies
Act will, among other things, bring credit union
cooperative societies under the regulatory ambit
of the Minister of Finance and Planning and the
Bank of Jamaica. Accordingly, this Bill includes
provisions that will restrict the deposit-taking
activities of cooperative societies, to those
cooperative societies, which operate as credit
unions. Other substantive enhancements to the
Cooperative Societies Act are contemplated
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by the Ministry of Industry Investment and
Commerce (MIIC), which is the Ministry with
portfolio responsibility for cooperative societies.
It is anticipated that this Bill will be presented
to Parliament jointly with the Bank of Jamaica
(Credit Union) draft Regulations which contain
the substantive prudential requirements to
which credit unions will be subject once the
aforesaid regulatory regime comes into effect.
3.4.3. Omnibus Banking Bill
The service of a drafting consultant was
contracted for the drafting of the Bill which
was completed and delivered to the Chief
Parliamentary Counsel. The official draft Bill is
now being developed.
In August 2010, Cabinet approved the
recommendations proposing the development
of omnibus legislation which will see the
consolidation of the legislation governing the
licensed deposit-taking sector into one omnibus
statute. The Bank of Jamaica is currently
reviewing legislation governing the operations
of licensed deposit-taking entities (specifically
the Banking Act, Financial Institutions Act,
and the BOJ (Building Societies) Regulations,
with a view to consolidating these pieces of
legislation into one consolidated statute (the
omnibus statute). The licensing and deposit-
taking provisions of the Building Societies
Act will also be transferred from the Building
Societies Act to the Omnibus statute. This
consolidation of legislative obligations into
one statute should remove any existing
inconsistencies in the regulatory regime
contained in the various statutes and ensure a
more synchronized progression of updates to
the laws governing the deposit-taking sector.
This initiative is also intended to implement
enhancements regarding consolidated and
conglomerate supervision that will bring the
regulation of the banking business in line with
the earlier international requirements (such
as Basel II) as well as with the more recently
issued Revised Basel Core Principles (i.e. Basel
III).1
Other enhancements that will be made to the
regulatory regime will also focus on current
issues such as outsourcing of certain functions
by licensees, electronic reporting to the
Supervisor, the offer of electronic financial
services, and enhancing powers available to the
Supervisor of Banks to achieve the objective of
supervisory autonomy, and to establish powers
as regards the investigation and prosecution
of illegal deposit taking activities, and the
implementation of an enforceable code of
conduct for licensees.
In 2008, the Bank submitted a policy working
paper to the Ministry of Finance on the matter.
The Bank subsequently published the Industry
Consultation Paper on the proposed Omnibus
Banking Bill to its website on 31 December 2012
and also formally invited relevant stakeholders
to review the paper and provide feedback to
1 The Basel Core Principles are the global standards for prudential regulation and supervision of banking systems.
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the Bank by 04 March 2013. The feedback from
the relevant stakeholders was considered and
subsequently addressed. The Consultation
Paper also informed the subsequent submission
to Cabinet to commence the legislative process.
A determination will also be made on whether
the Building Societies Act should be repealed
or retained with other amendments to effect
updates to the non-deposit-taking obligations
of building societies.
3.4.4. Pending Financial Regulations
Clarifying Note: With the exception of
the BOJ (Credit Union) Regulations, if the
proposed Omnibus Banking Bill is finalized
before the pending financial regulations
which are discussed below, then the process of
promulgating these regulations will be replaced
by the promulgation of these regulations under
the Omnibus statute. The BOJ (Credit Unions)
Regulations however, remains a separate
legislative initiative that will be finalized
separately from the Omnibus Banking Bill.
3.4.4.1. The Banking (Form of Application
Regulations and The Financial
Institutions (Form of Application)
Regulations
These regulations will comprise the prescribed
application form under the respective Acts.
The earlier format of licence fees regulations
under the Banking Act and the Financial
Institutions Act that dealt with both licences
fees and the prescribed form of application
was not retained. It was felt that the matter
of the prescribed application form should be
addressed via separate regulations so that
the periodic upgrading of this form would not
disrupt the licence fees aspect of the regulatory
regime. These regulations will also include
enhancements to the application form to capture
certain basic particulars from applicants that
were not captured under the old forms as well
as enhancements to bring them in line with the
revised Core Principles.
The revised form will also require the principals
signing on behalf of the applicant company to
certify that the information given in the form
is accurate to the best of their knowledge
and belief. Similar reforms to the application
form under the Building Societies Act will be
subsequently effected (see Clarifying Note).
3.4.4.2. The Bulding Societies (Licence Fees)
Regulations
3.4.4.3. These regulations will be revised
to bring the fees payable in line with the
applicable fees under the 2003 Licence Fees
Regulations under the Banking Act and the
Financial Institutions Act (see Supervision
of Deposit-Taking Financial Institutions and
Clarifying Note).
3.4.4.4. The Banking (Qualification of
Auditors) Regulations
These regulations will create a framework for
ensuring that auditors, who are proposed as the
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statutory auditors of financial institutions, are
independent of the financial institutions being
audited (see Supervision of Deposit-Taking
Financial Institutions and Clarifying Note).
3.4.4.5. The Banking (Credit Classification
and Provisioning) Regulations
These regulations will formally impose the
measures that banks are required to take in
assessing credit, taking security and making
provisions for the possibility of default (see
Supervision of Deposit-Taking Financial
Institutions and Clarifying Note).
3.4.4.6. The Bank of Jamaica Credit Union
Regulations
These regulations will bring the operations of
credit unions fully under the Bank of Jamaica’s
prudential supervisory regime. These
regulations will therefore among other things,
cover licensing, capital, reserves, prohibited
business, remedial and intervention processes
and the role of specially authorized credit union
(see Supervision of Deposit-Taking Financial
Institutions and Clarifying Note).
3.4.5. Non-Financial Legislation Passed in
2013
In relation to the AML/CFT framework and the
financial system, the following pieces of non-
financial legislation were passed in 2013.
3.4.5.1. The Proceeds of Crime Act (POCA)
The POCA was amended in October 2013. The
matters included in these amendments were
designed to:-
1. address deficiencies identified in relation
to reporting obligations of suspicious
transactions;
2. outline the powers that competent
authorities designated under the POCA
will have in relation to their role of
monitoring compliance of financial
institutions and designated non-
financial businesses and professions
(DNFBPs) with the applicable AML/
CFT requirements under the POCA;
and
3. incorporate a cash transaction limit (i.e.
$1 million) above which transactions in
physical currency cannot be conducted
unless with a person in the category of a
‘permitted person’.
The (Money Laundering Prevention)
Regulations under the POCA was also amended
to bolster Jamaica’s anti-money laundering
framework to include the following matters:
a) Customer due diligence requirements;
b) Emerging technology and non-face-
to-face business;
c) Customers conducting business
through third parties and introducers;
and
d) Record keeping obligations.
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Following the passage of the amendments
to the POCA, the following designation
Orders were prepared in contemplation of the
commencement of the oversight of DNFBPs:
1. The Proceeds of Crime (Designated
Non-Financial Institution) (Real
Estate Dealers) Order, 2013;
2. The Proceeds of Crime (Designated
Non-Financial Institution) (Gaming
Machine Operators) Order, 2013;
3. The Proceeds of Crime (Designated
Non-Financial Institution) (Attorneys-
at-law) Order, 2013;
4. The Proceeds of Crime (Designated
Non-Financial Institution) (Public
Accountants) Order, 2013; and
5. The Proceeds of Crime (Designated
Non-Financial Institution) (Casino
Operators) Order, 2013;
The foregoing Proceeds of Crime Designation
Orders 2013 will take effect in April 2014 and
in the case of Attorneys, the requisite Order
takes effect in June 2014.
3.4.5.2. The Terrorism Prevention
(Amendment) Bill
Amendments to the Terrorism Prevention Act
to strengthen the confiscation mechanisms
under that Act have been ratified and gazetted.
This amendment also represents Jamaica’s
ratification of The International Convention for
the Suppression of Acts of Nuclear Terrorism
of September 4, 2005; and to also allow for
Jamaica’s accession to the 2005 amendment
to the Convention on the Physical Protection
of Nuclear Material, and the October 14, 2005
amendment to the Protocol to the Convention
for the Suppression of Unlawful Acts Against
the Safety of Maritime Navigation, and to the
October 14, 2005 Protocol to the Convention for
the Suppression of Unlawful Acts Against the
Safety of Fixed Platforms.
The amendments to the related Terrorism
(Reporting Entities) Regulations under the
TPA will now provide a framework to address
Jamaica’s counter terrorism financing
framework which include the following
matters:–
a) Customer due diligence requirements;
b) Emerging technology and non-face-to-
face business;
c) Customers conducting business through
third parties and introducers; and
d) Record keeping obligations.
The amendments in this regard, mirror the
amendments effected to the Money Laundering
Prevention Regulations under the POCA.
3.4.5.3. The United Nations Security Council
Resolution (Implementation) Act, 2013
The Act reflects Jamaica’s compliance with
FATF Recommendation 7 (Targeted financial
sanctions related to proliferation) of the revised
FATF Forty (40) Recommendations issued in
2012.
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3.4.5.4. The Financial Investigations
Amendment (FIDA) Bill
Amendments to the FIDA were passed in
July 2013, following Cabinet’s approval
in December 2012. The amendments,
among other things, clearly incorporate
provisions that expressly establish the
FID’s ability to function with operational
independence and autonomy and the FID’s
ability to cooperate with its international
counterparts.2 These amendments are
critical to the successful completion of
the Financial Investigations Division’s
membership application to Egmont.3
2 Under the new FATF 40 Recommendations – the interpretative note to r 29 (formerly r26) reflects that the FIU must among other things have operational independence, operate free from undue influence or interference and should apply for membership in the Egmont Group. (Refer also to footnote 3 below)
3 “The Egmont Group is an informal group of financial intelligence units (FIUs) established in 1995. The group was so named for the location of the first meeting at the Egmont-Arenberg Palace in Brussels. The goal of this group is to provide a forum for FIUs to improve support to their respective national anti-money laundering programmes. This support includes expanding and systemizing the exchange of financial intelligence information, improving expertise and capabilities of personnel of such organizations, and fostering better communication among FIUs through application of technology.” Source: Information Paper on FIUs and the Egmont Group – (See the FATF web site at WWW.fatf-gafi-org or see www1.oecd.org/fatf/ctry-orgpages/org-egmont_.htm)
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4. Financial Market Operations
4.1. Open-Market Operations4.1.1. Bank of Jamaica Liquidity Management
Operations
During 2013, liquidity management operations
continued to include a range of financial
market instruments, which were implemented
concurrent with the daily offer of 30-day
Certificates of Deposit (CDs) and overnight
deposits. The interest rate on 30-day CDs
remained the benchmark for signalling the
Central Bank’s monetary policy stance and
was adjusted downwards by 50 bps to 5.75
per cent in the March 2013 quarter, where it
remained for the rest of the year. The interest
rate on overnight deposits remained at 0.25 per
cent. The broader range of financial market
instruments used in liquidity management
operations were aimed at:
(i) Lengthening the maturity profile for
the open-market liabilities; and
(ii) Providing Jamaica Dollar liquidity in
the context of the intermittent cycles of
liquidity tightening.
In that regard, commencing in the June quarter,
the Bank introduced a suite of CDs, which had
varied interest rates, tenors and currency of
denomination. Additionally, in order to provide
Jamaica Dollar liquidity to DTIs, the Bank
introduced special repurchase facilities in the
September quarter.
The Bank utilized its usual 30-day CD as the
primary instrument to manage Jamaica Dollar
liquidity during the March quarter. In this
regard, net placements on these instruments
amounted to $383.6 million for the quarter and
were supported by net placements of $4 779.0
million on overnight deposits. The impact of
these placements was partially offset by the
liquidity of $1 061.1 million injected via the
net purchase of foreign currency as well as
the purchase of $6 062.9 million in GOJ bonds
on the secondary market. Accordingly, the
reinvestment rate on 30-day CDs during this
quarter increased to 100.7 per cent from 87.6
per cent for the December 2012 quarter (see
Table 43). However, this was lower than the
108.2 per cent reinvestment rate on 30-day CDs
recorded for the March 2012 quarter.
Following the approval of the EFF supported
economic programme on 01 May, there was
reduced uncertainly in the domestic financial
markets. A key objective of the programme
is the rebuilding of foreign reserves over the
near-term. This was achieved through the
purchase of foreign currency from the financial
system. In order to achieve the targeted
accumulation of reserves, the Bank continued
to utilize special CDs bearing variable interest
rates benchmarked to GOJ weighted average
Treasury Bill yields as well as US dollar indexed
Notes, in its liquidity management. These offers
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facilitated the elongation of the maturity profile
by reducing the frequency and quantum of 30-
day maturities within the financial system.
In 2013, the Bank issued 35 variable rate CDs
and four US dollar Indexed Notes, with nominal
subscriptions amounting to $45 690.7 million
(see Table 45). These placements augmented
the issuance of 30-day CDs, with the latter net
absorbing $5 268.2 million during the June to
December quarters (see Table 44).
By the end of the September quarter, there was
a marked improvement in financial market
conditions and confidence in the near-term
prospects for the economy was gradually
returning. Further, the implementation of the
NDX eliminated the need for the GOJ to access
financing using domestic debt instruments.
Against this background, the number of offers of
special CDs increased but there were declines
in the average tenor and nominal subscriptions
(see Table 45). There was a simultaneous
Table 44
Table 43
Year QuarterTake-up (J$Mn)
Take-up Ratio (%)
Maturity (J$mn)
Maturity Ratio (%)
Net Issue(+)/net
Maturity(-) (J$mn)
Reinvest-ment Rate
(%)
March 285 992.0 34.7% 264 260.3 30.5% 21 731.8 108.2%
June 223 523.0 27.1% 251 812.4 29.1% -28 289.3 88.8%
September 183 053.4 22.2% 199 247.8 23.0% -16 194.4 91.9%
December 131 883.4 16.0% 150 504.6 17.4% -18 621.2 87.6%
Total 824 451.9 865 825.1 -41 373.2 95.2%
March 113 585.3 32.9% 112 740.8 31.0% 844.5 100.7%
June 91 164.0 26.4% 99 840.9 27.5% -8 676.8 91.3%
September 78 230.8 22.7% 82 331.6 22.7% -4 100.8 95.0%
December 61 913.1 18.0% 68 231.4 18.8% -6 318.3 90.7%
Total 344 893.3 363 144.7 -18 251.4 95.0%
2013
2012
INVESTMENT PROFILE OF BOJ'S 30-DAY CD(2012-2013)
March June September December Total
Net issues (+)/net mat. (-) on Certificates of Deposit 4 686.1 5 371.4 -3 779.9 3 676.7 9 954.4
Net Repurchase Issue(-) / net Repurchase Maturity (+) 1 007.6 2.5 -3 496.1 -7 935.4 -10 421.5
Net Purchase(-)/net sale (+) of GOJ BMI notes -6 062.9 0.0 0.0 0.0 -6 062.9
Net OMO issues (+)/net OMO maturity - 369.2 5 373.9 -7 276.0 -4 258.7 -6 530.0
Net Sale(+) / net Purchase(-) of Foreign Exchange -1 061.1 -23 153.5 -9 202.2 -15 852.4 -49 269.3
Net increase (+)/net Decrease (-) in Domestic Cash Reserve 632.2 - 102.2 335.6 897.1 1 762.7
Net Absorption (+)/Injection (-) - 798.1 -17 881.8 -16 142.6 -19 214.1 -54 036.5
BANK OF JAMAICA LIQUIDITY MANAGEMENT OPERATIONS 2013
Data for CDs include principal and net interest payments made during the year.
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lengthening of the average issue tenor to 365-
days for the December quarter relative to 349-
days in the June quarter. Additionally, for this
quarter, subscriptions on special CDs increased
by $18 264.5 million. For the December quarter,
there was a lengthening in the average tenor
relative to the June and September quarters.
Furthermore, by end-December, the special
CDs accounted for approximately 64.0 per cent
of the OMO liabilities, relative to approximately
7.0 per cent at the start of the year. Conversely,
the 30-day CDs accounted for approximately
34.0 per cent of the outstanding open market
liabilities (see Chart 39). In addition, there
was a reduction in the average daily turnover
in overnight deposits to $3 634.4 million by the
December quarter from $4 411.5 million for the
June quarter (see Chart 40).
Changes in GOJ’s and BOJ’s operations in the
context of the economic programme resulted
in relatively tight Jamaica Dollar liquidity con-
ditions by mid-year. In this regard, the Bank
provided support to DTIs to alleviate intermit-
tent cycles of liquidity tightening. The provi-
sion of Jamaica Dollar liquidity by the Cen-
tral Bank was through repurchase agreements
with deposit-taking financial institutions. This
was done through the Bi-monthly Repurchase
Operation (BMRO) which commenced in the
September quarter and a Standing Liquidity
Facility (SLF) which were formalized in the De-
cember quarter (see Box 2).1 The BMRO pro-
vided liquidity for 14 days at an interest rate of
0.25 percentage point above the Bank’s 30-day
OMO interest rate while the liquidity provided
under the SLF was for overnight at the Bank’s
30-day OMO interest rate plus a 1.5 percent-
age points spread. Accordingly, during 2013,
the interest rates were 6.00 per cent and 7.25
per cent for the BMRO and SLF, respectively.
For 2013, liquidity amounting to $10 421.5
million was injected into the financial system
through repurchase transactions conducted
under the BMRO and the SLF (see Table 44).
Most of this liquidity impetus occurred in the
December quarter, amounting to $7 935.4
million and supported the usually strong
1 The formalization of the SLF involved the Bank establishing pre-approved limits for each DTI which could be automatically accessed once the required collateral conditions were satisfied. Prior to this there were no pre-approved limits and all repurchase transactions conducted by the Bank with DTIs required a special approval by the Governor of the Bank.
Table 45
Quarter Mar-13 Jun-13 Sep-13 Dec-13
Number of Instruments Offered n/a 11 16 12
o/w - Variable Interest Rate n/a 9 16 10
o/w - US Indexed Note n/a 2 n/a 2
Average Tenor n/a 349 days 327 days 365 days
Nominal Subscription (J$mn) n/a 21 718.3 5 707.9 18 264.5
ISSUE OF BOJ SPECIAL CERTIFICATES OF DEPOSITfor JMD Liquidity Management
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Chart 40: Average Daily Turn-over of Overnight Deposit
Chart 39: Distribution of JMD OMO Instruments - 2013
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 Jun/13 Sep/13 Dec/13
J$ M
illio
ns
Q uarter-ended
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Special Deposits 30-day COD Special Issues
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demand for currency in the absence of the
traditionally strong net maturities on 30-day
OMO instruments. For the December 2013
quarter, net currency issue amounted to $11
921.7 million while the net maturities on 30-
day CDs totalled $6 318.3 million.
4.1.2. Primary Dealer Performance &
Administration
During 2013, the Bank continued to issue
CDs through the JamClear Central Securities
Depository JamClear® CSD to Primary Dealers
(PDs) and commercial banks. PDs continued
to dominate the subscriptions to CDs in 2013,
accounting for 81.1 per cent of the issues,
relative to 65.3 per cent for 2012 (see Chart 41).
Consequently, the PDs’ share of the outstanding
stock of CDs also increased and averaged 81.3
per cent for 2013 relative to 67.3 per cent for
2012.
In the absence of GOJ primary issues, excepting
the roll-over issues of GOJ Treasury Bills during
2013, and coupled with the increase in the suite
of OMO instruments, there was a net issue of $10
881.7 million in CDs accommodated through
PDs. The net issue for 2013 was observed in
three quarters of the year. In contrast, for 2012,
there was a net redemption of $14 269.4 million
observed in three quarters of that year (see
Chart 42).
The number of designated PDs decreased to 10
as at end-December 2013 from 11 as at end-
December 2012. This decline resulted from
the voluntary withdrawal of one designee
which cited challenges in continuing to
satisfy the performance requirements. A total
of eight persons attached to primary dealer
designated entities were assessed under the
Bank’s ‘Enhanced Fit & Proper’ Criteria. These
Chart 41: Primary Dealer Share of CDs as at end-Quarter
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2013 2012March Qtr June Qtr September Qtr December Qtr
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Chart 42: Primary Dealers Net Performance in OMOs
assessments were conducted in accordance
with the policy for designating new entities as
well as in relation to the requirements for the
annual renewal of the PD designation.
-$15,000.00
-$10,000.00
-$5,000.00
$0.00
$5,000.00
$10,000.00
$15,000.00
2013 2012J$M
N
March Qtr June Qtr September Qtr December Qtr
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4.2. International Reserves
The gross foreign asset (GFA) of the Bank of
Jamaica (BOJ) declined by US$163.2 million
to US$1 817.6 million at end-December 2013
(see Table 46). This decline largely reflected
net payments on behalf of the Government,
the impact of which was partly offset by net
purchases of foreign currency by the BOJ.
For the March and September quarters of 2013,
the GFA declined, but increased for the June
and December quarters. The most significant
decline occurred in the March quarter,
consequent on net payments of US$216.2
million on behalf of the GOJ. In contrast, there
was an increase of US$162.7 million for the
June quarter, primarily reflecting net trading
room purchases of US$218.1 million (see
Table 47). Additionally, SDR136.75 million
(US$207.2 million) was received in the June
quarter, representing the first disbursement
from the IMF under the four-year EFF which
was approved on 01 May 2013.1
The net international reserves (NIR) declined
by US$77.8 million to US$1 047.8 million
for the review year. This outturn compares
favourably with a targeted reduction of
US$220.5 million under the EFF. The decline
in the reserves mainly reflected a contraction
in the GFA, the impact of which was offset by
a reduction of US$85.5 million in the foreign
liabilities. The reduction in foreign liabilities
was influenced by net repurchases made to the
IMF during 2013.2 In that regard, the Bank’s
foreign liabilities declined to US$769.7 million
at end-December 2013 from US$855.2 million
at end-December 2012 (see Table 47).
1 IMF receipt of SDR136.75mn comprised SDR78.75mn for BOP support and SDR58.0mn for Budgetary support.
2 Repurchases represent re-payment of loans to the IMF.
Table 46
Opening Gross Foreign Assets (GFA) 1 980.8 Inflows 2 516.4 Outflows -2 665.5 Adjustment to GFA /1 - 14.1 Closing Gross Foreign Assets 1 817.6
US$MN
/1 - Unrealized gains/losses on foreign currencies and other investments.
BANK OF JAMAICA GROSS FOREIGN ASSETS As at 31 December 2013
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Table 47
4.2.1. Foreign Exchange Inflows and
Outflows
4.2.1.1. Inflows
Foreign exchange inflows to the BOJ increased
by US$491.4 million to US$2 516.4 million for
2013 (see Table 48). The primary sources of
inflows were market purchases by the BOJ and
GOJ foreign currency receipts which included
loan disbursements from multilateral agencies
under the 48-month EFF. Inflows from the IMF
for the year amounted to SDR176.7 million
(US$268.6 million) and were apportioned as
US$87.9 million and US$180.7 million for
budgetary and balance of payments support,
respectively.
Total market purchases for 2013 amounted to
US$1 717.1 million compared to US$1 419.8
million for 2012. The purchases in 2013
accounted for approximately 68.0 per cent of
total inflows. Of these purchases, US$1 161.4
million (67.6 per cent) was bought under the
Surrender Arrangements while US$555.7
million (32.4 per cent) was negotiated through
the trading room.
Foreign currency receipts on behalf of the
GOJ amounted to US$534.3 million for the
year, an increase of US$91.6 million relative
to 2012. The main source of these receipts was
multilateral loan inflows totalling US$344.5
million which were disbursed in accordance
with the conditions agreed under the EFF.
The disbursements also included grant
flows amounting to US$66.9 million, which
comprised US$58.4 million from the European
Commission and US$8.5 million from the World
Bank. Additionally, the GOJ received US$75.0
million in payments for the forward sale of
alumina by Clarendon Alumina Partners (CAP)
in June 2013.
2012
Dec. Mar. Jun. Sep. Dec.
Annual Change
(US$)
NIR 1 125.6 884.2 1 003.2 910.1 1 047.8 -77.8
Gross Foreign Assets 1 980.8 1 718.4 1 881.1 1 713.5 1 817.6 -163.2
Foreign Liabilities 855.2 834.1 877.9 803.4 769.7 -85.5
2013
BOJ NET INTERNATIONAL RESERVES(End of Period)
US$MN
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Table 48
2012 2013Change
($) Bauxite Receipts* 19.4 15.9 - 3.5
Market Purchases 1 419.8 1 717.1 297.3
Surrenders to BOJ 1 203.0 1 161.4 - 41.7
Authorised Dealers 774.1 733.8 - 40.2
Cambios 429.0 427.5 - 1.4
Other Purchases** 216.7 555.7 339.0
GOJ Receipts 442.7 534.3 91.6
Domestic USD Bond 354.0 0.0 - 354.0
Domestic USD Loans 0.0 40.0 40.0
GOJ Multilateral Agency Flows 3.2 344.5 341.3
IDB 0.0 60.0 60.0
IBRD 0.0 129.7 129.7
IMF /1 0.0 87.9 87.9
Grants 3.2 66.9 63.7
Divestment 0.0 75.0 75.0
Other GOJ 85.5 74.8 - 10.7
IMF 0.0 181.1 181.1
Loan Disbursement/Misc. Funds 0.0 181.1 181.1
Investment Income 15.6 11.7 - 3.9
Financial Institutions - Deposits 95.0 0.0 - 95.0
BOJ Certificates of Deposit 0.0 10.0 10.0
Other Receipts *** 32.4 46.3 13.8
Total Cash Inflows 2 025.0 2 516.4 491.4
INFLOWS OF FOREIGN EXCHANGEUS$MN
* Bauxite receipts have been revised to comprise Royalty, Levy and Taxes. Local Costs have been excluded.** Consists of all trading room purchases, including market intervention and Bauxite Local Costs.
***Other receipts include net prudential reserve inflows. - /1 IMF loan for Budgetary support.
For 2013, the Bank received US$15.9
million from the bauxite sector, representing
production levy and royalties. This reflected a
decline compared to US$19.4 million received
in 2012. The reduction primarily reflected the
production levy being lower by US$3.2 million.
The Central Bank augmented its monetary
operations during 2013 with the offer of USD
certificates of deposit in the domestic market.
In this regard, foreign currency inflows from
this source amounted to US$10.0 million.
4.1.1.2. Outflows
Foreign currency outflows totalled US$2 665.5
million during 2013, lower by US$171.6 million
relative to 2012 (see Table 49). The decline in
outflows largely reflected lower sales of US
dollars via the intervention window as well
as a reduction in GOJ foreign currency debt
payments. In contrast, foreign currency sold
under the Centralised Facility for Foreign
Exchange for Public Sector Entities (PSE)
increased for 2013.
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Bank of Jamaica payments for 2013 declined by
US$297.9 million to US$1 258.4 million. This
reduction mainly reflected a fall of US$506.6
million in intervention sales when compared
with 2012. However, foreign currency sold
under the PSE Facility increased by US$208.7
million to US$1 110.2 million. GOJ foreign
currency payments declined to US$1 060.1
million for 2013 from US$1 232.2 million for
2012, largely reflecting lower amortization.
Net repayment of financial institutions’ deposits
totalled US$22.9 million for 2013. Of note,
financial institutions’ deposits totalled US$95.0
million in 2012 when the Bank resumed
accepting USD placements.
The Bank commenced making repayments of
loans to the IMF in 2013. These payments
represent the quarterly repayments for loans
disbursed under the 36-month Standby
Arrangement which was approved in the
March 2010 quarter. For 2013, total repurchases
were SDR175.3 million (US$266.4 million).
However, there were gross disbursements of
SDR176.7 million (US$268.6 million) for the
year (see Tables 49 & 50).
Change
2012 2013 (US$)
GOJ Payments 1 232.2 1 060.1 -172.2
Debt 1 119.4 896.5 -222.9
Principal 605.1 409.4 -195.7
Interest 514.3 487.1 -27.2
Other GOJ Payments 112.8 163.5 50.7
Market Sales 1 556.2 1 258.4 -297.9
Intervention 654.8 148.2 -506.6
Public Sector Facility 901.4 1110.2 208.7
IMF 10.2 277.3 267.2
Principal 0.0 266.4 266.4
Interest 10.2 10.9 0.8Financial Institutions - Repayment of Deposits 0.0 22.9 22.9
Other Payments* 38.5 46.9 8.4
Total Cash Outflows 2 837.1 2 665.5 - 171.6
OUTFLOWS OF FOREIGN EXCHANGEUS$MN
*- Includes net prudential reserve outflows and Central Bank payments for notes and coins.
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Table 50
Date SDR USD Equiv. SDR Amt USD Equiv.
June Qtr 136.8 207.2 51.8 78.0
September Qtr 0.0 0.0 59.8 90.6
December Qtr 39.9 61.4 63.7 97.7
TOTAL 176.7 268.6 175.3 266.4
SDR DISBURSEMENTS & REPURCHASES/REPAYMENTSCalendar Year 2013
(MN)DISBURSEMENTS REPURCHASES
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4.3. Reserve ManagementThe Gross Foreign Assets held by the Bank of
Jamaica as at 31 December 2013 was US$1
817.6 million compared to US$1 980.8 million
as at 31 December 2012. Throughout the year,
the portfolio was managed in accordance with
the Bank’s Foreign Investment Policy which
informed the operating guidelines employed,
the strategies devised and the risk management
arrangements that were observed.
There were no changes to the objectives of the
Reserve Management function defined by the
Board of Directors to:
• Support and maintain confidence in
monetary policy;
• Provide the capacity to support the orderly
functioning of the foreign exchange market;
• Absorb shocks brought on by crisis in the
domestic and international economies; and
• Enhance the confidence of the international
capital markets by demonstrating that
Jamaica can meet its external obligations.
In order to realize these objectives, the reserves
continued to be managed with a bias towards
capital preservation and liquidity maintenance,
with income maximization as a secondary
objective.
4.3.1. Portfolio Distribution
During 2013, no new class of assets was
added to the portfolio. Accordingly, the asset
composition throughout the year was similar
to that for the previous year. The portfolio
continued to be dominated by placements in
money market instruments, as opportunities for
investing in the bond market remained limited
(see Table 51). Bond acquisitions were confined
to placements in AAA/AA+ rated securities
of governments, agencies of governments
and supranational entities and money market
investments with P-2/A-1 and Aa1/AA+ rated
financial institutions.
Throughout the review year, money market
instruments remained the main asset class in
order to mitigate reinvestment risk. Of note,
however, there was a reduction of US$171.7
Table 51
ASSET CLASSES
US$MN % US$MN %
Money Market Investments/ Balances 1 174.1 59.3 1 002.4 55.1
Bond Holdings 374.7 18.9 378.4 20.8
External Fund 141.1 7.1 141.5 7.8
Total Funds Invested 1 689.9 85.3 1 522.3 83.8
Allocation of Special Drawing Rights 290.9 14.7 295.3 16.2
TOTAL 1 980.8 100.0 1 817.6 100.0
20132012
DISTRIBUTION OF FOREIGN ASSETSas at 31 December
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million in money market holdings, resulting
from a decline in the Gross Foreign Assets.
In order to mitigate the risk of exchange rate
losses, the portfolio retained its bias toward US
dollar denominated investments with 70.1 per
cent of the portfolio, excluding the Allocation
of Special Drawing Rights, held in US Dollar
denominated securities at the end of the year.
4.3.2. Investment Climate
The investment climate in 2013 was largely
similar to that of 2012, being characterized by
low interest rates and high credit risk. However,
growth in the global economy moderated,
reflecting a slowdown in emerging markets
economies as there was stronger expansion
in developed nations. A number of factors
and events influenced the financial markets in
2013; these were:
• Communication by the Federal
Reserve (Fed) that it would
commence tapering quantitative
easing (QE3) in the near-term.
However, while the Fed’s actions
kept short-term interest rates low,
its general tone and guidance
made investors nervous, causing
longer-term rates to rise faster than
anticipated and bond portfolios to
suffer. In this regard, even though
equity markets in the US rallied
strongly in the context of improved
corporate earnings and continued
economic growth, fixed income
investments generally outperformed
equities, as the markets adjusted
interest rates higher in anticipation
of the tapering of QE3;
• The International Monetary Fund’s
forecast that world output would
grow by 3.6 per cent for 2014,
compared with the estimate of 2.9
per cent for 2013;
• The European Central Bank’s
cutting of its main interest rate to
a record low of 0.25 per cent in
November 2013; and
• The uptick in economic activity in
the U.S. economy as the drag from
changes in government spending
and taxation faded. The two-year
budget deal reached by Congress at
year’s end defused some economic
uncertainty as well.
4.3.3. Investment Strategy
Despite continued growth in the global
economy, there was little improvement in the
credit risk rating of institutions throughout the
review year. As a consequence, there continued
to be a limited number of counterparties that
met the minimum credit ratings of P-1/A-1 short-
term credit and Aa1/AA+ long-term ratings of
Moody’s and S&P, respectively, as specified by
the Investment Policy Statement (IPS).
Against this background, the Bank maintained
a defensive investment strategy throughout
the year, by purchasing U.S. Agency Bonds
with step coupons. As rates increased, the
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focus was shifted to bonds with shorter
duration so as to minimize the market risk of
the portfolio. The relatively low interest rates
and heightened uncertainty in the markets
significantly influenced the decision to
retain an overweight position in short-term
investments, with increased placements at
the Bank for International Settlements and
the Federal Reserve Bank of New York. The
earning capacity of the portfolio was also
adversely affected by liquidity requirements
in the second half of the year, due mainly to
market sales and impending debt payments.
The reduction in the Gross Foreign Assets
restricted the investment opportunity in the
capital market as well as reduced tenors in the
money market investments.
Portfolio Performance
Average income earning assets for the year
was US$1 732 million, which was US$109
million or 6.7 per cent above budget but 26.0
per cent lower than that for 2012 (see Table
52). Portfolio income of US$11.9 million was
US$4.3 million or 26.5 per cent lower than the
outturn for 2012. The average yield on the
portfolio was 0.69 per cent per annum for 2013,
the same when compared to 2012. The outturn
for 2013 reflected the fact that both the average
income earning assets and total income fell by
26.0 per cent.
Table 52
Earnings % of Earnings % of
ASSETS US$MN Earnings US$MN Earnings
Money Market Investments 3.4 21.0 2.8 23.5
Bond Holdings 11.0 67.9 7.7 64.7
External Funds 1.8 11.1 1.4 11.8
Total 16.2 100.0 11.9 100.0
Average Income Earning Assets 2 339.0 1 732.0
Rate of Return (%) 0.69 0.69
FOREIGN INVESTMENT INCOMEFor Years Ended 31 December
2012 2013
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5. Payment System Oversight
volume and value, respectively. The greatest
level of growth was recorded for direct debit
and credit transactions, with volumes and
values increasing by 32.0 per cent and 27.0
per cent, respectively. Debit and credit card
payments processed by commercial banks
recorded increases, with volumes and values
rising by approximately 10.0 per cent and 20.0
per cent, respectively, for each card type.
The BOJ also continued to be an active
participant in the development of regional
payment system activities under the guidance
of the Center for Latin American Monetary
Studies (CEMLA). In this regard, the Bank made
significant contributions to a regional project
on Payment Systems Statistics Methodologies.
In addition, the Bank, in conjunction with
the Bank for International Settlements and
CEMLA, hosted the second regional retail
payments workshop for Latin America and the
Caribbean in November 2013.
5.2. Retail Payment Systems
Developments
5.2.1. Guidelines for Electronic Retail
Payment Services
Through the implementation of the Guidelines,
the Bank established a consistent and
comprehensive framework within which
5.1. Overview
The Bank accomplished a major milestone
in the National Payment System reform
agenda in 2013, with the implementation
of a comprehensive framework to guide its
development, including electronic retail
payment service solutions. The framework,
which is set out in the Guidelines for Electronic
Retail Payment Services (Guidelines), was
published on 01 February 2013.
Other significant accomplishments over the
review period included the Bank’s strategic
objective of reducing the settlement risk
associated with the operation of the Automated
Clearing House (ACH) through further
reduction in the ACH threshold. In addition,
the Bank facilitated Government of Jamaica’s
(GOJ) objective of a gradual transition from the
use of cash and cheque payments to electronic
payments. The Bank also provided technical
and operational support to the GOJ in the
implementation of the National Debt Exchange
(NDX).
In discharging its oversight function, the
Bank continuously monitored payment system
activities, identifying trends and emerging
usage of payment instruments. During the
reporting period, electronic payment activities
increased by 8.0 per cent and 7.0 per cent in
- 124 -Payment Systems Oversight
Bank of Jamaica
Paym
ent S
yste
m
Management System (CTMS), with the
creation of a Treasury Single Account (TSA)
in the Bank to allow for the settling of large-
value and time critical payments electronically,
through JamClear RTGS rather than by the
issuing of cheques. The automation of GOJ
payments which commenced in September
2012, was accelerated in January 2013, with
the use of various electronic systems to effect
low value retail transactions such as salaries
and payments to suppliers. The clearance
and settlement of these items were effected
in the ACH for net settlement in JamClear-
RTGS. For the year, 78 416 payments valued
at $7.75 billion were processed through the
ACH as direct credits for the GOJ’s low-value
retail transactions. The effecting of electronic
payments proved to be a cost effective solution
that significantly enhanced the efficiency of the
GOJ payments process.
5.2.3. Automated Clearing House (ACH)
Value Threshold
In 2008, an agreement was reached with
stakeholders, for the ACH Value Threshold to
be lowered on a phased basis, from $5 million to
$1 million. This phased approach was adopted
to allow commercial banks the required time
to make the necessary system and procedural
changes.
Based on review and discussions with
commercial banks and the National Payments
Council, the ACH Value Threshold was reduced
from $5 million to $3 million and further to $2
both banks and non-banks work to provide
consumers with safe and efficient electronic
retail payment services in a competitive
environment. The Guidelines provide for two
payment service delivery options namely:-
• Customer account based payment
services, specifically for deposit-taking
entities regulated by the Bank of
Jamaica; and
• Custodian account based payment
services, for those entities authorized by
the Bank to offer pre-funded electronic
retail payment services.
As of April 2013, service providers intending
to offer electronic retail payment services
were required to apply to the Bank for
authorization prior to the commencement
of operations. For retail payment service
providers that commenced operations prior to
the establishment of the Guidelines, they were
required to apply for authorization to continue
the business, with a deadline of end-2013 for
compliance.
As at end-2013, 13 entities either applied for
authorization or submitted letters of enquiry.
Conditional authorization to conduct pilots
prior to full rollout was given to two entities.
Evaluation of other applications continued
apace towards the end of the year.
5.2.2. Government Payments
In 2013, the GOJ significantly advanced
the implementation of the Central Treasury
- 125 -
Annual Report 2013
Payment Systems Oversight
Paym
ent S
yste
m
million, with effect from 01 July 2013. The new
threshold will remain in effect until June 2014.
The phased implementation of the ACH value
threshold resulted in increased efficiency in the
payment system while significantly reducing
exposure to settlement risk. In this regard, the
percentage of large-value transactions greater
than or equal to $1 million processed through
the ACH was 49.7 per cent as at 31 December
2013 compared to 81.0 per cent for 2008.
5.3. Payment Systems Activities
5.3.1. JamClear Systems1
5.3.1.1 JamClear-RTGS
Transaction volumes passing through
JamClear-RTGS for 2013 increased by 16.2
per cent to 256 148, while values grew by 6.6
per cent to $14.2 trillion over the prior year
1 Please see Section 6.2 for report on JamClear®-CSD.
(see Chart 43). For the review year, USD
values declined by 19.4 per cent to US$1 965.0
million, relative to 2012. The total volume of
GOJ payments through JamClear-RTGS for the
period was 4 768 transactions valued at $479.4
billion. It is expected that the level of payment
activity for GOJ in JamClear-RTGS will
continue to increase with the intensification of
the automation of these payments.
5.3.2. Retail Payment Systems and
Instruments
There was increased usage of electronic payment
solutions during 2013, which was reflected in
volumes and values as well as the continued
decline in cheque payments processed through
the ACH and the proprietary systems of the
commercial banks. This development was
partially attributable to the tightening of the
ACH threshold restrictions and the work of the
Chart 43: JamClear-RTGS Volumes and J$ Values 2009 - 2013
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
-
50,000
100,000
150,000
200,000
250,000
300,000
2009 2010 2011 2012 2013
J$ V
alue
s (Bi
llion
s)
Volu
mes
Volume Value J$(Bn)
- 126 -Payment Systems Oversight
Bank of Jamaica
Paym
ent S
yste
m
CTMS Committee to process low-value GOJ
payments for salaries and suppliers through
the ACH as direct credits.
5.3.3. Cheque Clearing Activities
5.3.3.1 Domestic Cheques
For 2013, 7.5 million cheque payments valued
at $1.05 trillion were processed through the
ACH. This represented a decline of 4.0 per
cent in volumes and 7.1 per cent in value when
compared to 2012. The average value of each
cheque payment declined by 3.2 per cent to
approximately $139 718.
The total volume of cheques processed by the
commercial banks proprietary system was
11.2 million valued at $1.38 trillion, reflecting
declines of 1.8 per cent and 6.8 per cent
in volumes and values, respectively, when
compared to 2012. The average value of
proprietary cheques processed by commercial
banks declined by 5.1 per cent to $123 262
compared to 2012.
5.3.3.2 Selected Foreign Currency Cheques
The value of total foreign currency items
cleared manually through the BOJ Clearing
House reflected an increase in value of 1.0
per cent when compared to 2012 (see Table
53). Cheques cleared were denominated in
USD, GBP, CAD and Euro. Of the total foreign
currency cheques cleared in 2013, USD
cheques accounted for 98.0 per cent (US$1
929 million).
5.3.4. Electronic Payment Activities
Electronic retail payments are cleared and
settled through the ACH, Multilink and the
proprietary systems of commercial banks. For
2013, the primary instrument used to effect
Table 53
Currency Units 2010 2011 2012 2013
USD 2 707.0 2 188.0 1 889.0 1 929.0
CDN 25.7 15.1 12.7 11.3
GBP 53.2 43.8 34.3 28.4
Euro 3.8 4.0 9.6 4.7
Total in USD Millions 2 789.7 2 250.9 1 945.6 1 973.4All values processd are converted to USD Millions
FOREIGN CURRENCY ITEMS CLEARED(Value)
- 127 -
Annual Report 2013
Payment Systems Oversight
Paym
ent S
yste
m
electronic payments was debit cards which
accounted for 80.0 per cent and 4.0 per cent by
volumes and values, respectively.
5.3.4.1 ACH – Direct Credits and Debits
Direct debits and credit card transactions
processed in the ACH in 2013 totalled 1 867
356, an increase of 32.2 per cent relative to
2012. The total value was $115.4 billion, an
increase of 26.5 per cent.
5.3.4.2 Multilink
The Multilink network processed 15.4 million
debit card transactions valued at $84.8 billion
in 2013. This reflected a reduction of 4.5 per
cent in volumes and a slight increase in values
relative to 2012. ABM transactions totalled 9.9
million with a value of $57.1 billion, reflecting
a decline of 2.4 per cent in volumes and an
increase of 1.8 per cent in value relative to 2012.
Point-of-Sale (POS) transactions declined in
volumes and values by 8.0 per cent and 2.1 per
cent respectively, to 5.5 million transactions
valued at $27.7 billion relative to 2012 (see
Charts 44 & 45).
5.3.5. Proprietary Systems – Commercial
Banks
5.3.5.1 Debit Cards
There were 79.7 million ABM and POS
transactions valued at $664.2 billion settled
through the proprietary systems of the
commercial banks in 2013. ABM transactions
totalled 51.5 million valued at $460.5 billion,
growth of 11.7 per cent and 18.9 per cent,
respectively, relative to 2012. The total volume
of POS transactions processed through the
commercial banks proprietary systems was
28.2 million valued at $203.7 billion, reflecting
increases of 9.6 per cent and 17.6 per cent,
respectively, relative to the previous year.
5.3.5.2 Credit Cards
Commercial banks reported growth of 13.6 per
cent and 19.0 per cent in volumes and values,
respectively, for credit card transactions for
2013. These growth rates translated into total
transactions of 16.4 million for a value of $161.3
billion.
5.3.6. Bill Payment Activities
The three independent bill payment providers
Paymaster, Bill Express and Quik&EZ Bill Pay
reported 10.6 million payment transactions
with a value of $84.3 billion in 2013. Cash was
the dominant payment method, accounting for
83.0 per cent of the total volume of transactions.
Cash and cheques accounted for 50.0 per cent
and 39.0 per cent, respectively, of the total value
of bill payments, while credit and debit cards
accounted for the remaining 11.0 per cent.
5.3.7. Instruments & Channels
Debit and credit cards continued to be the
dominant electronic payment instruments.
At end-2013, total debit cards in circulation
amounted to 2.3 million, reflecting an increase
of 11.0 per cent relative to 2012. Total credit
cards in circulation was 215 084, an increase of
3.0 per cent when compared to 2012.
- 128 -Payment Systems Oversight
Bank of Jamaica
Paym
ent S
yste
m
Chart 44: Multilink ABM vs POS Transaction by Volume: 2009 - 2013
Chart 45: Multilink ABM vs POS Transaction by JMD Value: 2009 - 2013
0
2
4
6
8
10
12
2009 2010 2011 2012 2013
Volume (Millions)
POS Volume ABM Volume
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013
J$ (Billions)
POS Value ABM Value
- 129 -
Annual Report 2013
Payment Systems Oversight
Paym
ent S
yste
m
ABM and POS machines are the primary
channels for the execution of electronic retail
payments. At end-2013, total ABMs installed
increased by 21 terminals to 445. POS terminals
increased to 19 666 from 16 565 in 2012.
5.3.8. Regional Activities
5.3.8.1 Review of Payment Systems Statistics
Methodologies
Working groups were established by CEMLA
to promote the exchange of standardized
statistical information of all central banks
within Latin America and the Caribbean.
Bank of Jamaica was grouped with the Central
Bank of Trinidad and Tobago to develop
the Caribbean perspective for a common
methodology for retail payment systems. This
project was completed and is being assessed by
CEMLA and the Working Group on Payment
Systems for Latin America and the Caribbean
(WGPSLAC).
- 131 -
6. Banking & Depository Services
banks as well as acting as a participant, by
negotiating cheques drawn on the commercial
banks, sending and receiving electronic files
with data captured from the cheques, as well
as direct debits and credits. Consistent with
its risk mitigation strategy, the Bank committed
to having large-value transactions settled in
the RTGS. In this regard, the Bank lowered the
ACH value threshold from $3.0 million to $2.0
million effective 01 July 2013. This allowed
for the migration of cheque transactions with
values equal to or greater than $2.0 million
from the ACH to the RTGS for settlement.
The Government implemented a Central
Treasury Management System (CTMS) in
January 2013, and in this regard, the Bank
granted the Accountant General’s Department
access to the ACH, to commence the origination
of retail payments. There were efficiency gains
to the system from this action, as the Government
is the single most significant initiator of retail
transactions. Having direct access to the ACH
enabled the Government to create its own files
in the system, thereby taking full responsibility
for verifying the accuracy and timeliness of
payments.
6.1. Banking Services
The Bank continued to provide a range of
banking services to its customers during 2013.1
In this regard, the Bank operated the JamClear
Real Time Gross Settlement (RTGS) system
and provided administrative support to the
Automated Clearing House (ACH) system,
owned and operated by the commercial banks.
Both systems are Systemically Important
Payment Systems (SIPS) in Jamaica.
The JamClear RTGS is specifically designed
to clear large-value, time-critical payments
by financial market participants on accounts
held at the BOJ in real time throughout the
business day. Payments settled in the RTGS are
final and irrevocable. The JamClear RTGS and
the JamClear Central Securities Depository
(CSD) systems are fully integrated, facilitating
settlement on a delivery versus payment (DvP)
basis of all Government of Jamaica and Bank
of Jamaica securities traded in the domestic
market.
During the year, the Bank continued to provide
oversight to ensure the efficient operation of
the ACH and to effect the settlement of clearing
balances on the accounts of the commercial
1 The Bank’s customers include the Government, licensed financial institutions, primary dealers, selected brokers of the Jamaica Central Securities Depository (JCSD) and regional central banks.
- 132 -Banking & Depository Services
Bank of Jamaica
Bank
ing
Serv
vice
s
6.2. Electronic Securities Depository
(JamClear®-CSD)
The Bank continued to function as operator
of JamClear-Central Securities Depository
(JamClear®-CSD) and registrar for BOJ
and GOJ domestically issued fixed income
securities, excluding Treasury Bills. As
Operator, the Bank maintained the system
on a daily basis to ensure the accuracy of the
register.
As Registrar, the Bank continued to deliver all
related services including (i) the registration
of new debt issues; (ii) dematerialization
and immobilization of securities; (iii) on-
going maintenance of ownership records; (iv)
distribution of maturity proceeds and interest
payments; (v) generation of withholding
tax certificates; and (vi) provision of audit
confirmations. The total value of securities
held in JamClear®-CSD as at end-2013 was
$839.2 billion and US$1.3 billion compared to
$848.4 billion and US$1.1 billion at end-2012.
A major achievement in 2013 was the execution
of the National Debt Exchange (NDX) on 22
February 2013 on behalf of the Government
of Jamaica which resulted in the exchange
of unencumbered securities in JamClear®-
CSD for new securities. The exercise was
conducted during 23 - 24 February, 2013 and
the new securities were available to investors
in their JamClear®-CSD accounts at the start
of the business day on 25 February 2013. The
remaining securities were treated as exceptions
and once unencumbered, were processed
manually.
At end-2013, the JamClear®-CSD had forty
participants as a result of the de-registration
of two members. The participants in the
depository comprised nine commercial and
merchant banks, ten primary dealers and
twenty-one secondary dealers, with the GOJ
and the BOJ as the only issuers of securities.
JamClear®-CSD provided a wide variety
of depository services including Pledges,
Entitlement Proceeds and Repurchase
Agreements (see Table 54). Pledges had the
highest utilization over the review period,
accounting for 32.9 per cent of the total volumes
traded. Entitlement Proceeds and Repurchase
Agreements accounted for 29.5 per cent and
16.9 per cent, respectively. The reduction in
volumes was due to declines in all transactions
except Repurchase Agreements and Initial
Placements. Of note, the increased activity as
it related to Initial Placements was due mainly
to the NDX. During the year, the Bank ensured
that Entitlement Proceeds were paid at the start
of the business day in JamClear®-CSD. As at
end-2013, there were 27 513 beneficial owner
accounts in JamClear®-CSD, an increase of 1
468 compared to end-2012.
For 2013, a total of 181 766 transactions was
processed in JamClear®-CSD for both BOJ
and GOJ instruments with nominal values of
$15.1 trillion and US$14.0 billion (see Charts
- 133 -
Annual Report 2013
Banking & Depository Services
Bank
ing
Serv
ices
Table 54
Volume 2012
% of Vol.
Volume 2013
% of Vol.
Transaction TypeBill Payment 489.0 0.3 482.0 0.3Delivery Versus Payment 432.0 0.2 113.0 0.1Entitlement Proceeds 54 631.0 28.6 53 679.0 29.5Free of Payment 12 945.0 6.8 11 859.0 6.5Initial placement/ Reopening 12 119.0 6.3 14 701.0 8.1Pledges 71 767.0 37.6 59 800.0 32.9Repurchase Agreement 25 395.0 13.3 30 628.0 16.9Taxation 13 299.0 7.0 10 504.0 5.8
191 077.0 100.0 181 766.0 100.0
JAMCLEAR-CSD TRANSACTIONS TYPESby Volume 2012 -2013
46 & 47). In comparison to 2012, transaction
volumes fell by 4.9 per cent, with Jamaica
Dollar and US dollar nominal values declining
by 31.1 per cent and 56.9 per cent, respectively.
The reduction in volumes was due to declines
in all transactions except for Repurchase
Agreements and Free of Payment. The decline
in transaction values occurred in the context of
the implementation of the NDX and the non-
Chart 46: JamClear - CSD Annual JMD Values
01 0002 0003 0004 0005 0006 0007 000
Billi
ons
2012 2013
issuance of new bonds by the GOJ. JamClear®-
CSD processed, on average, 706 trades per day,
compared to 765 trades for 2012.
Total outstanding nominal values for both GOJ
and BOJ Jamaica Dollar securities declined by
1.0 per cent relative to 2012. In contrast, US
dollar nominal values increased by 20.0 per
cent (see Charts 48 & 49).
- 134 -Banking & Depository Services
Bank of Jamaica
Bank
ing
Serv
vice
s
Chart 48 CSD JMD Nominal Values 2012 and 2013
Chart 49 JamClear-CSD USD Nominal Values 2012 and 2013
0.80
0.90
1.00
1.10
1.20
1.30
1.40
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Billi
ons
2012 2013
830
840
850
860
870
880
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Billi
ons
2012 2013
Chart 47: JamClear - CSD USD Values
02468
101214
Bill
ions
2012 2013
- 135 -
Annual Report 2013
Banking & Depository Services
Bank
ing
Serv
ices
Chart 50: Comparison of Daily Average Liquidity Utilized – 2012 & 2013
0
2
4
6
8
10
12
14
16
18
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Billi
ons
Bank Dealer
6.3. Intraday Liquidity
The Bank’s Intraday Liquidity facility was
accessed by 16 participants 3 005 times during
the review year, reflecting an increased usage
of 11.0 per cent, relative to 2012. The average
value of Intraday Liquidity provided also
increased over the period, with the highest
utilization in December 2013 (see Chart
50). The peak in December was attributed to
scheduled time critical payments on behalf of
commercial bank end-users.
- 137 -
7. Currency Operations
7.1. Currency in CirculationThe total value of banknotes in circulation
increased by 7.9 per cent to $67.1 billion at
end-2013, relative to end-2012 (see Chart 51).
The $1000 note and the $500 note accounted
for 72.3 per cent and 13.0 per cent, respectively,
of the total value of notes in active circulation at
end-2013. These compared with 72.0 per cent
and 12.6 per cent, respectively, for the previous
year. The $5000 note represented 8.8 per cent
of the total value of notes in active circulation
at end-2013 relative to 9.3 per cent for the
previous year. Of the total value of banknotes in
circulation at end-2013, 0.3 per cent consisted
of unredeemed withdrawn notes (inactive), that
is, $20, $10, $5, $2, $1 and $0.50.1
At end-2013, the value of coins in circulation
was $3.7 billion, representing an increase of 8.5
1 Withdrawn notes are a liability of the BOJ and therefore are included in the calculation of currency in circulation.
per cent relative to the previous year (see Chart
52). The $20 continued to account for the
largest share (40.9 per cent) of the total value
of coins in active circulation, marginally higher
than the 40.8 per cent for 2012 (see Table 55).
7.2. Currency IssueThe total value of banknotes issued for 2013
amounted to $249.0 billion (see Table 56). This
represented an increase of 2.3 per cent when
compared to the previous year. A monthly
average of $20.8 billion was issued during
the review year relative to a monthly average
of $20.3 billion for 2012. Of note, the $1000
denomination continued to account for the
largest proportion of notes issued during
the year, increasing by 0.8 percentage point
compared to 2012. The $5000 denomination
represented 2.9 per cent relative to 2.5 per cent
for the previous year. The Bank continued to
Chart 51: Total Value of Banknotes in Circulation Chart 52: Total Value of Decimal Coins in Circulation
$49.9$54.6
$60.3$62.2
$67.1
$0
$10
$20
$30
$40
$50
$60
$70
2009 2010 2011 2012 2013
BIL
LIO
NS
$2.6$2.8
$3.1
$3.4$3.7
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
2009 2010 2011 2012 2013
BIL
LIO
NS
- 138 -Currency Operations
Bank of Jamaica
Cur
renc
y For the review year, the total value of coins
issued amounted to $554.2 million, which was
11.5 per cent above the total value issued for
2012. The $20 coin accounted for 50.5 per
cent of the total value of coins issued for 2013
relative to 50.0 per cent for 2012. In terms of the
number of pieces of coins issued, the $1 coin
witness a sharper decline in the issuance of new
notes as the more durable notes, introduced in
July 2012 continued to permeate the circulation
stock. In this regard, there was a decline of 44.8
per cent in the number of new notes issued for
2013 following a reduction of 10.6 per cent for
2012.
Table 55
Table 56
DenominationValue
(J$Mn) % ShareValue
(J$Mn) % Share% Change
in Value
$20 1 364.0 40.8 1 484.3 40.9 8.8
$10 756.7 22.6 831.9 22.9 9.9
$5 513.0 15.3 557.9 15.4 8.8
$1 612.9 18.3 658.3 18.1 7.4
$0.25 65.6 2.0 66.8 1.8 1.8
$0.10 30.4 0.9 31.0 0.9 1.9
$0.01 0.8 0.0 0.8 0.0 0.0
Total 3 343.4 100.0 3 631.0 100.0 8.6
COMPARISON OF DECIMAL COINS IN ACTIVE CIRCULATIONYear ended 31 December
2012 2013
DenominationValue
(J$Bn) % ShareValue
(J$Bn) % Share% Change
in Value
$5,000 6.0 2.5 7.1 2.9 18.4
$1,000 182.5 75.0 188.9 75.8 3.5
$500 43.7 18.0 42.5 17.1 - 2.7
$100 9.5 3.9 8.9 3.6 - 6.6
$50 1.7 0.7 1.6 0.7 - 2.4
Total 243.5 100.0 249.0 100.0 2.3
COMPARISON OF DECIMAL NOTES ISSUEDYear ended 31 December
2012 2013
- 139 -
Annual Report 2013
Currency Operations
Cur
renc
y
For 2013, the redemption/issue ratio increased
to 0.48 from 0.43 for 2012 (see Table 58). The
$20 denomination accounted for 59.8 per cent
of the total value of coins redeemed for 2013,
relative to 59.3 per cent for 2012. The $10 and
$5 coins represented 27.9 per cent and 10.1 per
cent, respectively, of the total value of coins
redeemed for 2013, compared to 27.3 per cent
and 10.6 per cent for 2012.
7.4. Quality of Banknotes For the review year, 390.8 million notes valued
at $244.3 billion were processed via the Bank’s
Banknote Processing System (BPS) Machines,
compared to 341.3 million pieces valued at
$236.9 billion for the previous year. Of the total
number of notes processed, 73.9 per cent was
classified as re-issuable notes relative to 64.7
per cent for 2012. The BPS machines deemed
25.3 per cent of the notes processed as unfit to
re-enter circulation and automatically shredded
represented 47.6 per cent of the total number
of pieces issued for 2013 compared to 49.2 per
cent for 2012.
7.3. Currency Redemption
Banknotes redeemed during 2013 were valued
at $244.1 billion, 1.0 per cent above the figure
for the previous year. The redemption/issue
ratio for these notes declined marginally to
0.98 for 2013, relative to 2012 (see Table 57). A
monthly average of $20.3 billion was redeemed
during the review period relative to a monthly
average of $20.1 billion for 2012. The $1000
and $500 banknotes accounted for 75.9 per cent
and 17.1 per cent, respectively, of the value of
banknotes redeemed for 2013 relative to 74.8
per cent and 18.2 per cent for 2012.
Coins redeemed in 2013 were valued at $266.7
million, representing an increase of 23.8 per
cent relative to the figure for the previous year.
Table 57
DenominationValue
(J$Bn) % ShareValue
(J$Bn) % Share% Change
in Value
$5,000 5.9 2.4 7.0 2.9 17.9
$1,000 180.6 74.7 185.2 75.9 2.5
$500 44.0 18.2 41.6 17.0 - 5.5
$100 9.6 4.0 8.8 3.6 - 8.6
$50 1.6 0.7 1.6 0.6 - 0.7
$20 0.0 0.0 0.0 0.0 - 0.8
$10 0.0 0.0 0.0 0.0 - 54.3
$5 0.0 0.0 0.0 0.0 37.0
$2 0.0 0.0 0.0 0.0 27.0
$1 0.0 0.0 0.0 0.0 - 75.0
Total 241.8 100.0 244.1 100.0 1.0
COMPARISON OF DECIMAL NOTES REDEEMEDYear ended 31 December
2012 2013
- 140 -Currency Operations
Bank of Jamaica
Cur
renc
y
these notes. This compared to 34.4 per cent for
2012. The remaining notes were rejected by
the note sorting machines and subsequently
shredded off-line. A total of 9.6 million pieces
of notes were destroyed by offline shredding
bringing the total number of notes processed to
400.3 million pieces.
Table 58
7.5. Counterfeit DetectionThe total number of counterfeit notes detected
in 2013 declined by 1.9 per cent to 3 481
pieces. These notes were valued at $3.5
million, an increase of 40.0 per cent relative
to the previous year. The counterfeit notes
detected in 2013 were 0.004 per cent of the
total value of banknotes in circulation or 22.7
counterfeit notes per one million genuine notes
in circulation. This compares to 24.4 pieces
per million at the end-2012. The Central Bank
identified 38.2 per cent of the total number of
counterfeit notes detected in 2013 relative to
44.1 per cent for 2012.
DenominationValue
(J$Mn)%
ShareValue
(J$Mn)%
Share% Change
in Value$20 127.7 59.3 159.5 59.8 24.9
$10 58.8 27.3 74.4 27.9 26.6
$5 22.9 10.6 26.9 10.1 17.6
$1 5.8 2.7 5.5 2.1 - 5.0
$0.50 0.0 0.0 0.0 0.0 - 64.7
$0.25 0.2 0.1 0.3 0.1 38.1
$0.20 0.0 0.0 0.0 0.0 - 55.6
$0.10 0.1 0.1 0.1 0.0 - 5.7
$0.05 0.0 0.0 0.0 0.0 - 25.0
$0.01 0.0 0.0 0.0 0.0 - 90.9
Total 215.5 100.0 266.7 100.0 23.8
COMPARISON OF DECIMAL COINS REDEEMEDYear ended 31 December
2012 2013
- 141 -
8. Administration
8.1 Administration
8.1.1 Overview
In achieving its overall strategic objectives,
the Bank relies on the support of its internal
administrative services to attract and retain
the best staff, facilitate a safe and efficient
working environment and deliver high
quality customer service to both its internal
and external clients. During 2013, initiatives
such as the development and launch of the
Bank’s Succession Management and Wellness
Programmes, enhancement to the Energy
Management Programme and upgrade to areas
of the Bank’s plant were priorities.
8.1.2 Organization Development
The Bank continued its strategic focus on
aligning human resources, processes and
technology towards enhancing operational
efficiency and effectiveness during 2013.
Organizational reviews of some departments
which have been impacted by expanded or
new mandates were the primary focus. This
was to ensure that the necessary staffing and
work arrangements were properly aligned to
support achievement of prescribed objectives.
The review is continuous and includes the
reassessment and redefinition of work processes,
organizational structures and specific jobs in
instances where new and improved processes
are required.
8.1.3 The Bank’s Succession Management
Team
This programme focused on identifying and
mitigating risks associated with the disruption
or loss of effectiveness as a consequence
of critical positions being vacant. Against
this background, the process of identifying
positions at risk commenced during 2013.
Additionally, a programme of targeted training
and development geared towards improving
the skills and competencies of candidates
identified for the succession management pool
was implemented. Emphasis will be placed
on enhancing the Succession Management
Programme in 2014.
8.1.4 Staffing
At the end of the review year, the Bank’s staff
complement was 562, reflecting a decrease of
4.0 per cent relative to end-2012. The staff
complement comprised of 483 permanent
employees and 79 fixed-term contract staff. For
the review period, the staff attrition rate was
7.7 per cent, compared to 6.5 per cent for 2012.
The increase in the staff turnover was largely
attributable to a higher level of resignations.
8.1.5 Industrial Relations
The industrial relations environment remained
stable in 2013. Major emphasis was placed
on improving communication through regular
updates to the Combined Delegates Council
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Bank of Jamaica
and timely advice to staff. Special focus was
also placed on the timely implementation of
the relevant items of the Heads of Agreement
between the Government of Jamaica and the
Jamaica Confederation of Trade Unions for the
contract period 2012 – 2015.
8.1.6 Occupational Health & Safety
During the year, the Bank continued the drive
to provide a healthy, safe, productive and
rewarding work environment. A comprehensive
Wellness Programme “BOJ...Banking on OUR
Wellness” was launched in May 2013. The
Programme was aimed at:
1. Providing a work environment that
will support employee health and well-
being;
2. Helping individuals become actively
involved in improving their personal
health by building knowledge, skill
and ability to take control of their well-
being;
3. Improving understanding of workplace
issues that impact the health and well-
being of the Bank’s staff; and
4. Improving job satisfaction and morale,
which contribute to a more effective
organization.
A proactive approach was employed in carrying
out the occupational and safety health mandate
for employees and visitors to the Bank. This
approach included close monitoring of the
Bank’s main plant and external facilities
through frequent inspections as well as air and
water quality assessments.
8.1.7 Training & Development
The strategic training outlook for 2013
represented a continuation of Vision 2015,
a four-year training strategy under the
theme, “Targeted Training: Creating a New
Generation of Central Bankers”. The Training
Institute was charged with the responsibility
to increase the identification, development
and implementation of targeted training
programmes, aimed at supporting new and
existing mandates through more effective
training delivery.
During 2013, the Training Institute facilitated
targeted training programmes with particular
focus on Economists, Bank Supervisors,
Financial Analysts, Cambio Inspectors and
Accountants as well as on building leadership
capacity. The training and development
programmes were predicated on the new and
future roles being assumed by the Bank.
For the review year, the Bank’s Training
Institute facilitated 134 training programmes
that involved 586 participants. Forums on
health and lifestyle (wellness) were also
organized and conducted during the year. Of
the persons trained, 59 attended 48 overseas
training programmes conducted or sponsored
by regional and international organizations,
including the Caribbean Regional Technical
Assistance Centre (CARTAC), World Bank,
International Monetary Fund, Centre for
Latin American Monetary Studies (CEMLA),
Caribbean Group of Bank Supervisors (CGBS)
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Annual Report 2013
Administration
and the Federal Reserve Board. The Bank
also collaborated with CEMLA in hosting the
second regional Payment System Workshop
for the Caribbean and Latin America, having
hosted the first such seminar in 2012.
8.1.8 Pension Administration
Pension Administration continued to focus on
the Bank’s role as Administrator and Investment
Manager of the Pension Scheme. Amendments
to the pension scheme’s constitutive documents
were reviewed by the Bank’s management
during the year. Finalization of the review
process by the Bank’s Board and the Trustees of
the Scheme should take place in 2014.
During the year, a Pension Management
Committee was established to monitor the
activities of the pension scheme and provide
reports to the management of the Bank on the
pension scheme’s operations. The Committee
focused on the implementation of measures
and policies to enhance governance, risk
assessment and compliance with statutory
requirements.
Membership in the pension scheme declined
by 5 to 1 022 at end-2013, attributable mainly to
staff resignations. Membership comprised 482
active members, 255 pensioners, 253 deferred
pensioners and 30 beneficiaries (spouse and
dependent children).
8.1.9 Energy & Environmental Management
The Bank’s Energy Management Programme
recorded its fourth consecutive year of reduction
in energy consumption since the start of the
initiative in 2010. The 2013 consumption of
3 986 528 kWh was 30.0 per cent below the
base year (2009) consumption of 5 676 648
kWh and translated to estimated savings
of approximately $144.0 million since the
programme was implemented. For 2013, there
was a marginal reduction of 62 248 kWh (1.6 per
cent) relative to 2012. This trend is expected
to continue throughout 2014 as renewed focus
will be placed on the area.
The Bank’s Environmental Management
Programme also yielded positive results with
improvements in the air and water quality,
reduction in the use of copy and print paper
and the elimination of the use of styrofoam
products. The process of reducing the use
of paper and plastic commenced with two
Divisions towards the end of the year and is
expected to be completed in early 2014.
8.1.10 Plant and Physical Infrastructure
The programme to optimize the performance of
the physical plant and equipment continued in
2013. This involved the upgrade of the Bank’s
electrical and air-conditioning systems as well
as the general plant.
8.1.11 Safety & Security
Improvement work on the fire and life safety
module of the Bank’s Enterprise Building
Integrator commenced with the replacement of
530 smoke detectors throughout the building
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Bank of Jamaica
and the upgrading of the fire controllers which
will be commissioned in 2014. The review and
upgrade of security systems and equipment
continued during the period.
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9. Governance
9.1. OverviewUnder the Bank of Jamaica Act, the Governor is
the Chief Executive Officer of the Bank as well
as Chairman of the Board of Directors. The
Governor is responsible for the business of the
Bank, and more specifically, the formulation
and implementation of monetary policy,
the supervision and regulation of deposit-
taking entities and other specified financial
institutions, the issuance of currency and
the provision of fiscal agency services to the
Government. In addition, the Governor has
statutory responsibility for the oversight of
Jamaica’s payment, clearing and settlement
systems under the Payment Clearing and
Settlement Act (2010).
9.2. Board MembershipThe Board of Directors is comprised of the Gov-
ernor, the Senior Deputy Governor and six in-
dependent directors appointed by the Minister
of Finance for three-year renewable terms. The
Financial Secretary is an ex officio member
of the Board. In December 2013, there was a
change in the composition of the Board of the
Bank due to the retirement of Senior Deputy
Governor Myrtle Halsall. She was replaced
by Mr John Robinson, the new Senior Deputy
Governor. In this regard, at 31 December 2013
the Board was comprised of Mr Brian Wynter,
Chairman; Mr Christopher Bicknell, Dr Chris-
tine Clarke, Ms Janice Holness, Dr Vincent
Lawrence, Mr Dennis Morrison, Mr John Rob-
inson and Mr Devon Rowe.
Matters of importance which fall outside the
daily management functions of the Bank are
submitted to the Board. Additionally, on the
recommendation of the Governor, the Board
is responsible for the appointment of auditors,
attorneys, currency agents, other agents of the
Bank as well as the Bank’s senior managers.
9.3. Statutory MeetingsThe Bank’s board is required by law to meet
at least 10 times annually. In this regard, for
2013, 10 meetings were held.
9.4. Committee Meetings The Board has three standing committees. These
are the Audit Committee, the Budget Committee
and the Human Resource Development (HRD)
Committee. These committees have written
terms of reference outlining their respective
responsibilities. The Audit Committee, chaired
by Dr Vincent Lawrence, has oversight of the
internal audit function as well as responsibility
for overseeing the relationship with the Bank’s
external auditors. In 2013, this Committee
held three meetings, satisfying the minimum
stipulation. The Budget Committee, chaired
by Dr Christine Clarke, oversees the financial
affairs of the Bank including scrutiny of the
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Bank of Jamaica
annual budget prior to final approval by the
Board. This Committee met once in 2013,
satisfying the minimum requirement. The
(HRD) Committee, chaired by Mr Dennis
Morrison, meets when necessary. There was
no meeting of this Committee in 2013.
9.5. Executive CompensationThe Bank’s Executive Management comprises
the Governor, the Senior Deputy Governor and
three Deputy Governors. These officers are
appointed under fixed-term contracts by the
Minister of Finance and Planning, as provided
for under the Bank of Jamaica Act. The
Governor and Senior Deputy Governor are also
ex officio members of the Board of Directors.
The compensation of Executive Management
for the year ended 31 December 2013 is
described below.
Salary Range of Executive Management
$9 555 031 to $18 023 335
Allowances - Deputy Governors
$948 060
Members of the Executive Management
team are eligible for benefits available to
other members of staff, inclusive of health
insurance, life insurance and staff loans. With
the exception of the Governor, all the executive
managers are members of the non-contributory
pension scheme sponsored by the Bank. The
Governor is paid a gratuity in lieu of pension
benefits.
In addition, the Governor is provided with a
residence which is maintained by the Bank. He
is also eligible for reimbursement of prescribed
overseas medical insurance premium and
expenses for his children’s education. The
Governor and the Deputy Governors are
provided with fully maintained motor vehicles.
Non-executive Directors are not remunerated
for their services but are paid reimbursable
expenses within the scale of rates approved
by the Ministry of Finance and Planning for
Directors of public bodies. They are not eligible
for staff-related benefits.
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10. Community Outreach
10.1. Overview
Bank of Jamaica remains dedicated to promoting
the cultural and social development of the
country, especially in downtown Kingston.
This corporate social responsibility is effected
through community outreach programmes that
support education as well as the visual and
performing arts.
10.2. Support for Education
10.2.1. Internship Programme
Bank of Jamaica facilitates the educational
development of students at the undergraduate
and post graduate levels by providing
internship opportunities for periods of up to
10 weeks. The Bank of Jamaica Summer Work
Experience Programme (BOJ-SWEP) exposes
students at the secondary and tertiary levels to
a practical, professional and challenging work
environment while providing an opportunity
for them to make a meaningful contribution to
the operations of the Bank. During 2013, 686
applications were received from secondary and
tertiary level students to participate in the BOJ-
SWEP.
Of the number of students who applied, 81
were selected for the programme, inclusive of
11 interns, and assigned to Departments across
the Bank and to three external agencies based
on their areas of study. The Programme was
arranged in two cohorts over the period 03
June – 23 August 2013.
The internships were offered to students from
the University of the West Indies (UWI) and the
University of Technology (UTECH). The Bank
also accommodated for internship one student
who was sponsored by CARTAC. The interns
were granted opportunities to apply their
academic knowledge to assignments in the
fields of Economics and Law as well as Library
and Information Science and in the process
gained relevant experience.
10.2.2. Schools’ Education Programme
The Schools’ Education Programme continues
to allow students to interact with the BOJ
staff members and discuss several aspects
of economics. This programme included the
Bank’s hosting of the Seminars in Economics
series for CAPE students in its auditorium
over the period 21 to 22 March. More than
300 students from high schools across Jamaica
attended each day.
10.2.3. St. Michael’s Primary School
The Bank continued its involvement throughout
2013 with St Michael’s, a primary school in
the neighbourhood. In this regard, the Bank
provided material and stationery for the school.
In addition, the Bank sponsored the Boys’ Day
and the annual summer school programme
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Bank of Jamaica
through the payment of a stipend to teachers
and the provision of lunch for staff and students
each day.
10.2.4. Money Museum
Throughout 2013, the Bank’s Money Museum
retained its primary function of showcasing the
history of money in general and the Jamaican
currency in particular. In addition, the Money
Museum has become the starting point for
persons to learn about the role and functions
of the Bank of Jamaica in the economy and a
means of connecting with the wider society in
an enjoyable way.
10.3. Visual and Performing Arts
10.3 1. Lunch Hour Concerts
The Lunch Hour concerts are now a fixture on
the downtown entertainment scene. The 2013
concerts provided free entertainment by top
quality professionals and amateur acts in the
fields of music, dance, theatre and the spoken
word.
10.3 2. Art Exhibitions
During 2013, the Bank hosted two ceramic
exhibitions: The Association of Jamaican
Potters’ annual group exhibition in June and
the Mustard Seed Communities’ exhibition in
November.
10.3 3. University Singers in Concert
The annual concert, “An Evening with The
University Singers”, is held in December and
continues to delight hundreds of supporters.
The Chapel on the Mona campus of the
UWI continues to be the venue. Given the
popularity of this concert, patrons have become
accustomed to arriving at the venue an hour or
two early to guarantee being seated.
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11. Bank of Jamaica’s Strategic Objectives 2012-2015
11.1. Overview
The medium-term goal of the Bank of Jamaica
is to reduce inflation to single digits, in
line with the average inflation of Jamaica’s
main trading partners, while maintaining a
sound financial sector, in addition to robust
payments and settlement systems. In order
to enhance the Bank’s capacity to meet these
objectives, major institutional reforms are
being contemplated, viz. (i) progressively
fulfil the requirements for full-fledged
inflation targeting (FFIT) for implementation
once the issue of fiscal dominance has been
successfully resolved by the medium-term
economic programme; (ii) amendment of the
Bank of Jamaica Act to give the BOJ overall
responsibility for financial system stability;
and (iii) development of the Omnibus Banking
Law, which will further strengthen BOJ’s
capacity to conduct supervision and regulation
of financial conglomerates. In light of these
reforms and the increased accountability that
will accompany such institutional changes, the
Bank has defined seven strategic objectives to
provide a ‘road map’ for its operations for 2014.
These objectives, as set out below, also inform
the performance benchmarks for the Bank.
11.2. Strategic Objectives
The Bank’s objectives for 2014 are to:
1. Enhance the Monetary Policy Framework
to Achieve Inflation Objective by:
i. deepening research and development
and enhancing the monetary analysis
framework and the monetary
transmission;
ii. strengthening the inflation forecast
and policy assessment system
(IFPAS) through operationalization
of the Dynamic Stochastic General
Equilibrium (DSGE) model and
enhanced surveillance;
iii. assessing the adequacy of the Open-
Market Operations structure to ensure
its effectiveness in attaining the inflation
objectives; and
iv. developing a comprehensive data
management infrastructure integrated
with the enterprise business intelligence
system (EBIS).
2. Strengthen the Bank’s Institutional
Framework for Maintaining Financial
System Stability by:
i. strengthening the macro-prudential
surveillance and risk management
framework, focussing on macro-financial
forecast model; designing framework &
tools for coordinated “bottom-up” stress
- 150 -Strategic Objectives
Bank of Jamaica
testing and self-assessment of SFIs as
well as making internal preparations for
a Financial Stability Committee;
ii. enhancing the financial and prudential
database;
iii. promoting an appropriately robust
legal and regulatory framework and
maintaining an adequate and effective
supervisory framework, including the
implementation of enhanced framework
for cambio and remittance companies,
licensing and development of enhanced
ladder of enforcement for non-compliant
licensees and full implementation of
the new credit reporting oversight
framework;
iv. fostering the development of stable,
robust and efficient money and foreign
exchange markets to support monetary
and financial stability objectives,
focussing on the development of a
discount window, identifying and
implementing specific enhancements
for foreign exchange markets to broaden
the range of products and improve
market efficiency;
v. promoting the efficiency, integrity,
reliability and safety of the payment
and settlement systems, focussing on
the development of business continuity
plan (BCP) for the RTGS;
vi. strengthening the payment system
oversight towards ensuring the safety
and security of the system;
vii. taking the leading role in co-ordinating
the implementation of the CFATF action
plan leading to the fourth round mutual
evaluation of Jamaica; and
viii. leading the development of the country’s
strategies and policies in preparation
for the implementation of FATCA.
3. Benchmark and Monitor the Financial
Performance of the Bank by:
i. implementing a new suite of
management reports to support decision
strategies for effective management at
the divisional level;
ii. improving efficiency and effectiveness
of the budgeting, budgetary control and
financial reporting processes;
iii. reviewing the reserve management
function to ensure attainment of the
risk minimization, capital preservation
and return maximization imperatives,
including greater use of available funds
management expertise; and
iv. ensuring the efficiency of the currency
operations, including assessing the
performance of the new substrates and
reviewing the currency structure to
determine efficacy.
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Annual Report 2013
Strategic Objectives
4. Improve the Effectiveness of the Bank’s
Communication by:
i. reviewing and enhancing the
programme for regular external and
internal communication using new and
existing channels;
ii. emphasising topics and subjects that
relate to the organization’s strategic
direction and objectives, promoting
stakeholder discussions on monetary
policy framework and inflation objective
and introducing public education on
the new credit reporting framework,
pursuant to the scheduled launch of
operations of licensed credit bureaus;
iii. promoting financial literacy;
iv. enhancing market transparency through
timely and accurate information
dissemination to all stakeholders; and
v. ensuring the reinforcement of key
strategic messages.
5. Align the Bank’s Human Resources,
Processes, Technology and Organizational
Structure to Support the Attainment of the
Bank’s Strategic Objectives by:
i. developing and implementing a
succession management programme
to ensure that the Bank is adequately
staffed at all times;
ii. developing and administering targeted
training programmes to address the
current and future skills and competency
requirements of the Bank, consisting of
technical as well as management and
leadership training;
iii. enhancing the Bank’s organization
development programme, ensuring
the optimum organizational structure
with the required alignment of
human resources, work processes and
technology; and
iv. undertaking a strategic compensation
review.
6. Enhance the Capacity and Improve the
Stability and Performance of the Bank’s
ICT Infrastructure by:
i. enhancing the IT security arrangements
for the Bank’s data and information;
ii. strengthening the business continuity
plan (BCP) within the context of the IT
framework;
iii. facilitating the implementation of the
fixed-income trading platform; and
iv. developing and implementing a foreign
exchange trading platform.
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Bank of Jamaica
7. Implement Programmes to Improve the
Operational Efficiency and Reliability of
the Bank’s Physical Plant and Equipment
by:
i. delivering agreed capital projects on
time and within budget;
ii. implementing environmental awareness
programmes, including the greening of
the Bank;
iii. enhancing the energy management
programmes; and
iv. initiating plans for the replacement of
elevators over the next 2-3 years.
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12. Calendar of Monetary Policy Developments
2013/02/25 The interest rate applicable to Bank of Jamaica’s 30-day Certificate of Deposit
was reduced by 50 basis points to 5.75 per cent per annum. This policy action
was consistent with the reduction in interest rates on Government of Jamaica
securities, consequent on the National Debt Exchange which settled on 22
February. These actions occurred against the background of a staff level
agreement between the Government and the International Monetary Fund on a
medium-term economic programme.
2013/04/09 The Bank of Jamaica offered a 365-day US-Dollar Indexed Note at a fixed coupon
of 4.75 per cent per annum. The initial exchange rate for the purchase of this
instrument was US$1.00 = J$98.0153.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/04/15 In order to augment its liquidity management operations, the Bank of Jamaica
offered three variable rate instruments:
i. A 180-day Certificate of Deposit, with offer limit of $3.0 billion. The coupon
was re-priced quarterly at 0.15 percentage point above the three-month GOJ
Treasury Bill rate existing at the beginning of the next interest period. The initial
coupon for the first three months was 5.97 per cent per annum.
ii. A 275-day Certificate of Deposit, for an unlimited amount. The instrument
was re-priced quarterly at 0.20 percentage point above the three-month GOJ
Treasury Bill rate existing at the start of each re-pricing period. The initial
coupon for the first three months was 6.02 per cent per annum.
iii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument is
re-priced quarterly at 0.25 percentage point above the three- month GOJ Treasury
- 154 -Calendar of Monetary Policy Developments
Bank of Jamaica
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.07 per cent per annum.
2013/05/17 In order to augment its liquidity management operations, the Bank of Jamaica
offered two variable rate instruments:
i. A 276-day Certificate of Deposit, for an unlimited amount. The instrument was
re-priced quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.88 per cent per annum.
ii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument is
re-priced quarterly at 0.25 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.93 per cent per annum.
2013/05/29 In order to augment its liquidity management operations, the Bank of Jamaica
offered two variable rate instruments:
i. A 184-day Certificate of Deposit, for an unlimited amount. The instrument was
re-priced quarterly at 0.15 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.77 per cent per annum.
ii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument is
re-priced quarterly at 0.25 percentage point above the three- month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.87 per cent per annum.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
2013/06/12 The Bank of Jamaica offered two variable rate instruments in order to augment
its liquidity management operations:
i. A 183-day Certificate of Deposit, for a limited nominal amount of $3.0 billion.
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Annual Report 2013
Calendar of Monetary Policy Developments
The instrument was re-priced quarterly at 0.15 percentage point above the three-
month GOJ Treasury Bill rate existing at the start of each re-pricing period. The
initial coupon for the first three months was 6.77 per cent per annum.
ii. A 365-day Certificate of Deposit, for an unlimited amount. The instrument is re-
priced quarterly at 0.23 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.85 per cent per annum.
2013/06/20 The Bank of Jamaica offered a special 365-day US Dollar Indexed Note at a fixed
coupon of 4.00 per cent per annum. The initial exchange rate for the purchase of
this instrument was US$1.00 = J$100.1081.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/07/01 In order to augment its liquidity management operations, the Bank of Jamaica
offered two variable rate instruments:
i. A Variable Rate Certificate of Deposit 2013(D), which was originally issued on
12 June 2013, was re-opened for a limited nominal amount of $2.0 billion. The
tenor for the re-opened instrument was 164 days. This instrument maintained
the original issue terms. The initial coupon was 6.77 per cent per annum up to
the first interest payment date on 12 September 2013 and was re-priced quarterly
at 0.15 percentage point above the three- month GOJ Treasury Bill rate for the
following interest payment date up to the maturity date on 12 December 2013.
ii. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.23 percentage point above the three month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 6.99 per cent per annum.
- 156 -Calendar of Monetary Policy Developments
Bank of Jamaica
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/07/09 To augment its liquidity management operations, the Bank of Jamaica offered
two variable rate instruments:
i. A 365-day Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, is re-priced semi-annually at 0.23 percentage
point above the six-month GOJ Treasury Bill rate existing at the start of each re-
pricing period. The initial coupon for the first six months was 7.35 per cent per
annum.
ii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, is re-priced semi-annually at 0.25 percentage
point above the six- month GOJ Treasury Bill rate existing at the start of each re-
pricing period. The initial coupon for the first six months was 7.37 per cent per
annum.
The interest rate applicable to Bank of Jamaica’s 30-day Certificate of Deposit
remained at 5.75 per cent.
2013/07/18 To augment its liquidity management operations, the Bank of Jamaica offered
two variable rate instruments:
i. A 365-day Certificate of Deposit, for an unlimited amount. The instrument, which
qualified as a liquid asset, is re-priced semi-annually at 0.23 percentage points
above the six month GOJ Treasury Bill rate existing at the start of each re-pricing
period. The initial coupon for the first six months was 7.35 per cent per annum.
ii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, is re-priced semi-annually at 0.25 percentage
points above the six-month GOJ Treasury Bill rate existing at the start of each re-
pricing period. The initial coupon for the first six months was 7.37 per cent per
annum.
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Annual Report 2013
Calendar of Monetary Policy Developments
2013/07/26 To augment its liquidity management operations, the Bank of Jamaica offered
three variable rate instruments:
i. A 186-day Certificate of Deposit, for an unlimited amount. The instrument was
re-priced quarterly at 0.15 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.50 per cent per annum.
ii. A 276-day Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, was re-priced quarterly at 0.20 percentage
point above the three-month GOJ Treasury Bill rate existing at the start of each
re-pricing period. The initial coupon for the first three months was 7.55 per cent
per annum.
iii. An 18-month Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, is re-priced quarterly at 0.25 percentage point
above the three-month GOJ Treasury Bill rate existing at the start of each re-
pricing period. The initial coupon for the first three months is 7.60 per cent per
annum.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/08/08 To augment its liquidity management operations, the Bank of Jamaica offered
two variable rate instruments:
i. A 182-day Certificate of Deposit, for an unlimited amount. The instrument re-
priced quarterly at 0.15 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.50 per cent per annum.
ii. A 272-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.55 per cent per annum.
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Bank of Jamaica
The interest rate applicable to Bank of Jamaica’s 30-day Open Market Instruments
remained at 5.75 per cent.
2013/08/26 Bank of Jamaica, in order to augment its liquidity management operations,
offered
two variable rate instruments:
i. A 182-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.15 percentage point above the three month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.49 per cent per annum.
ii. A 273-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.54 per cent.
The interest rate applicable to Bank of Jamaica’s 30-day Certificate of deposit
remained at 5.75 per cent.
2013/09/09 To augment its liquidity management operations, the Bank of Jamaica offered
two variable rate instruments:
i. A 273-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.54 per cent per annum.
ii. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.23 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.57 per cent per annum.
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Annual Report 2013
Calendar of Monetary Policy Developments
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/09/20 The Bank of Jamaica offered two variable rate instruments:
i. A 273-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.62 per cent per annum.
ii. A 364-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.23 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was 7.65 per cent per annum.
The interest rate applicable to Bank of Jamaica’s 30-day Certificate of Deposit
remained at 5.75 per cent.
2013/10/08 The Bank of Jamaica offered two variable rate instruments:
i. A 272-day Certificate of Deposit, for an unlimited amount. The instrument,
which qualified as a liquid asset, re-prices quarterly at 0.20 percentage point
above the three month GOJ Treasury Bill rate existing at the start of each re-
pricing period. The initial coupon for the first three months was therefore the
three-month GOJ Treasury Bill rate of 7.42 per cent, plus 0.20 percentage point.
ii. A 364-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.23 percentage point above the three month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was therefore the three-month GOJ Treasury Bill rate of 7.42
per cent, plus 0.23 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
- 160 -Calendar of Monetary Policy Developments
Bank of Jamaica
2013/10/17 The Bank of Jamaica offered two variable rate instruments:
i. A 273-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was the three-month GOJ Treasury Bill rate of 7.42 per cent,
plus 0.20 percentage point.
ii. A 2-year Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.25 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was the three-month GOJ Treasury Bill rate of 7.42 per cent,
plus 0.25 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
2013/10/24 The Bank of Jamaica offered two variable rate instruments:
i. A 273-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.20 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was the three-month GOJ Treasury Bill rate of 7.37 per cent,
plus 0.20 percentage point.
ii. A 550-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.25 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was the three-month GOJ Treasury Bill rate of 7.37 per cent,
plus 0.25 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
- 161 -
Annual Report 2013
Calendar of Monetary Policy Developments
2013/11/06 The Bank of Jamaica offered the following variable rate instrument:
i. A 182-day Certificate of Deposit, for an unlimited amount. The instrument re-
prices quarterly at 0.18 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months was the three month GOJ Treasury Bill rate of 7.37 per cent,
plus 0.18 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
2013/11/11 The Bank of Jamaica offered a special instrument:
i. US Dollar Indexed Linked Note 2014C, for an unlimited amount. The instrument
paid a coupon of 4.0 per cent annum. The initial conversion exchange rate
was US$1:00=J$104.5135, which was the BOJ 10-day moving average buying
exchange rate applicable on 11 November 2013. For each interest payment and
at maturity, the applicable exchange rate is the BOJ 10-day moving average
selling exchange rate applicable on the date of payment multiplied by a factor
1.002. All payments on this instrument are made in Jamaica Dollars.
Interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
2013/11/20 The Bank of Jamaica offered the following instrument:
i. Bank of Jamaica US Dollar Certificate of Deposit: BOJ-USD CD 2015. This
instrument was a 2-year instrument with an unlimited offer amount at a fixed
coupon of 2.50 per cent per annum.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained at 5.75 per cent.
- 162 -Calendar of Monetary Policy Developments
Bank of Jamaica
2013/11/28 The Bank of Jamaica offered two instruments:
i. Bank of Jamaica US Dollar Indexed Linked Note: BOJ US-Linked Note 2014D.
This was a 1-year instrument with an unlimited offer amount. The coupon of
3.50 per cent per annum is paid semi-annually.
ii. Bank of Jamaica Variable Rate Certificate of Deposit: BOJ VR-CD 2014W. This
was a 1-year instrument with an unlimited offer amount.
The instrument is re-priced quarterly at 0.25 percentage point above the three-
month GOJ Treasury Bill rate existing at the start of each re-pricing period.
The initial coupon for the first three months is therefore the three- month GOJ
Treasury Bill rate of 7.57 per cent plus 0.25 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
2013/12/11 The Bank of Jamaica offered two instruments:
i. Bank of Jamaica US Dollar Certificate of Deposit: BOJ-USD CD 2015A.
This offer of BOJ-USD CD 2015A was for an unlimited offer amount at a fixed
coupon of 4.0 per cent per annum semi-annually.
ii. Bank of Jamaica Variable Rate Certificate of Deposit: BOJ VR-CD 2014AA. The
offer of BOJ VR-CD 2014AA was for an unlimited offer amount. The instrument is
re-priced quarterly at 0.25 percentage point above the three-month GOJ Treasury
Bill rate existing at the start of each re-pricing period. The initial coupon for the
first three months is therefore the three-month GOJ Treasury Bill rate of 7.37 per
cent, plus 0.25 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
- 163 -
Annual Report 2013
Calendar of Monetary Policy Developments
2013/12/16 The Bank of Jamaica formalized an enhanced liquidity management framework
(ELMF) for deposit-taking institutions (DTIs). The ELMF, which comprises an
overnight and bi-monthly repurchasing facility, is designed to ensure financial
system stability (see Box 2).
2013/12/27 The Bank of Jamaica offered two instruments:
i. Bank of Jamaica US Dollar Certificate of Deposit, BOJ-USD CD 2017. This offer
was for an unlimited offer amount at a fixed coupon of 5.0 per cent per annum,
paid semi-annually.
ii. Bank of Jamaica Variable Rate Certificate of Deposit, BOJ VR-CD 2014AB. This
offer was for an unlimited offer amount and re-priced quarterly at 0.23 percentage
point above the three-month GOJ Treasury Bill rate existing at the start of each
re-pricing period. The initial coupon for the first three months is therefore the
three-month GOJ Treasury Bill rate of 7.53 per cent, plus 0.23 percentage point.
The interest rate applicable to Bank of Jamaica’s 30-day Open-Market Instruments
remained the same at 5.75 per cent.
- i -
Auditors’ Report
- ii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
KPMG Peat MarwickChartered AccountantsP.O. Box 76Kingston Jamaica
The Victoria Mutual Building6 Duke StreetKingston Jamaica
Telephone +1 (876) 922-6640Telefax +1 (876) 922-7198 +1 (876) 922-7198email: [email protected]
- iii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
- iv -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
3
BANK OF JAMAICA
Statement of Financial PositionDecember 31, 2013
* Restated – See note 35.The accompanying notes form an integral part of the financial statements.
Notes 2013 2012 2011J$'000 J$'000 J$'000
ASSETS
Foreign assets:Notes and coins 66,564 59,342 22,605Cash and cash equivalents 4 40,346,255 29,784,471 36,142,913Interest in funds managed by agents 5 15,000,571 13,081,356 12,098,615Investments 6 106,557,831 114,375,202 167,046,339International Monetary Fund -
Holding of Special Drawing Rights 31,389,869 26,958,840 28,536,152Bilateral accounts - - 23,744
Total foreign assets 193,361,090 184,259,211 243,870,368
Local assets:Notes and coins 138,309 127,859 124,726Loans and advances 7 - 1,000,000 -Resale agreements 8 11,500,000 - -Investments 9 99,002,152 92,159,856 92,820,849International Monetary Fund – Quota subscription 10 5,080,610 4,206,706 4,315,897Due from Government and Government Agencies 11 37,288,737 16,440,252* 18,871,646*Property, plant and equipment 12 3,312,961 3,424,013 3,521,325Intangible assets 13 2,679 30,244 47,398Employee benefit assets 14 5,393,500 5,393,100* 4,355,500*Other 15 3,796,848 4,042,626 6,665,704
Total local assets 165,515,796 126,824,656 130,723,045
Total assets 358,876,886 311,083,867 374,593,413
- v -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
- vi -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
5
BANK OF JAMAICA
Statement of Profit or Loss and Other Comprehensive IncomeYear ended December 31, 2013
* Restated – See note 35The accompanying notes form an integral part of the financial statements.
Notes 2013 2012J$'000 J$'000
Operating income:Interest 25 11,757,259 8,918,503Foreign exchange gain 26 1,906,921 5,797,505Other 141,057 111,521
Total operating income 13,805,237 14,827,529
Operating expenses:Interest on deposits and open market liabilities 27 3,802,008 5,322,778Interest on IMF loan 1,058,956 871,203Staff costs 28 2,315,831 2,234,609*Currency expenses 1,001,338 1,061,013Property expenses, including depreciation 866,003 837,875Loss on disposal of securities in National Debt
Exchange 21,084,780 -Other operating expenses 709,330 714,661
Total operating expenses 29 30,838,246 11,042,139
Operating (loss)/profit (17,033,009) 3,785,390
Other income/(expenses):Pension, medical and life insurance 14 265,400 172,000*Loss on re-measurement of staff loans ( 18,209) ( 60,138)Gain on disposal of securities designated
as available-for-sale 986 16,414Gain on disposal of property, plant and equipment 7,003 4,032
(Loss)/profit for the year before transfer to pension equalisation reserve (16,777,829) 3,917,698
Transfer to pension equalisation reserve 24(c) ( 376,100) ( 259,700)*
(Loss)/profit for the year transferred to general reserve fund 11 (17,153,929) 3,657,998
Other comprehensive income:Item that will never be reclassified to profit or loss
(Loss)/gain on fair value of pension asset and obligation, net ( 605,700) 612,800
Items that are or will be reclassified to profit or lossChange in fair value of available-for-sale securities ( 4,671,711) ( 1,866,496)
Total other comprehensive income/(loss) for the year ( 5,277,411) ( 1,253,696)*
Total comprehensive (loss)/income for the year (22,431,340) 2,404,302
- vii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
6
BANK OF JAMAICA
Statement of Changes in Capital and ReservesYear ended December 31, 2013
The accompanying notes form an integral part of the financial statements.
General SpecialShare reserve stabilisation Othercapital fund account reserves TotalJ$'000 J$'000 J$'000 J$'000 J$'000
(Note 21) (Note 22) (Note 23) (Note 24)
Balances at December 31, 2011As previously reported 4,000 20,000 777,130 12,294,923 13,096,053Prior year adjustments (note 35) - - - 115,800 115,800
As restated 4,000 20,000 777,130 12,410,723 13,211,853
Total comprehensive income for the year:
Profit for the year:As previously reported - 3,655,097 - - 3,655,097Prior year adjustments (note 35) - 2,901 - - 2,901
As restated - 3,657,998 - - 3,657,998
Other comprehensive income:As previously reported:Realised change in fair value of available-
for-sale securities - - - 240,527 240,527Unrealised change in fair value of available-
for-sale securities - - - ( 2,107,025) ( 2,107,025)
- - - ( 1,866,496) ( 1,866,496)
Prior year adjustment (note 35) - - - 612,800 612,800
As restated - - - ( 1,253,696) ( 1,253,696)
Total comprehensive income, as restated (note 35) - 3,657,998 - ( 1,253,696) 2,404,302
Other changes in reserves:Profit due to consolidated fund (note 11):
As previously reported - ( 3,655,097) - - ( 3,655,097)Prior year adjustments (note 35) - ( 2,901) - - ( 2,901)
As restated - ( 3,657,998) - - ( 3,657,998)
Transfer from coins in circulation - - 70,465 - 70,465Transfer of surplus on defined benefit
pension scheme:As previously reported - - - 422,600 422,600Prior year adjustments (note 35) - - - ( 66,100) ( 66,100)
As restated (note 35) - - - 356,500 356,500
Other changes in reserves, as restated - ( 3,657,998) 70,465 356,500 ( 3,231,033)
Balances at December 31, 2012As previously reported 4,000 20,000 847,595 10,851,027 11,722,622Prior year adjustment 2011 - - - 115,800 115,800Prior year adjustment 2012 - - - 546,700 546,700
As restated (note 35) Carried forward - 20,000 847,595 11,513,527 12,385,122
- viii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
7
BANK OF JAMAICA
Statement of Changes in Capital and Reserves (Cont’d)Year ended December 31, 2013
The accompanying notes form an integral part of the financial statements.
General SpecialShare reserve stabilisation Othercapital fund account reserves TotalJ$'000 J$'000 J$'000 J$'000 J$'000
(Note 21) (Note 22) (Note 23) (Note 24)
Balances at December 31, 2012 Brought forward - 20,000 847,595 11,513,527 12,385,122
Total comprehensive income for the year:Loss for the year - (17,153,929) - - (17,153,929)Other comprehensive income:
Realised change in fair value of available-for-sale securities - - - ( 2,377,458) ( 2,377,458)
Unrealised change in fair value of available-for-sale securities - - - ( 2,294,253) ( 2,294,253)
- - - ( 4,671,711) ( 4,671,711)Loss on fair value of pension asset
and obligation - - - ( 605,700) ( 605,700)
Total other comprehensive income - - - ( 5,277,411) ( 5,277,411)
Total comprehensive income - (17,153,929) - ( 5,277,411) (22,431,340)
Other changes in reserves:Loss due from consolidated fund (note 11) - 17,153,929 - - 17,153,929Transfer from coins in circulation - - 71,928 - 71,928Transfer of surplus on defined
benefit pension scheme - - - 470,600 470,600
- 17,153,929 71,928 470,600 17,696,457
Balances at December 31, 2013 4,000 20,000 919,523 6,706,716 7,650,239
- ix -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
8
BANK OF JAMAICA
Statement of Cash FlowsYear ended December 31, 2013
* RestatedThe accompanying notes form an integral part of the financial statements.
Notes 2013 2012J$'000 J$'000
Cash flows from operating activities:(Loss)/profit for the year (16,777,829) 3,917,698*Adjustments for:
Depreciation – property, plant and equipment 12 316,065 319,321Amortisation – intangible assets 13 35,381 35,082Gain on disposal of property, plant and equipment ( 7,003) ( 4,032)Employee benefits, net ( 146,800) ( 185,600)*Unrealised exchange gain (15,062,735) ( 9,647,889)IMF Quota Subscription ( 873,904) 109,191Unrealised exchange loss on International Monetary
Fund - Allocation of SDR's 7,346,445 ( 917,933)Interest income 25 (11,757,259) ( 8,918,503)Interest expense 27 3,802,008 5,322,778Operating loss before changes in other assets and
other liabilities (33,125,631) ( 9,969,887)Other assets 309,478 2,580,379Other liabilities 3,138,031 3,689,331Due from Government and Government Agencies ( 1,620,549) ( 1,142,728)
Interest received 9,551,587 8,905,813Interest paid ( 4,073,246) ( 5,203,338)
Net cash used by operating activities (25,820,330) ( 1,140,430)
Cash flows from investing activities:International Monetary Fund
- Holding of Special Drawing Rights ( 4,431,029) 1,577,313Interest in funds managed by agents ( 39,289) ( 94,118)Foreign currency denominated investments 17,841,350 60,444,488Local currency denominated investments ( 9,538,446) ( 996,336)Loans and advances 1,000,000 ( 1,000,000)Resale agreements (11,500,000) -Additions to property, plant and equipment 12 ( 254,029) ( 244,707)Additions to intangible asset 13 ( 7,816) ( 17,928)Proceeds of disposal of property, plant and equipment 56,019 26,730
Net cash (used)/provided by investing activities ( 6,873,240) 59,695,442
Cash flows from financing activities:Notes and coins in circulation 5,197,185 2,088,206Deposits and other demand liabilities 14,692,593 (23,837,003)Open market liabilities 19,617,603 (45,144,294)Foreign liabilities 32 ( 3)
Net cash provided/(used) by financing activities 39,507,413 (66,893,094)
Net increase/(decrease) in cash and cash equivalents 6,813,843 ( 8,338,082)Cash and cash equivalents at beginning of year 29,971,672 36,290,244Effect of exchange rate fluctuation on cash held 3,765,613 2,019,510
Cash and cash equivalents at end of year 40,551,128 29,971,672
- x -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
9
BANK OF JAMAICA
Statement of Cash Flows (Continued)Year ended December 31, 2013
The accompanying notes form an integral part of the financial statements.
Notes 2013 2012J$'000 J$'000
Cash and cash equivalents at December 31 comprise:Foreign cash and cash equivalents 4 40,346,255 29,784,471Foreign notes and coins 66,564 59,342Local notes and coins 138,309 127,859
40,551,128 29,971,672
- xi -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
10
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
1. Identification
Bank of Jamaica (hereafter “the Bank”) was established under the Bank of Jamaica Act (hereafter “the Act”) most recently amended on December 31, 2010. The Bank is domiciled in Jamaica and its principal office is located at Nethersole Place, Kingston, Jamaica.
The principal objects of the Bank, as set out in the Act, are to issue and redeem notes and coins; to keep and administer the external reserves of Jamaica; to influence the volume and conditions of supply of credit so as to promote the fullest expansion in production, trade and employment, consistent with the maintenance of monetary stability in Jamaica and the external value of the currency; to foster the development of money and capital markets in Jamaica; and to act as banker to the Government of Jamaica.
2. Basis of preparation
(a) Statement of compliance:
The financial statements are prepared in accordance with the relevant provisions of the Bank of Jamaica Act, and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
New, revised and amended standards and interpretations that became effective during the year:
Certain new, revised and amended standards and interpretations came into effect during the financial year under review. None of them had, or, based on the Bank’s current operations, are expected in the foreseeable future to have, any significant effect on the amounts and disclosures in the financial statements, except that the amendment to IAS 19, Employee Benefits, effective for annual reporting periods beginning on or after January 1, 2013, was adopted. It requires that:
• all actuarial gains and losses be recognised immediately in other comprehensive income, thereby removing the corridor approach and eliminating the ability of entities to recognise all changes in the defined benefit obligation and in plan assets in profit or loss;
• the expected return on plan assets recognised in profit or loss is to be calculated using the rate used to discount the defined benefit obligation; and
• all past service costs, including unvested amounts, are immediately recognised in profit or loss.
The Bank has adopted these amendments with the result that the foregoing changes, as well as the effect of the asset ceiling are presented in other comprehensive income.
- xii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
11
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
2. Statement of compliance, basis of preparation and significant accounting policies (continued)
(a) Statement of compliance (continued):
New, revised and amended standards and interpretations that became effective during the year (continued):
IFRS 13, Fair Value Measurement, which is effective for annual reporting periods beginning on or after January 1, 2013, defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. It explains how to measure fair value and is applicable to assets, liabilities and an entity’s own equity instruments that, under other IFRSs, are required or permitted to be measured at fair value, or when disclosure of fair values is provided. It does not introduce new fair value measurements, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. The adoption of this standardresulted in additional disclosures as set out in notes 12 and 33.
New, revised and amended standards and interpretations that are not yet effective:
At the date of authorisation of these financial statements, certain new, revised and amended standards and interpretations have been issued which were not effective at the reporting date and which the Bank has not early-adopted. The Bank has assessed them with respect to its operations and has determined that the following are relevant to its financial statements.
• IFRS 9, Financial Instruments, which is effective for annual reporting periods beginning on or after January 1, 2017 (previously January 1, 2015), retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The standard includes guidance on classification and measurement of financial liabilities designated as at fair value through profit or loss and incorporates certain existing requirements of IAS 39,Financial Instruments: Recognition and Measurement, on the recognition and de-recognition of financial assets and financial liabilities. The Bank is assessing the impact that the standard will have on its 2017 financial statements.
• Amendments to IAS 32, Financial Instruments: Presentation, which is effective for annual reporting periods beginning on or after January 1, 2014, clarifies those conditions needed to meet the criteria specified for offsetting financial assets and liabilities. It requires the entity to prove that there is a legally enforceable right to set off the recognised amounts. Conditions such as whether the set off is contingent on a future event and the nature and right of set-off and laws applicable to the relationships between the parties involved should be examined. Additionally, to meet the criteria, an entity should intend to either settle on a net basis or to realise the asset and settle the liability simultaneously. The Bank is assessing the impact that the amendment will have on its 2014 financial statements.
- xiii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
12
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
2. Basis of preparation (continued):
(b) Functional and presentation currency
The financial statements are presented in Jamaica Dollars (J$) which is the Bank’s functional currency.
(c) Basis of measurement
The financial statements are prepared on the historical cost basis, except that:
(i) available-for-sale investments and certain classes of property, plant and equipmentare included at fair value; and
(ii) the defined benefit asset is recognized as plan assets, less the present value of the defined benefit obligation, adjusted for the effect of limiting the net defined benefit asset to the asset ceiling as explained in note 3(f).
(d) Estimates assumptions and judgements
The preparation of the financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of, and disclosure relating to assets, liabilities, contingent assets and contingent liabilities at the reporting date and the income, expenses, gains and losses for the year then ended. Actual results may differ from these estimates.
Accounting estimates and judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are set out below:
(i) Pension and other post-retirement benefits
The amounts recognised in the statements of financial position and profit or loss and comprehensive income for pension and other post-retirement benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised include the discount rate used to determine the present value of estimated future cash flows required to settle the pension and other post-retirement obligations, and the expected rate of increase in medical costs for post-retirement medical benefits.
The discount rate is determined based on the estimate of yield on long-term government securities that have maturity dates approximating the terms of the Bank’s obligation. In the absence of such instruments in Jamaica, it has been necessary to estimate the rate by extrapolating from the longest-tenor security on the market. The estimate of expected rate of increase in medical costs is determined based on inflationary factors. Any changes in these assumptions will impact the amounts recorded in the financial statements for these obligations.
- xiv -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
13
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
2. Basis of preparation (continued):
(d) Estimates assumptions and judgements (continued):
(ii) Fair value of financial instruments
There are no quoted market prices for a significant proportion of the Bank’s financial instruments and non-financial assets and liabilities. Accordingly, fair values of financial assets are estimated using prices obtained from a yield curve. That yield curve is, in turn, obtained from a pricing source which estimates the yield curve onthe basis of indicative prices submitted to it by licensed banks and other financial institutions in Jamaica. There is significant uncertainty inherent in this approach which is categorised as a level 2 fair value; consequently, the estimates arrived atmay be different from the actual price of the instrument in an actual arm’s length transaction (see notes 9 and 33).
The fair value of property, plant and equipment is determined by property valuers, as set out in note 12, using largely unobservable inputs, making it a level 3 fair value.
3. Significant accounting policies:
(a) Foreign currencies:
The rate of exchange of the Jamaica Dollar for the United States dollar is determined by the weighted average rate of trades reported by authorised foreign exchange dealers and cambios and the rate at which the Bank itself buys United States dollars. The rates of exchange for other currencies are derived from the US$ rate, thus determined, using rates published by The World Markets Company Plc (WM Reuters).
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rates prevailing at that date. Transactions in foreign currencies are translated at the foreign exchange rates ruling at the dates of those transactions.
Gains and losses arising on fluctuations in exchange rates are included in profit or loss.
(b) Financial instruments:
(i) Classification of investments
Management determines the classification of investments at the time of purchase and takes account of the purpose for which the investments were purchased. Investments are classified as held-to-maturity, loans and receivables and available-for-sale securities.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank has the positive interest and ability to hold to maturity and which are not designated as at fair value through profit or loss or as available-for-sale. Where the Bank sells other than an insignificant amount of held-to maturity securities, the entire category would be tainted and would be reclassified by the Bank, which would also be prohibited from classifying any securities as held-to-maturity for the current and following two financial years. Held-to-maturity securities are recognised on the date the Bank commits to purchase them, and are measured at amortised cost.
- xv -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
14
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(b) Financial instruments:
(i) Classification of investments (continued)
Loans and receivables are non-derivative financial assets acquired by the Bank with fixed or determinable payments and which are not quoted in an active market. An active market is one where quoted prices are readily and regularly available from anexchange, dealer, broker or other agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. Loans and receivables are recognised on the day they are acquired by the Bank.
Other financial instruments held by the Bank are classified as available-for-sale. Available-for-sale instruments are recognised on the date the Bank commits to purchase the instruments.
(ii) Measurement
Financial instruments are measured initially at cost, including transaction costs.
Subsequent to initial recognition, available-for-sale investments are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably determined, is stated at cost, including transaction costs, less impairment losses.
Non-derivative, non-trading financial liabilities, held-to-maturity securities and loans and receivables are measured at amortised cost, less impairment losses. Amortised cost is calculated on the effective interest method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument.
Based on the above guidelines, the Bank’s investments are classified and measured as follows:
[i] Loans and advances are classified as loans and receivables and are stated at amortised cost, less allowance for impairment losses as appropriate.
[ii] Local currency denominated Government of Jamaica securities which do not have a quoted market price in an active market and whose fair values cannot be reliably determined, and interest-bearing deposits are stated at historical or amortised cost.
[iii] Local currency denominated Government of Jamaica securities with quoted prices in an active market are classified as available-for-sale and measured at fair value.
[iv] US Government bonds are classified as available-for-sale and are measured at fair value.
[v] Interest in managed funds is classified as available-for-sale and is measured at fair value.
- xvi -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
15
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(b) Financial instruments (continued):
(iii) Fair value measurement principles
The fair value of financial instruments classified as available-for-sale is based on their quoted market price at the reporting date without any deduction for transaction costs. Where a quoted market price is not available, the fair value of the instrument is estimated using discounted cash flow techniques or a generally accepted alternative method.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates of the amount and timing of such cash flowsand the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions.
(iv) Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of available-for-sale assets are recognised in other comprehensive income, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses, which are recognized in profit or loss. When the financial assets are sold, collected or otherwise disposed of, the cumulative gain or loss recognised in other comprehensive income is recognised in profit or loss.
(v) Cash and cash equivalents
Cash and cash equivalents comprise demand deposit accounts with banks and are shown at cost.
(vi) Other assets
Other assets are stated at amortised cost, less impairment losses.
(vii) Other liabilities
Other liabilities are stated at amortised cost.
(viii) Derecognition
A financial asset is derecognised when the Bank loses control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered. A financial liability is derecognised when it is extinguished.
Available-for-sale assets that are sold are derecognised and corresponding receivables from the buyer for the payment are recognised as of the date the Bank commits to sell the assets.
Loans and receivables are derecognised on the day they are transferred by the Bank.
- xvii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
16
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(c) Property, plant and equipment:
(i) Owned assets:
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, except for freehold land and buildings, which are stated at market value.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bringing the asset to the location and condition where it is ready for its intended use.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Bank and it can be measured reliably.
The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
The market value of freehold land and building is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms’ length transaction.
(ii) Depreciation:
Property, plant and equipment are depreciated on the straight-line basis at annual rates estimated to write down the assets to their residual value over their estimated useful lives. Leasehold property is amortised in equal instalments over the shorter of the lease term and the property’s estimated useful life.
Land, works of art and museum coins are not depreciated.
The estimated useful lives are as follows:
Buildings 10 – 20 yearsLeasehold property Shorter of lease term and useful lifeFurniture, plant and equipment 10 yearsComputer equipment 5 yearsMotor vehicles 5 years
The depreciation methods, useful lives and residual values are reassessed at eachreporting date.
(d) Notes and coins in circulation:
The nominal value of numismatic coins sold is included in notes and coins in circulation. The net proceeds from such sales are included in profit or loss.
- xviii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
17
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(d) Notes and coins in circulation (continued):
Notes and coins in circulation is stated after a deduction of 25% of the value of coins in circulation in accordance with the Bank of Jamaica (Value of Coins in Circulation) Order 1973, as permitted under Section 22 of the Act. The deductions are credited to the special stabilisation account.
(e) Taxation:
Section 46 of the Act, which exempted the Bank from income tax, stamp duties and transfer tax, was repealed on December 23, 2003; however, the Bank is still exempt from income tax under Section 12(b) of the Income Tax Act. The Bank’s supplies are substantially exempt from general consumption tax (GCT); it incurs GCT at standard rates on taxable supplies acquired.
(f) Employee benefits:
Employee benefits comprise all forms of consideration given by the Bank in exchange for service rendered by employees. These include current or short-term benefits such as salaries, NIS contributions, annual vacation leave, and non-monetary benefits such as medical care and life insurance; post-employment benefits such as pension and medical care; and other long-term employee benefits such as termination benefits.
(i) General benefits
Employee benefits that are earned as a result of past or current service are recognised in the following manner: short-term employee benefits are recognised as a liability, net of payments made, and charged as expense. The estimated cost of accumulated vacation leave is recognised annually. Post-employment benefits are accounted for as described below.
(ii) Post-employment benefits - Defined benefit pension plan
In respect of defined-benefit arrangements, employee benefits and obligations included in the financial statements are determined annually by a qualified independent actuary, appointed by management. The appointed actuary’s report outlines the scope of the valuation and the actuary’s opinion. The actuarial valuations are conducted in accordance with IAS 19, and the financial statements reflect the Bank’s post-employment benefit asset and obligation as computed by the actuary. In carrying out their audit, the auditors rely on the work of the actuary and the actuary’s report.
The cost to the Bank of the pension benefits it is committed to providing is the totalof (1) the net obligation under the plan, and (2) the cost of administration of the plan – all of which costs are borne by the Bank.
- xix -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
18
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(f) Employee benefits (continued):
(ii) Post-employment benefits - Defined benefit pension plan
The Bank’s net obligation under its defined-benefit pension plan is calculated by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods; that value is discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is determined by reference to the yield at the reporting date on long-term government securities with maturities approximating the terms of the Bank’s obligation. The calculation is performed by a qualified actuary using the projected unit credit method.
Re-measurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Bank determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.
When the benefits of the plan are changed or when the plan is contracted, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Bank recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Where the calculation results in a benefit to the Bank, the recognised asset is limited to the net present value of economic benefits available in the form of any future refunds from the plan or reduction in future contributions to the plan and the present value of any future refunds from the plan or reductions in future contributions to the plan.
(iii) Post-employment defined benefits – Medical care and life insurance
The Bank’s obligation in respect of unfunded long-term employee medical care and life insurance are the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is then discounted to determine its present value. The discount rate is determined as per the defined benefit pension plan set out above. The calculation is performed using the projectedunit credit method. Re-measurements of the defined obligation as well as net interest expense is recognised in the same manner as defined above for defined benefits pension plan.
- xx -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
19
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued)::
(g) Statutory transfer of profits and losses:
Section 9 of the Act provides for each financial year’s net income to be credited, or net loss charged, to the General Reserve Fund, and for the balance on the General Reserve Fund in excess of five times the Bank’s authorised share capital to be transferred to the Consolidated Fund. Likewise, any losses not covered by reserves are required by the Act to be funded by Government out of the Consolidated Fund.
(h) Impairment:
The carrying amounts of the Bank’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.
When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that has been recognised in other comprehensive income is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.
(i) Calculation of recoverable amount
The recoverable amount of the Bank’s investment in loans and receivables and other receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short-term duration are not discounted.
(ii) Reversals of impairment
An impairment loss in respect of loans and receivables carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. For all other assets, an impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount.
An impairment loss in respect of an investment in an equity instrument classified as available-for-sale is not reversed through profit or loss. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if noimpairment loss had been recognised.
- xxi -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
20
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
3. Significant accounting policies (continued):
(i) Intangible asset:
Intangible asset represents software and is measured at cost less accumulated depreciation and impairment losses. The asset is depreciated on the straight line basis at an annual rate estimated to write down the asset to its residual value over its estimated useful life of 5 years.
(j) Resale agreements:
Resale agreements are accounted for as short-term collateralised lending. They are classified as loans and receivables and carried at amortised cost.
Interest earned on resale agreements is recognised as interest income over the life of each agreement using the effective interest method.
(k) Revenue recognition:
Interest income
Interest income is recognised in profit or loss on the accrual basis using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset (or, where appropriate, a shorter period) to the carrying amount of the financial asset. The effective interest rate is established on initial recognition of the financial asset and is not revised subsequently. Interest income includes coupons earned on fixed income investments, accretion of discount on treasury bills and other discounted instruments, and amortisation of premium on instruments bought at a premium.
4. Cash and cash equivalents
2013 2012J$'000 J$'000
Current accounts and money at call with foreign banks 40,003,312 29,051,024Current accounts with local banks 342,943 733,447
40,346,255 29,784,471
5. Interest in funds managed by agents
This represents investments managed by Crown Agents Investment Management Limited (CAIML) on behalf of the Bank. The portfolio consists of investments in government bonds,treasury bills, corporate bonds and cash denominated in United States dollars and other currencies. The portion denominated in other currencies is hedged in United States dollars as required by the agreement in place between the Bank and CAIML.
- xxii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
21
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
6. Foreign currency denominated investments
2013 2012J$'000 J$'000
Available-for-sale securities:US Government securities 40,084,032 34,711,648
Loans and receivables:Short-term deposits with foreign banks 66,473,799 79,663,554
106,557,831 114,375,202
7. Loan and advances
In the previous year the Bank granted loans and advances, amounting to J$1,000,000,000, to certain financial institutions. These loans were collateralised by securities issued or guaranteed by the Government of Jamaica.
As at the reporting date, the fair value of the securities obtained and held by the Bank for the loans and advances granted, or which may in the future be granted, was $Nil (2012: $1,330,532,000). All loans and advances mature within twelve months after the reporting date.
8. Resale agreements
The Bank, in pursuing its monetary policy objectives entered into various resale agreements with financial institutions. Under these agreements, the Bank purchased Government of Jamaicasecurities and agreed to resell them on a specified date and at a specified price. These are accounted for as short-term collateralized lending [note 3(j)]. Section 23(f) of the Act requires the Bank to obtain collateral with a market value that is 1⅓ times the amount of the credit granted to each financial institution. At December 31, 2013, securities held had a fair value of $15,288,098,000 (2012: $Nil).
9. Local currency denominated investments
2013 2012J$'000 J$'000
Available-for-sale securities:Jamaica Government Securities:
Treasury bills 5,660 38Variable rate benchmark investments 11,901,080 74,017,330Fixed rate benchmark investments 12,532,027 18,142,488
24,438,767 92,159,856Held to maturity investments:
Jamaica Government Securities:Fixed rate accreting notes (“FRANs”) [See note below] 74,563,385 -
99,002,152 92,159,856
- xxiii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
22
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
9. Local currency denominated investments (continued)
As part of the National Debt Exchange, Government of Jamaica (“GOJ”) mandated the Bank (and all other state-owned/controlled entities that held GOJ issued notes) (“Old Notes”) to exchange those Old Notes for new notes – FRANs - as at February 22, 2013. Old notes with a carrying amount of $94,833,000,000 at that date were exchanged for FRANs with a fair value of $73,748,000,000 resulting in a loss of $21,085,000,000. In summary, under the terms of the FRANs:
(i) A holder of Old Notes was issued J$80 of initial principal value of FRANs for every J$100 of principal value of Old Notes;
(ii) Interest is payable semi-annually on February 15 and August 15 at a fixed rate of 10% p.a. on the accreted principal value with the first payment due on August 15, 2013;
(iii) Accretion for the additional J$20 of principal value will commence in August 2015 as follows:• 0.5% of $100 every six months from August 15, 2015 until August 15, 2020;• Thereafter, 1.0% of $100 every six months until August 15, 2026; and• Thereafter, 1.5% of $100 every six months until August 15, 2027.
(iv) The FRANs may be redeemed by GOJ on any interest payment date after August 15, 2020. (The value at which the FRAN could be redeemed is not included in the offer document.)
10. International Monetary Fund – Quota Subscription
This represents the portion of Jamaica's fee for membership of the International Monetary Fund (IMF), based on its quota, which was paid by the Bank (the other portion having been subscribed by the Government of Jamaica). The Bank holds, on behalf of the IMF, promissory notes issued by the Government reflecting the Jamaica dollar value of the unpaid subscription quota allocated to Jamaica. The Jamaica dollar value of the promissory notes issued are determined by the SDR:J$ rate at April 30 of each year. Jamaica is assigned a quota of SDR 273,500,000 which represents .047% of the total quota allocated by the IMF.
Quotas are reviewed every five years, when adjustments may be considered.
2013 2012SDR'000 J$'000 J$'000
Amount subscribed by the Government of Jamaica(substituted by securities) 242,375 36,229,014 32,757,849
Amount subscribed by the Bank 31,125 5,080,610 4,206,706
Total quota 273,500 41,309,624 36,964,555
2013 2012SDR'000 J$'000 J$'000
Amount subscribed by the Bank (net of reserve tranche of J$Nil):
At beginning of year 31,125 4,206,706 4,315,897
Effect of exchange rate fluctuation * - 873,904 ( 109,191)
At end of year 31,125 5,080,610 4,206,706
* The exchange rate at the reporting date is set out at note 17(d)(iii).
- xxiv -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
23
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
11. Due from Government and Government Agencies
2013Movements during the year
At Atbeginning Advances/ (Settlement)/ end of
of year losses profit yearJ$'000 J$'000 J$'000 J$'000
Withholding tax refund due[see note (c) below] 3,276,736 1,485,047 - 4,761,783
Accrued interest on Government securities 3,437,751 5,647,260 (3,437,751) 5,647,260
Net loss receivable from Consolidated Fund 9,725,765 17,153,929 - 26,879,694
16,440,252 24,286,236 (3,437,751) 37,288,737
2012Movements during the year
At Atbeginning Advances/ (Settlement)/ end of
of year losses profit yearJ$'000 J$'000 J$'000 J$'000
Withholding tax refund due[see note (c) below] 2,134,009 1,142,727 - 3,276,736
Accrued interest on Government securities 3,353,876 3,437,751 (3,353,876) 3,437,751
Net loss receivable from Consolidated Fund 13,383,763* - (3,657,998) 9,725,765
18,871,648 4,580,478 (7,011,874) 16,440,252
(a) By virtue of Section 36 of the Act, the Bank is empowered to make advances to the government of up to thirty percent of the estimated revenue of Jamaica for the financial year of the Government. Such advances are to be repaid within three months of the end of the financial year in which the advances were made. Where advances are not duly repaid,the Bank is prohibited from granting further advances in any subsequent financial year until the outstanding advances are repaid.
During 2013, the Bank extended credit to the Government by way of temporary advancesamounting to $31.8 billion (2012: $7.5 billion), which was repaid during the year.
(b) The Government is required by the Act to pay to the Bank, out of the Consolidated Fund, amounts to cover losses incurred by the Bank. Section 9 (3) of the Act provides that if in the opinion of the Minister of Finance payment to clear the losses cannot be made from the Consolidated Fund, such losses may be cleared by the issue of securities to the Bank chargeable to the Consolidated Fund. At the reporting date, losses of $26,879.69 million (2012: $9,725.77 million) remained unsettled.
- xxv -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
24
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
11. Due from Government and Government Agencies (continued)
(c) Income tax is withheld on income earned by the Bank on its holding of securities (in practice, this is GOJ securities) in accordance with Section 31A of the Income Tax Act asan advance on payment of income tax which may be due. However, as the Bank is exempt from income tax it, therefore, has no liability for income tax, and the entire amount of tax withheld is recoverable from Tax Administration Jamaica.
At the reporting date, the age profile of the withholding tax recoverable was as follows:
2013 2012J$'000 J$'000
1-6 months 531,288 467,7106-12 months 940,458 675,0181-5 years 3,054,187 2,080,465Over 5 years 235,850 53,543
4,761,783 3,276,736
The amount is expected to be recovered in accordance with the Government of Jamaica’s programme for the elimination of withholding tax arrears.
12. Property, plant and equipment
Freehold Furniture,land and Leasehold plant and Motor Work-in-buildings property equipment vehicles progress Total
J$'000 J$'000 J$'000 J$'000 J$'000 J$'000Cost or valuation:
December 31, 2011 2,956,154 15,821 1,501,380 374,452 32,940 4,880,747Additions 73,930 19,277 81,409 70,091 - 244,707Transfers 23,719 9,221 - - (32,940) -Disposals/write-offs ( 87) - ( 3,265) ( 62,244) - ( 65,596)
December 31, 2012 3,053,716 44,319 1,579,524 382,299 - 5,059,858Additions 20,201 16,530 98,339 118,959 - 254,029Disposals/write-offs - - ( 154) (129,178) - ( 129,332)
December 31, 2013 3,073,917 60,849 1,677,709 372,080 - 5,184,555
Depreciation:December 31, 2011 238,590 6,082 997,178 117,572 - 1,359,422Charge for the year 125,521 4,433 113,534 75,833 - 319,321Eliminated on disposals - - ( 3,300) ( 39,598) - ( 42,898)
December 31, 2012 364,111 10,515 1,107,412 153,807 - 1,635,845
Charge for the year 126,749 6,078 112,812 70,426 - 316,065Eliminated on disposals - - - ( 80,316) - ( 80,316)
December 31, 2013 490,860 16,593 1,220,224 143,917 - 1,871,594
Net book values:December 31, 2013 2,583,057 44,256 457,485 228,163 - 3,312,961
December 31, 2012 2,689,605 33,804 472,112 228,492 - 3,424,013
December 31, 2011 2,717,564 9,739 504,202 256,880 32,940 3,521,325
- xxvi -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
25
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
12. Property, plant and equipment (continued)
The Bank’s land and buildings at Nethersole Place were revalued in January 2010 by an external, independent valuer, with appropriate recognised professional qualification and recent experience in the location and category of land and buildings being valued (namely, The C. D. Alexander Company Realty Limited, Real Estate Broker, Appraiser and Auctioneer). The Bank’s other land and buildings have not been revalued.
An independent valuer provides the fair value of the land and buildings when requested by the Bank. There has been no recent request to update the valuation; management of the Bank is of the opinion that there was no significant change in the value of land and buildings between the valuation date and the reporting date.
The surplus arising on revaluation, inclusive of depreciation no longer required, is included inproperty revaluation reserve [note 24(b)].
Two fair values were determined at the date of the valuation, viz: $2.23 billion on the depreciated replacement cost basis and $1.882 billion using the Income approach. The management selected the Cost Approach for recording fair value.
The fair value of land and buildings is categorised as level 3 in the fair value hierarchy.
The significant unobservable inputs used in determining the fair value of property, plant and equipment, and the effect of each of them on the value determined, are summarised below:
Valuation techniques Significant unobservable inputs
Inter-relationship between key unobservable inputs and fair value measurement
Depreciated replacement cost.This model takes into account:Building:
(i) An estimate of the full replacement cost at the reporting date
(ii) An estimate of depreciation based on the age and condition of the building
(iii) Deducting the estimated depreciation from the current replacement cost
Land (i) An estimate of the site
improvements made (ii) An estimate of the market
value of the land with the site improvements
Estimates of material, labour, professional fees and other costs of planning, design and construction, expressed as cost per square foot
Judgements about the physical condition of the building
Judgements about the environment in which the building is located
The estimated fair value would increase (decrease) if:• the cost per square
foot were higher (lower)
• judgement about the condition of the building had determined the condition to be better (worse)
- xxvii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
26
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
13. Intangible assets
Computer Work-in software progress Total J$’000 J$’000 J$’000
Cost:December 31, 2011 428,911 4,615 433,526Additions 17,928 - 17,928Transfers 4,615 ( 4,615) -
December 31, 2012 451,454 - 451,454Additions 7,816 - 7,816
December 31, 2013 459,270 - 459,270
Amortisation:December 31, 2011 386,128 - 386,128Charge for the year 35,082 - 35,082
December 31, 2012 421,210 - 421,210Charge for the year 35,381 - 35,381
December 31, 2013 456,591 - 456,591
Net book values:December 31, 2013 2,679 - 2,679
December 31, 2012 30,244 - 30,244
December 31, 2011 42,783 4,615 47,398
14. Employee benefits
The Bank operates non-contributory defined benefit pension, medical, and life insurance schemesfor all its permanent eligible employees and funds supplemental retirement benefits. Benefits under the pension scheme are computed by reference to final salary. The assets of the scheme, which are held separately from those of the Bank, are under the control of a board of trustees, with day-to-day management by employees of the Bank.
(a) Pension asset recognised:
2013 2012J$'000 J$'000
Present value of funded obligations ( 7,283,400) ( 6,794,000)Fair value of plan assets 12,676,900 12,295,400Unrecognised due to ceiling - ( 108,300)
Recognised asset 5,393,500 5,393,100
- xxviii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
27
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
14. Employee benefits (continued)
(a) Pension asset recognised (continued):
(i) Movements in the present value of defined benefit obligations
2013 2012J$'000 J$'000
Balance at beginning of year 6,794,000 6,423,400Benefits paid ( 354,100) ( 404,900)Service and interest costs 889,900 843,400Remeasurement gain on obligation included in OCI ( 46,400) ( 67,900)
Balance at end of year 7,283,400 6,794,000
(ii) Movements in plan assets
2013 2012J$'000 J$'000
Fair value of plan assets at beginning of year 12,295,400 11,999,000Contributions paid 94,500 96,800Interest income on plan assets 1,277,400 1,184,500Benefits paid ( 354,100) ( 404,900)Remeasurement gain on assets include in other
comprehensive income ( 636,300) ( 580,000)
Fair value of plan assets at end of year 12,676,900 12,295,400
Plan assets consist of the following:Government of Jamaica securities 11,555,600 11,809,200Bank of Jamaica certificates of deposit 909,300 77,500Real estate 85,000 85,000Other 127,000 323,700
12,676,900 12,295,400
(iii) Credit recognised in profit or loss
2013 2012J$'000 J$'000
Current service costs 176,600 164,300Interest on obligations 713,300 642,200Interest income on assets (1,277,400) (1,184,500)Interest on effect of asset ceiling 11,400 118,300
( 376,100) ( 259,700)
- xxix -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
28
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
14. Employee benefits (continued)
(a) Pension asset recognised (continued):
(iv) Items in other comprehensive income
2013 2012J$'000 J$'000
Remeasurement gain on obligation:Change in financial assumptions 304,300 137,400Experience adjustment (350,700) ( 205,300)
( 46,400) ( 67,900)Remeasurement loss on assets 636,300 580,000Change in effect of asset ceiling (119,700) (1,193,200)
470,200 ( 681,100)
(v) Principal actuarial assumptions at the reporting date (expressed as weighted averages)
2013 2012% %
Discount rate 9.5 10.5Future pension increases 2.5 3.0Future salary increases 6 7
(vi) A one percentage point change at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by amounts shown below:
One percentage One percentageActuarial assumption point increase point decrease
Discount rate (817,000) 1,091,300Assumed rate of salary escalation 288,700 ( 258,000)Future rate of pension 774,500 ( 584,600)
- xxx -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
29
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
14. Employee benefits (continued)
(b) Obligations for post-retirement life insurance and medical benefits:
(i) Liability recognised in statement of financial position
2013 2012J$'000 J$'000
Balance at beginning of year 750,600 608,200Interest cost 81,000 62,600Current service cost 29,700 25,100Benefits paid ( 16,900) ( 13,600)Re-measurement loss on obligation, included in other
comprehensive income [see (iii)] 135,500 68,300
Balance at end of year 979,900 750,600
(ii) Expense recognised in profit or loss:
2013 2012J$'000 J$'000
Current service costs 29,700 25,100Interest on obligations 81,000 62,600
110,700 87,700
(iii) Items in other comprehensive income
2013 2012J$'000 J$'000
Change in financial assumptions 102,200 -Experience adjustment 33,300 68,300
Re-measurement loss on obligation 135,500 68,300
(iv) Principal actuarial assumptions at the reporting date (expressed as weighted averages):
2013 2012% %
Discount rate 9.50 10.50Medical claims growth 7.50 9.50
Assumptions regarding future mortality are based on the PA (90) mortality table for pensioners (British mortality tables), but with each age rated down by six years.
- xxxi -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
30
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
14. Employee benefits (continued)
(c) At the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by amounts shown below:
One Onepercentage percentage
point increase point decreaseJ$'000 J$'000
Assumed medical cost trend rate and rate ofsalary escalation 187,100 (146,400)
Discount rate (147,400) 188,600
(d) The estimated pension contributions expected to be paid into the plan during the next financial year is J$118,510,000 (2012: J$103,000,000).
15. Other assets
2013 2012J$'000 J$'000
Items in process of collection - 979Staff loans 1,975,174 1,891,723Ex-staff loans 76,413 37,818Stock of unissued notes and coins 1,955,281 2,354,966Accrued interest receivable other than on GOJ securities 203,389 207,226Other 267,657 212,773
4,477,914 4,705,485Less:
Re-measurement of staff loans ( 669,461) ( 651,253)Provision for loan loss on ex-staff loans ( 11,605) ( 11,605)
3,796,848 4,042,627
16. Notes and coins in circulation
2013 2012J$'000 J$'000
Notes 67,059,634 62,150,162Coins 2,758,571 2,542,786
69,818,205 64,692,948
Section 21 of the Act requires the Bank to hold specified assets of an amount in value sufficient to cover the value of the total amount of notes and coins in circulation as defined in that section. The assets held shall include, inter alia, (a) gold; (b) "hard currency" cash, bank balances or securities issued by a foreign government or international financial institution of which Jamaicais a member; or (c) Special Drawing Rights. Specified assets held by the Bank, as at December 31, 2013, were 3.88 (2012: 4.49) times the value of notes and coins in circulation at that date.
- xxxii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
31
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
16. Notes and coins in circulation (continued)
Coins in circulation are shown net of a reserve of 25% of the gross amount of coins in circulation(note 23).
17. Deposits and other demand liabilities
(a) Deposits and other demand liabilities comprise the following:
2013 2012J$'000 J$'000
Government and Government agencies 25,488,416 8,902,218Commercial banks and specified financial institutions 68,718,764 68,385,891International Monetary Fund [see (c) below] 72,637,206 73,325,376Others 3,117,510 2,073,911
169,961,896 152,687,396
Jamaica dollar equivalent of foreign currency deposits 121,426,390 101,395,792Jamaica dollar deposits 48,535,506 51,291,604
169,961,896 152,687,396
(b) Deposit and other demand liabilities include the reserve deposits prescribed by Section 28 of the Bank of Jamaica Act, Section 14 of the Banking Act, Section 14 of the Financial Institutions Act and Section 31 of the Building Societies Regulations. Reserve deposits at the reporting date were $57,144,713 million (2012: $50,131.14 million).
(c) Under Section 28A of the Bank of Jamaica Act, commercial banks and specified financial institutions may be required to make special deposits with the Bank of Jamaica in the form of cash or specified securities. There were no special deposits at the reporting date.
(d) IMF related information
(i) The above IMF balance consists of the following loans:
2013 2012 2013 2012SDR'000 SDR'000 J$'000 J$'000
2010 Standby agreement 366,525 541,800 54,786,340 73,226,2112013 Extended fund facility 118,690 - 17,741,193 -
Total draw-downs 485,215 541,800 72,527,533 73,226,211Other IMF amounts 734 734 109,673 99,165
Total IMF liability 485,949 542,534 72,637,206 73,325,376
- xxxiii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
32
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
17. Deposits and other demand liabilities (continued)
(d) IMF related information (continued)
(ii) The following reconciliation shows the total IMF liability convertedat the SDR to J$ exchange rates prevailing at April 30 and December 31
2013 2012J$'000 J$'000
At the December 31, 2013 SDR rate:Amount at which the loan is carried by the Bank 79,322,157 77,341,414
Effect of exchange rate depreciation (note 20) ( 6,684,951) ( 4,016,038)
At the April 30, 2013 SDR rate:Amount at which the loan is carried by
the IMF [per (a) above] 72,637,206 73,325,376
(iii) The following table shows the rate of exchange of J$ to SDR at April 30 and December 31, 2013
2013 2012
April 30 J$1 = 0.00669008 0.00739899December 31 J$1 = 0.00612620 0.00701471
As at March 3, 2014, the date of approval of these financial statements, the exchange rate was J$1 = SDR0.0059813.
(iv) The balance on the Extended Fund Facility reflected in these financial statements does not include an amount of SDR58.00 million (J$8,669.55 million) as it was disbursed toGovernment of Jamaica for fiscal support.
18. Open market liabilities
As part of the process of controlling liquidity in the financial system, the Bank acquires funds from or makes funds available to financial institutions and this is effected by entering into short-term agreements with the institutions. In the case of funds acquired, receipt of funds is evidenced by the Bank issuing Certificates of Deposit to the depositor.
19. International Monetary Fund - Allocation of Special Drawing Rights
This represents the Bank's obligation for Special Drawing Rights (SDRs) allocated to it. This allocation does not change unless there are cancellations or further allocations.
2013 2012SDRs'000 J$'000 J$'000
At beginning of year 261,644 35,362,449 36,280,382Effect of exchange rate fluctuation - 7,346,445 ( 917,933)
At end of year 261,644 42,708,894 35,362,449
- xxxiv -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
33
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
20. Other liabilities
2013 2012J$'000 J$'000
Interest payable 611,348 340,110Staff and staff-related expenses 307,951 379,397SDR equalisation provision [note 17(d)] 6,684,951 4,016,038Overdrafts 2,486 2,486Items in process of collection 17,549 -Other 64,383 83,844
7,688,668 4,821,875
21. Share capital
Section 8 of the Act provides for the capital of the Bank to be J$4,000,000, which has been paid by the Government of Jamaica.
22. General reserve fund
Section 9 of the Act provides that the Bank shall establish and maintain a General Reserve Fund:
(a) to which, at the end of each financial year, the net income for that year shall be transferred or the net losses charged;
(b) from which shall be paid to the Consolidated Fund the amount by which, at the end of the financial year, the balance thereon exceeds five times the Bank's authorised share capital;
(c) into which should be paid from the Consolidated Fund at the end of the financial year, the amount by which the Bank’s net loss exceeds the balance in the General Reserve Fund.
23. Special stabilisation account
The special stabilisation account is maintained at 25% of the coins in circulation as a reserve against coins that are unlikely to be redeemed (note 16).
- xxxv -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
34
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
24. Other reserves
This represents the following:
2013 2012J$'000 J$'000
Securities revaluation reserve [see (a)] ( 854,796) 3,816,916Property revaluation reserve [see (b)] 2,321,411 2,321,411Pension equalisation reserve [see (c)] 5,240,101 5,375,200
6,706,716 11,513,527
(a) This represents the unrealised gains net of losses on the revaluation of available-for-sale investments securities.
(b) The property revaluation reserve represents the surplus arising on the revaluation of certain freehold properties (see note 12).
(c) The pension equalisation reserve represents the pension surplus arising on the actuarial valuation, under IAS 19, of the Bank’s pension scheme. Annual changes in the value of the plan are shown in the statement of comprehensive income, then transferred to this reserve.
25. Interest income
2013 2012J$'000 J$'000
(a) Interest income comprises:
Loans and receivables:Cash and cash equivalents 17,592 64,921Funds managed by agents 141,596 125,267Investment securities 238,770 206,116Loans and advances - 2,767Resale agreements 111,984 -Other 120,091 87,539
Available-for-sale:Investment securities 3,806,353 8,431,893
Held to maturity:Investment securities 7,320,873 -
11,757,259 8,918,503(b) Analysed as follows:
Government of Jamaica (note 30) 10,370,919 7,565,718Other sources 1,386,340 1,352,785
11,757,259 8,918,503
- xxxvi -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
- xxxvii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
36
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
30. Related party balances
(a) A related party is a person or entity that is related to the Bank:
(i) A person or a close member of that person’s family is related to the Bank if that person:
(a) has control or joint control over the Bank;
(b) has significant influence over the Bank; or
(c) is a member of the key management personnel of the Bank
(ii) An entity is related to the Bank if any of the following conditions applies:
(a) The entity and the Bank are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(b) The entity is a post-employment benefit plan for the benefit of employees of either the Bank or an entity related to the Bank.
(c) The entity is controlled, or jointly controlled by a person identified in (i).
(d) A person identified in (i)(a) has significant influence over the Bank or is a member of the key management personnel of the Bank.
A related party transaction is a transfer of resources, services or obligations between the Bank and a related party, regardless of whether or not a price is charged.
The Bank has related party relationships with its Board of Directors, the members of the Executive management, the Bank of Jamaica pension scheme and the Government of Jamaica and its agencies (see notes 11 and 17).
The statement of financial position includes balances, arising in the ordinary course of business,with related parties, as follows:
2013 2012J$'000 J$'000
Loans:Executive management (included in staff loans, note 15) 93,150 83,290
Open market liabilities:Pension fund 909,288 77,500
The executive management team consists of twelve (12) persons.
The interest rates applicable on loans to executive management range from 1% - 3%. In addition, a deemed taxable income is computed on the interest saved by virtue of the concessionary interest rate. No non-executive director receives emoluments or is in receipt of a loan from the Bank.
- xxxviii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
37
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
30. Related party balances (cont’d)
The statement of comprehensive income includes income earned from/expenses incurred in transactions with related parties, in the ordinary course of business, as follows:
2013 2012J$'000 J$'000
Interest expense:Government and Government agencies (note 27) 451,523 610,790Pension scheme 36,878 30,444Executive management 1,650 3,106
Interest income:Government of Jamaica [note 25(b)] 10,370,919 7,565,718Executive management 2,507 2,598
Pension contribution:Pension scheme 104,899 101,173
Executive management compensation is as follows:
2013 2012J$'000 J$'000
Emoluments, included in staff costs (note 28) 172,959 161,327
31. Commitments
At the reporting date the Bank had:
(a) Capital commitments as follows:
2013 2012J$'000 J$'000
Authorised and contracted 53,507 19,783Authorised but not contracted 170,512 9,917
224,019 29,700
(b) Operating lease commitments, payable as follows:
2013 2012J$'000 J$'000
Within one year 11,040 9,621Within 1-5 years 43,897 -Over 5 years 70,954 -
130,891 9,621
32. Contingent liabilities
At December 31, 2013 and 2012, the Bank was a defendant in various relatively minor suits claiming damages. The Bank is of the view that the claims are generally without merit and will not result in any significant losses to the Bank. There are no lawsuits pending with the Bank as plaintiff as at December 31, 2013 and December 31, 2012.
- xxxix -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
38
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
33. Fair value of financial instruments
Fair value is the arm’s length consideration for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties, who are under no compulsion to act and is best evidenced by a quoted market price, if one exists.
Determination of fair value:
The financial instruments held at the reporting date were: cash and cash equivalents, interest in funds managed by agents, loans and advances, resale agreements, foreign and local currencydenominated investments, International Monetary Fund – Holding of Special Drawing Rights, due from Government and Government Agencies, other assets, deposits and other demand liabilities, open market liabilities, International Monetary Fund – Allocation of Special Drawing Rights, foreign liabilities and other liabilities.
The fair value of foreign and local currency denominated investments is assumed to be equal to the estimated market values as provided in notes 6 and 9, respectively. These values are obtained on the basis outlined in note 3(b)(iii). The ranges of interest rates used to discount estimated cash flows, where applicable, are based on the yield curves from the Bank and Bloomberg at the reporting date and were as follows:
2013 2012% %
Foreign currency denominated investments:US$ bonds 0.15 – 3.82 0.16 – 3.64
Government of Jamaica local securities:Treasury bills 8.30 6.97Variable rate benchmark investments 7.67 – 8.04 6.51 – 6.94Fixed rate benchmark investments 5.89 – 11.05 6.70 – 9.07
The fair value of certain short-term financial instruments was determined to approximate their carrying value.
No fair value has been estimated on the amount due from Government and Government Agencies, as there is no practical means of estimating its fair value.
Fair value hierarchy
The table below analyses financial instruments carried at fair value and those not carried at fair value but for which fair value has been disclosed. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
- xl -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
39
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
33. Fair value of financial instruments (continued)
(a) Securities carried at fair value
2013Level 1 Level 2 Level 3 TotalJ$'000 J$'000 J$'000 J$'000
Available-for-sale financial assetsUS Government securities 40,084,032 - - 40,084,032Government of Jamaica securities - 24,438,767 - 24,438,767Securities included in funds
managed by agent- Sovereign bonds - 6,708,959 - 6,708,959- Corporate bonds - 8,138,720 - 8,138,720
40,084,032 39,286,446 - 79,370,478
2012Level 1 Level 2 Level 3 TotalJ$'000 J$'000 J$'000 J$'000
Available-for-sale financial assetsUS Government securities 34,711,648 - - 34,711,648GOJ securities - 92,159,856 - 92,159,856Securities included in funds
managed by agent- Sovereign bonds - 10,629,763 - 10,629,763- Corporate bonds - 2,445,711 - 2,445,711
34,711,648 105,235,330 - 139,946,978
(b) Securities not carried at fair value
December 31, 2013Level 1 Level 2 Level 3 TotalJ$'000 J$'000 J$'000 J$'000
Held to maturity financial assetsGovernment of Jamaica securities
(FRANs) - 76,369,096 - 76,369,096
There were no securities not carried at fair value for which fair values were disclosed in 2012.
There were no transfers between levels during the year ended December 31, 2013 (2012: No transfers).
- xli -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
40
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
33. Fair value of financial instruments (continued)
(c) Valuation techniques for investment securities classified as Level 2.
The following table shows the valuation techniques used in measuring the fair value of investment securities.
Type of security Valuation techniquesGOJ J$ securities • Obtain bid yield from yield curve
provided by a recognized pricing source (which uses Jamaica-market-supplied indicative bids)
• Adjust yield based on internal policy, by an amount which depends on the term to maturity or to the next re-pricing date
• Using the adjusted yield, determine price using standard approach
• Apply modified price to estimate fair value
Interest in funds managed by agent
• Estimated using bid prices published by major overseas broker.
34. Financial risk management
(a) Introduction and overview
The Bank has exposure to the following risks from its use of financial instruments:
• credit risk• liquidity risk• market risks
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Bank has established an Investment Committee which is responsible for providing oversight on the conversion of investment strategy into performance, portfolio construction and risk modelling. There is also a Credit Committee which is responsible for evaluating and approving applications for staff loans. Both committees report to the Committee of Administration, which reports on a regular basis to the Board of Directors.
The Bank’s Audit Committee is responsible for monitoring compliance with the Bank’s risk management policies and procedures and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. The Audit Committee is assisted in these functions by the Internal Audit Department. This department undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board of Directors and the Audit Committee.
(b) Credit risk
Credit risk is the risk of loss arising from a counter-party to a financial contract failing to discharge its obligations. This risk arises primarily from the Bank’s foreign and local currency investment securities, loans and advances, cash and cash equivalents, interest in funds managed by agents and other assets.
- xlii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
41
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(b) Credit risk (continued)
(i) Management of credit risk on classes of financial assets exposed to that risk:
• Foreign currency investments and interest in funds managed by agents
Credit risk in the foreign currency investment portfolio is managed by restricting the holdings of investments substantially to US Government securities, other highly rated sovereign securities, Jamaica Government US$ debentures and placements in highly rated supranational institutions. The Bank uses the credit ratings ascribed by Moody’s Investor Services and Standard & Poors Financial Services LLC as its main criteria for assessing the creditworthiness of financial institutions and sovereigns. The Bank’s foreign investments are restricted to money market placements with financial institutions with minimum short-term credit ratings of A-1/P-2 and with minimum long-term ratings of Aa1/AA+. Additionally, capital market issues must have a minimum credit rating of Aa1/AA+. In order to reduce consolidated credit risk exposure, the Bank has investment limits in place. The Bank’s foreign investment portfolio consists of short-, medium- and long-term investments each of which has stipulated percentage limits (upper and lower) of the portfolio at market value.
• Local investment securities
Credit risk for local securities is managed by investing only in Government of Jamaica securities. Management does not expect this counterparty to fail to meet its obligations.
• Loans and advances
Credit risk is managed by requiring institutions to deposit with the Bank or its agents, designated securities sufficient to collateralise loans and advances. The collateral value of securities accepted is limited to a defined percentage of market value.
• Cash and cash equivalents
Cash and cash equivalents are held in financial institutions which management regards as strong and there is no significant concentration. The strength of these financial institutions is continually reviewed by the Investment Committee.
• Other assets
Other credit exposures consist mainly of staff loans for housing and motor vehicles. There is a documented credit policy in place which guides the Bank’s credit process for staff loans. The policy includes established procedures for the authorisation of credit. Staff loans are limited to a percentage of the value of the assets being purchased. Mortgages and liens are obtained for staff housing and motor vehicle loans, respectively, which must also be insured.
- xliii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
42
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Impaired loans and securities
Impaired loans and securities are loans and securities for which the Bank determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan or securities agreements.
(iii) Past due but not impaired loans and securities
These are loans and securities where contractual interest or principal payments are past due but the Bank believes that impairment is not appropriate on the basis of the level of security available or the stage of collection of amounts owed to the Bank.
(iv) Loans with renegotiated terms
Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and where the Bank has made concessions that it would not otherwise consider. Once the loan is restructured, it remains in this category independent of satisfactory performance after restructuring. The Bank had no such loans as at December 31, 2013 and 2012.
(v) Allowances for impairment
The Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The allowance is the aggregate of the estimated losses on individual exposures.
(vi) Write-off policy
The Bank writes off a loan or security balance (and any related allowances for impairment losses) when the Bank determines that the loan or security isuncollectible. This determination is usually made after considering information such as changes in the borrower’s financial position, or that proceeds from collateral willnot be sufficient to pay back the entire exposure.
(vii) Exposure to credit risk
Current credit exposure is the amount of loss that the Bank would suffer if every counterparty to which the Bank was exposed were to default at once; this is represented substantially by the carrying amount of financial assets shown on the statement of financial position.
Exposures to credit risk attached to financial assets are monitored through credit rating and lending limits, which are regularly reviewed. In addition, securities issued or guaranteed by the Government of Jamaica are required to collateralise advances tofinancial institutions.
There has been no change to the nature of the Bank’s exposure to credit risk or the manner in which it manages and measures the risk.
- xliv -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
43
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(b) Credit risk (continued)
(vii) Exposure to credit risk
The Bank’s significant concentrations of credit exposure by geographical region (based on the region of ownership of the entity that issued the security or holds the cash or cash equivalents) are as follows:
2013 2012J$'000 J$'000
Caribbean 112,469,222 94,376,499North America 144,172,439 118,850,864Europe 53,791,883 68,759,794Other 267,764 266,936
Total financial assets 310,701,308 282,254,093
(c) Liquidity risk
Liquidity risk is the risk that the Bank will not be able to meet its financial liabilities as they fall due. Prudent liquidity management implies maintaining sufficient cash and marketable securities, and ensuring the availability of funding through an adequate amount of committed standby credit facilities to meet commitments.
The Bank’s exposure to liquidity risk to meet foreign liabilities, as an institution, is limited due to the minimal amount owed to overseas creditors/lenders. Management of liquidity risk relates primarily to the availability of liquid foreign resources to sell to the Government of Jamaica and its agencies to repay their suppliers and lenders. The Bank manages this risk through a combination of:
• Budgetary procedures to identify the timing of Government foreign payments.• Scheduling the maturity of foreign deposits to coincide with the demands of
Government and its Agencies.• Maintaining a portion of its foreign assets in cash or near cash as precautionary funds
to meet unforeseen demands.
The Bank, like all central banks, has no real liquidity risk in relation to its domestic financial obligations.
The Bank is not subject to any imposed liquidity limit.
- xlv -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
44
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(c) Liquidity risk (continued)
The following table presents the undiscounted contractual maturities of financial liabilities:2013
Within 1 1 to 3 3 to 12 1 to 5 Month months months years TotalJ$'000 J$'000 J$'000 J$'000 J$'000
Deposits and other demand liabilities 169,961,896 - - - 169,961,896
Open market liabilities 19,783,217 3,518,961 35,128,144 1,567,742 59,998,064Foreign liabilities 47 - - - 47Other 7,688,668 - - - -Commitments 876 88,679 7,809 137,704 235,068
197,434,704 3,607,640 35,135,953 1,705,446 230,195,075
2012Within 1 1 to 3 3 to 12 1 to 5 Month months months years Total
Deposits and other demand liabilities 152,687,396 - - - 152,687,396
Open market liabilities 36,763,974 - 3,616,487 - 40,380,461Foreign liabilities 16 - - - 16Other 4,821,875 - - - 4,821,875Commitments 1,425 968 36,928 - 39,321
194,274,686 968 3,653,415 - 197,929,069
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Bank’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market riskexposures within acceptable parameters, while optimising the return on financial assets.Market risk exposures are measured using sensitivity analysis.
There was no change during the year in the Bank’s exposure to market risks or the manner in which it manages and measures the risk.
(i) Currency risk
Currency risk is the risk that the market value of, or the cash flows from, financial instruments will vary because of exchange rate fluctuations. The Bank is exposed to foreign currency risk due to fluctuations in exchange rates on transactions and balances that are denominated in currencies other than the Jamaica dollar. At the reporting date, the Bank’s net exposure to foreign exchange rate fluctuations, in Jamaica dollar equivalent, was as follows, based on currencies in which reported amounts are denominated:
- xlvi -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
45
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(d) Market risk (continued)
(i) Currency risk (continued)
2013US Euro Pound Other Total
$'000 $'000 $'000 $'000 $'000
Foreign currency assets:Notes and coins - for local sale 43,469 1,555 25,439 2,331 72,794
- for repatriation 22,450 4,304 9,688 30,122 66,564Cash and cash equivalents 33,388,010 4,638,418 686,298 1,263,398 39,976,124Interest in funds managed
by agents 15,000,571 - - - 15,000,571Interest receivable on BHAs 173,600 - 508 25,464 199,572Items in the process of collection 488 - 10 10 508Investment securities 106,557,831 - - - 106,557,831IMF- Holding of special
drawing rights - - - 31,389,869 31,389,869IMF - Quota subscription - - - 5,080,610 5,080,610
155,186,419 4,644,277 721,943 37,791,804 198,344,443
Foreign currency liabilities:Open market liabilities 25,308,042 - - - 25,308,042Deposits - current accounts 46,185,937 37,249 2,035,044 530,954 48,789,184Deposits - IMF 72,637,206 72,637,206IMF - Allocation of special
drawing rights - - - 42,708,894 42,708,894Foreign liabilities - - - 47 47Bilateral - - - 70,973 70,973Interest payable 233,917 - - - 233,917
144,365,102 37,249 2,035,044 43,310,868 189,748,263Net foreign currency assets/
(liabilities) 10,821,317 4,607,028 (1,313,101) ( 5,519,064) 8,596,180
- xlvii -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
46
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(d) Market risk (continued)
(i) Currency risk (continued)
2012US Euro Pound Other Total
$'000 $'000 $'000 $'000 $'000
Foreign currency assets:Notes and coins - for local sale 30,744 3,993 9,768 4,081 48,586
- for repatriation 20,185 2,794 6,976 29,387 59,342Cash and cash equivalents 24,510,879 566,962 687,759 3,285,424 29,051,024Interest in funds managed
by agents 13,081,356 - - - 13,081,356Interest receivable on BHAs 184,630 - 48 18,864 203,542Items in the process of collection 920 - 3 - 923Investment securities 114,375,202 - - - 114,375,202IMF- Holding of special
drawing rights - - - 26,958,840 26,958,840IMF - Quota subscription - - - 4,206,706 4,206,706
152,203,916 573,749 704,554 34,503,302 187,985,521
Foreign currency liabilities:Deposits - current accounts 26,088,837 31,154 1,544,965 412,214 28,077,170Deposits - IMF 73,318,622 - - - 73,318,622IMF - Allocation of special
drawing rights - - - 35,362,449 35,362,449Foreign liabilities - - - 16 16Bilateral - - - 3,000 3,000Interest payable 17,259 - - - 17,259
99,424,718 31,154 1,544,965 35,777,679 136,778,516Net foreign currency assets/
(liabilities) 52,779,198 542,595 ( 840,411) ( 1,274,377) 51,207,005
Exchange rates at December 31:
2013 2012
US$1 to J$ 105.99 92.68UK£1 to J$ 175.55 150.65CDN$1 to J$ 99.76 93.08Є to J$ 146.06 122.18
At March 3, 2014, the date of approval of these financial statements, the exchange rates were US$1 to J$108.0043, UK£1 to J$180.9990, CDN$1 to J$97.5693 and Є 1 to J$149.1701.
The exchange rate for SDR to J$ is shown in note 17(d)(iii).
Sensitivity to exchange rate movements
A 15 percent (2012: 10 percent) devaluation of the Jamaica Dollar against currencies which expose the Bank to risk at December 31 would have increased profit by $1,289,427,000 (2012: $5,120,700,500) while a 0.5 percent (2012: 1 percent) revaluation would have decreased profit by $42,981,000 (2012: $512,070,050). The analysis assumes that all other variables, in particular, interest rates, remain constant. The analysis has been performed on the same basis as for 2012.
- xlviii -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
47
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(d) Market risk (continued)
(ii) Interest rate risk:
Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. It arises when there is a mismatch between interest-earning assets and interest-bearing liabilities which are subject to interest rate adjustments within a specified period. It can be reflected as a loss of future net interest income and/or a loss of current market values. The Bank manages this risk by monitoring interest rates daily and ensuring that, even though there is no formally predetermined gap limits, to the extent practicable, the maturity profile of its financial assets is, at least, matched by that of its financial liabilities.
The following table summarises the carrying amounts of financial assets and liabilities to arrive at the Bank’s interest rate gap based on the earlier of contractual re-pricing and maturity dates.
2013Weighted
Within Three to Over Payable Non-rate average3 months 12 months 12 months after notice sensitive Total interest J$'000 J$'000 J$'000 J$'000 J$'000 J$'000 %
AssetsNotes and coins - - - - 204,873 204,873 -Cash and cash equivalents - - - - 40,346,255 40,346,255 -Interest in funds managed by agents - - - 15,000,571 - 15,000,571 0.46Foreign currency denominated
investments 1,911,475 4,838,977 99,807,379 - - 106,557,831 0.69International Monetary Fund -
Holding of Special Drawing Rights - - - - 31,389,869 31,389,869 -Resale agreements 11,500,000 - - - - 11,500,000 6.00Local currency denominated
investments 6,309 - 98,995,843 - - 99,002,152 9.36International Monetary Fund –
Quota Subscription - - - - 5,080,610 5,080,610 -Due from Government and
Government Agencies - - - - 37,288,737 37,288,737 -Other assets - - - - 3,796,848 3,796,848 -
Total financial assets 13,417,784 4,838,977 198,803,222 15,000,571 118,107,192 350,167,746
LiabilitiesNotes and coins in circulation - - - - 69,818,205 69,818,205 -Deposits and other demand liabilities:
Jamaica dollar equivalent offoreign currency deposits 99,300,123 - - 22,126,267 - 121,426,390 0.35
Jamaica dollar deposits 13,235,969 - - 35,299,537 - 48,535,506 0.64Open market liabilities 19,783,217 38,647,105 1,567,742 - - 59,998,064 5.38International Monetary Fund –
Allocation of Special DrawingRights - - - - 42,708,894 42,708,894 -
Foreign liabilities - - - - 47 47 -Bilateral accounts - - - - 70,973 70,973 -Other liabilities - - - - 7,688,668 7,688,668 -
Total financial liabilities 132,319,309 38,647,105 1,567,742 57,425,804 120,286,787 350,246,747Total interest rate sensitivity
gap (118,901,525) ( 33,808,128) 197,235,480 (42,425,233) ( 2,179,595) ( 79,001)
Cumulative gap (118,901,525) (152,709,653) 44,525,827 2,100,594 ( 79,001) -
- xlix -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
48
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(d) Market risk (continued)
(ii) Interest rate risk (continued):
2012Weighted
Within Three to Over Payable Non-rate average3 months 12 months 12 months after notice sensitive Total interest
J$'000 J$'000 J$'000 J$'000 J$'000 J$'000 %
AssetsNotes and coins - - - - 187,201 187,201 -Cash and cash equivalents - - - - 29,784,471 29,784,471 -Interest in funds managed by agents - - - 13,081,356 - 13,081,356 0.97Foreign currency denominated
investments 1,865,207 2,628,872 109,881,123 - - 114,375,202 0.62International Monetary Fund -
Holding of Special Drawing Rights - - - - 26,958,840 26,958,840 -Loans and advances 1,000,000 - - - - 1,000,000 7.0Local currency denominated
investments 691,970 307,048 91,160,838 - - 92,159,856 8.91International Monetary Fund –
Quota Subscription - - - - 4,206,706 4,206,706 -Due from Government and Government Agencies - - - - 16,440,252 16,440,252 -Other assets - - - - 4,042,627 4,042,627 -
Total financial assets 3,557,177 2,935,920 201,041,961 13,081,356 81,620,097 302,236,511 -
LiabilitiesNotes and coins in circulation - - - - 64,692,948 64,692,948 -Deposits and other demand liabilities:
Jamaica dollar equivalent offoreign currency deposits 84,456,678 - - 16,939,114 - 101,395,792 0.21
Jamaica dollar deposits 17,613,770 - - 33,677,834 - 51,291,604 0.72Open market liabilities 36,763,974 3,616,487 - - - 40,380,461 6.3International Monetary Fund –
Allocation of Special DrawingRights - - - - 35,362,449 35,362,449 -
Foreign liabilities - - - - 16 16 -Bilateral accounts - - - - 3,000 3,000 -Other liabilities - - - - 4,821,875 4,821,875 -
Total financial liabilities 138,834,421 3,616,487 - 50,616,948 104,880,288 297,948,145 -Total interest rate sensitivity
gap (135,277,244) ( 680,567) 201,041,961 (37,535,592) (23,260,191) 4,288,366 -
Cumulative gap (135,277,244) (135,957,812) 65,084,149 27,548,557 4,288,366 - -
- l -Final Accounts for Year Ended 31 December 2013
Bank of Jamaica
49
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
34. Financial risk management (continued)
(d) Market risk (continued)
(ii) Interest rate risk (continued):
Sensitivity to interest rate movement
An increase of 300 (2012: 300) basis points and a decrease of 100 (2012:100) basis points in interest rates for Jamaica dollar financial instruments and a change of 20 (2012: 20) basis points for United States dollar financial instruments would have increased or decreased profit and reserve by the amounts shown below. The analysis assumes that all other variables, in particular, foreign currency rates, remain constant. The analysis has been performed on the same basis as for 2012.
Increase DecreaseEffect on Effect on Effect on Effectprofit/loss reserves profit/loss on reserves
J$'000 J$'000 J$'000 J$'000December 31, 2013
Fixed rate financial instruments - (6,805,576) - 5,324,389Variable rate financial instruments 357,000 ( 31,586) (119,000) 8,745
357,000 (6,837,162) (119,000) 5,333,134
December 31, 2012Fixed rate financial instruments - (6,566,569) - 6,605,046Variable rate financial instruments 2,214,730 ( 362,250) (738,243) 32,057
2,214,730 (6,928,819) (738,243) 6,637,103
(e) Capital management
The Bank’s capital consists of share capital, general reserve fund, special stabilisation account, securities revaluation reserve, property revaluation reserve and pension equalisation reserve. The share capital of the Bank may be increased by resolution of the Board of Directors. This resolution has to be approved by the House of Representatives of Jamaica. The Bank’s net profit is transferred to the general reserve fund. Whenever the credit in the reserve fund exceeds five times the authorised share capital such excess profit is paid to the Consolidated Fund. The Bank has been complying with this requirement. There were no changes in the Bank’s approach to capital management during the year.
35. Prior year adjustment
The Bank has adopted the 2011 amendment to IAS 19, Employee Benefits, which is effective for annual reporting periods beginning on or after January 1, 2013. The adoption of this policy removed the corridor method for recognising actuarial gains and losses and required an adjustment to the computation of interest and service costs recognized for the year. All actuarial gains and losses are now recognised immediately in other comprehensive income.
- li -
Annual Report 2013
Final Accounts for Year Ended 31 December 2013
50
BANK OF JAMAICA
Notes to the Financial StatementsYear ended December 31, 2013
35. Prior year adjustment
The change in accounting policy was applied retrospectively. The effects of the adjustments are detailed below:
Due from government
Employee Employee and benefit benefit government Other Profit forasset obligation agencies reserve the year$'000 $'000 $'000 $'000 $'000
Balances at Dec 31, 2011:
As previously reported 4,290,100 641,800 18,854,846 12,294,923 (1,495,390)Effect of remeasurement of employee
benefit asset/obligation 65,400 ( 33,600) 16,802 115,800 ( 16,802)
As restated 4,355,500 608,200 18,871,648 12,410,723 (1,512,192)
Balances at December 31, 2012:
As previously reported 4,712,700 718,800 16,426,351 10,851,027 3,655,097Effect of remeasurement of employee
benefit asset/obligation 680,400 31,800 13,901 662,500 2,901
As restated 5,393,100 750,600 16,440,252 11,513,527 3,657,998
Effect on total comprehensive income for year ended December 31, 2012:As previously reported 1,788,601Prior year adjustment (see below) 615,701
As restated 2,404,302
Effect on profit for the year ended December 31, 2012:Decrease in pension, medical and life insurance income ( 60,500)Decrease in transfer to the pension equalization reserve 62,500Increase in staff cost 901
2,901
Effect on other comprehensive income for year ended December 31, 2011:Actuarial gain recognised in other comprehensive income 612,800
Increase in other comprehensive income 612,800
Effect on total comprehensive income for the yearended December 31, 2012:Increase in profit 2,901
Increase in other comprehensive income 612,800
615,701
- xlvii -
Annual Report 2012
Appendicies
Inflation Outturn for 2013 Relative to 2012 Weight 2013 2013 2013 2012 YOY in CPI Basket
Per cent Inflation
%Wgt Inflation
%Share Inflation
Per cent Inflation
%pt Chg Inflation
01 FOOD & NON-ALCOHOLIC BEVERAGES 37.45 7.9 3.0 31.8 14.3 -6.4 01.1 Food 35.10 7.7 2.7 29.1 14.7 -7.0 Bread and Cereals 6.10 7.6 0.5 4.9 8.2 -0.7 Meat 7.66 7.1 0.5 5.8 11.7 -4.6 Fish and Seafood 5.33 4.4 0.2 2.5 12.9 -8.4 Milk, Cheese and Eggs 3.11 13.3 0.4 4.4 15.8 -2.5 Oils and Fats 1.64 11.4 0.2 2.0 9.4 2.1 Fruit 1.14 20.3 0.2 2.5 18.0 2.4 Vegetables and Starchy Foods 6.85 5.7 0.4 4.2 28.4 -22.6 Vegetables 4.64 5.6 0.3 2.8 32.6 -27.0 Starchy Foods 2.21 7.1 0.2 1.7 19.1 -12.0 Sugar, Jam, Honey, Chocolate and Confectionery 1.72 7.5 0.1 1.4 7.2 0.3 Food Products n.e.c. 1.55 7.3 0.1 1.2 10.2 -2.9 01.2 Non-Alcoholic Beverages 2.35 11.5 0.3 2.9 8.4 3.0 Coffee, Tea and Cocoa 0.66 12.6 0.1 0.9 13.0 -0.4 Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 1.69 11.0 0.2 2.0 6.6 4.4 02 ALCOHOLIC BEVERAGES & TOBACCO 1.38 11.0 0.2 1.6 6.1 4.9 03 CLOTHING & FOOTWEAR 3.33 9.2 0.3 3.3 11.6 -2.4 03.1 Clothing 2.12 9.9 0.2 2.3 12.0 -2.1 03.2 Footwear 1.22 8.1 0.1 1.1 11.1 -3.0 04 HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS 12.76 10.0 1.3 13.7 5.3 4.7 04.1 Rentals for Housing 3.52 1.2 0.0 0.4 1.6 -0.4 04.3 Maintenance and Repair of Dwelling 0.80 14.4 0.1 1.2 8.9 5.4 04.4 Water Supply and Miscellaneous Services Related to the
Dwelling 1.32 28.7 0.4 4.1 6.6 22.1 04.5 Electricity, Gas and Other Fuels 7.12 10.4 0.7 7.9 6.6 3.8 05 FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE
HOUSEHOLD MAINTENANCE 4.93 7.3 0.4 3.8 8.6 -1.3 05.1 Furniture and Furnishings (inc. Floor Coverings) 0.69 8.3 0.1 0.6 9.5 -1.2 05.2 Household Textiles 0.32 6.6 0.0 0.2 9.3 -2.6 05.3 Household Appliances 0.56 8.4 0.0 0.5 11.1 -2.7 05.4 Glassware, Tableware and Household Utensils 0.05 7.6 0.0 0.0 10.4 -2.8 05.5 Tools and Equipment for House and Garden 0.15 10.0 0.0 0.2 4.4 5.5 05.6 Goods and Services for Routine Household Maintenance 3.16 6.8 0.2 2.3 8.0 -1.3 06 HEALTH 3.29 5.9 0.2 2.1 3.1 2.8 06.1 Medical Products, Appliances and Equipment 1.22 6.7 0.1 0.9 4.3 2.4 06.2 Health Services 2.07 5.4 0.1 1.2 2.4 3.1 07 TRANSPORT 12.82 20.4 2.6 28.1 2.5 17.9 08 COMMUNICATION 3.99 -4.2 -0.2 -1.8 -39.4 35.2 09 RECREATION & CULTURE 3.36 5.9 0.2 2.1 6.6 -0.8 10 EDUCATION 2.14 4.0 0.1 0.9 3.7 0.3 11 RESTAURANTS & ACCOMMODATION SERVICES 6.19 7.8 0.5 5.2 5.3 2.5 12 MISCELLANEOUS GOODS & SERVICES 8.37 10.3 0.9 9.2 6.0 4.3
0.0 ALL DIVISIONS 100.0 9.5 9.5 100.0 8.0 1.5
Regional Inflation and Change in Inflation for 2013 Relative to 2012
Inflation (%)
Inflation (YOY Percentage Point Change)
GKMA OUC RUA GKMA OUC RUA
01 FOOD & NON-ALCOHOLIC BEVERAGES 10.4 7.9 6.1 -8.4 -4.2 -6.1 01.1 Food 10.4 7.5 5.8 -8.8 -4.7 -6.8 Bread and Cereals 8.4 7.2 7.3 -2.5 -0.6 0.3 Meat 8.7 7.6 5.7 -5.6 -1.6 -5.0 Fish and Seafood 4.7 5.4 3.9 -9.4 -5.0 -9.2 Milk, Cheese and Eggs 13.5 14.6 12.6 0.6 0.3 -6.1 Oils and Fats 13.9 15.2 8.6 3.7 7.2 -0.8 Fruit 21.6 20.9 17.5 5.4 0.5 -1.7 Vegetables and Starchy Foods 12.9 2.4 0.3 -26.7 -17.6 -22.5 Vegetables 12.6 3.0 -1.6 -33.9 -20.1 -25.0 Starchy Foods 13.6 0.7 5.4 -7.0 -12.2 -15.9 Sugar, Jam, Honey, Chocolate and Confectionery 8.0 7.0 7.4 -0.4 -2.6 1.7 Food Products n.e.c. 8.1 7.8 6.6 -12.0 -1.4 2.4 01.2 Non-Alcoholic Beverages 10.0 13.3 11.5 -0.9 3.8 5.3 Coffee, Tea and Cocoa 8.4 12.7 14.8 -6.9 -3.4 4.3 Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 10.7 13.5 9.9 1.3 6.2 5.7 02 ALCOHOLIC BEVERAGES & TOBACCO 9.7 13.4 10.9 1.1 7.1 6.4 03 CLOTHING & FOOTWEAR 6.9 15.9 8.4 -9.7 5.3 -0.6 03.1 Clothing 6.9 20.1 8.0 -13.8 10.1 0.1 03.2 Footwear 6.8 8.4 9.0 -4.6 -3.4 -1.7 04 HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS 8.2 10.4 11.7 3.2 5.5 5.9 04.1 Rentals for Housing 1.3 1.2 0.8 -1.0 0.6 0.2 04.3 Maintenance and Repair of Dwelling 10.6 16.3 15.7 0.8 9.8 6.1 04.4 Water Supply and Miscellaneous Services Related to the
Dwelling 28.9 28.9 28.1 22.3 22.3 21.5 04.5 Electricity, Gas and Other Fuels 8.8 10.4 11.3 2.1 3.7 4.9 05 FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE
HOUSEHOLD MAINTENANCE 7.4 7.8 6.9 -3.2 -1.2 0.2 05.1 Furniture and Furnishings (inc. Floor Coverings) 8.0 8.8 8.3 -3.7 -0.1 0.3 05.2 Household Textiles 5.4 12.1 4.5 -5.4 4.1 -4.4 05.3 Household Appliances 7.3 9.2 9.0 -1.1 -4.0 -3.5 05.4 Glassware, Tableware and Household Utensils 8.9 10.5 5.7 -1.0 1.4 -5.5 05.5 Tools and Equipment for House and Garden 14.5 10.3 9.2 6.1 3.5 5.7 05.6 Goods and Services for Routine Household Maintenance 7.3 6.8 6.3 -3.5 -1.6 0.9 06 HEALTH 2.0 7.3 7.5 -1.8 4.9 4.5 06.1 Medical Products, Appliances and Equipment 4.2 6.8 8.1 0.3 3.6 3.3 06.2 Health Services 0.4 7.5 7.2 -3.2 5.7 5.3 07 TRANSPORT 20.2 20.2 20.7 17.8 18.1 18.2 08 COMMUNICATION -5.1 -4.4 -3.1 25.3 35.6 43.8 09 RECREATION & CULTURE 6.3 7.1 5.1 2.0 0.4 -3.1 10 EDUCATION 3.7 4.1 4.3 1.7 -1.0 -1.0 11 RESTAURANTS & ACCOMMODATION SERVICES 4.6 11.1 9.1 -0.3 4.9 3.8 12 MISCELLANEOUS GOODS & SERVICES 8.3 11.5 11.2 0.3 4.9 7.0 ALL DIVISIONS 9.6 10.1 9.0 -0.4 3.2 2.1
- li -
Annual Report 2012
Appendicies
Dec-11 Dec-12 Dec-13 Dec-11 Dec-12 Dec-13 Dec-11 Dec-12 Dec-13 Dec-11 Dec-12 Dec-13
Number of institutions in operation 7 7 7 2 2 2 4 4 3 13 13 12 J$MN1Total Assets (incl. contingent accounts) 613,637 659,950 740,692 21,449 21,320 25,372 185,472 201,504 211,088 820,558 882,774 977,1522Total Assets (excl. contingent accounts) 600,935 646,914 726,580 21,290 21,306 25,310 185,472 201,504 211,088 807,697 869,724 962,978Cash & Bank Balances 125,834 132,720 156,634 1,137 1,477 1,718 18,212 19,597 28,380 145,183 153,794 186,732Investments [incl. Securities Purch.] (net of prov.) 177,442 171,846 168,758 12,609 13,470 15,825 66,555 72,027 70,676 256,606 257,343 255,259Total Loans (gross) 266,043 307,479 362,117 6,885 5,625 7,093 89,340 95,879 97,377 362,268 408,983 466,587Total Loans (net of IFRS prov.) a 258,573 298,017 353,710 6,549 5,334 7,051 87,912 94,469 95,835 353,034 397,820 456,596Total Deposits 400,122 444,795 487,472 6,556 7,852 11,118 121,783 131,438 141,352 528,461 584,085 639,942Borrowings (incl. repos) 72,383 80,336 98,274 9,555 8,364 8,372 24,519 26,648 25,135 106,457 115,348 131,781Non-Performing Loans [NPL] (3 mths & >) 23,287 20,978 18,669 3,171 974 120 5,744 6,771 6,224 32,202 28,723 25,013Provision for Loan Losses 18,302 20,913 19,550 2,332 1,040 172 3,597 3,975 4,182 24,231 25,928 23,9043 Capital Base 63,835 65,196 78,931 2,667 3,825 3,943 22,789 24,045 26,058 89,291 93,066 108,932Contingent Accts [Accept., LC's & Guarantees] 12,702 13,036 14,112 159 14 62 0 0 0 12,861 13,050 14,174Funds Under Management 308 320 337 0 0 0 0 0 0 308 320 337Repos on behalf of or for on-trading to clients n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
%Rate of Asset 1 Growth 4.0% 7.5% 12.2% -12.1% -0.6% 19.0% 10.2% 8.6% 4.8% 4.8% 7.6% 10.7%Rate of Deposit Growth 5.5% 11.2% 9.6% -21.6% 19.8% 41.6% 5.1% 7.9% 7.5% 5.0% 10.5% 9.6%Rate of Loans Growth (gross) 5.8% 15.6% 17.8% -4.2% -18.3% 26.1% 2.3% 7.3% 1.6% 4.8% 12.9% 14.1%Rate of Capital Base Growth 5.6% 2.1% 21.1% -26.1% 43.4% 3.1% 10.5% 5.5% 8.4% 5.4% 4.2% 17.0%Rate of NPL (3 Mths &>) Growth 72.8% -9.9% -11.0% 10.6% -69.3% -87.7% -4.6% 17.9% -8.1% 44.0% -10.8% -12.9%
Investments :Total Assets 1 28.9% 26.0% 22.8% 58.8% 63.2% 62.4% 35.9% 35.7% 33.5% 31.3% 29.2% 26.1%Loans (net of prov.):Total Assets 1 42.1% 45.2% 47.8% 30.5% 25.0% 27.8% 47.4% 46.9% 45.4% 43.0% 45.1% 46.7%Fixed Assets:Total Assets 1 2.1% 2.2% 2.0% 0.5% 0.4% 0.3% 1.6% 1.7% 1.8% 1.9% 2.1% 1.9%Loans (gross) : Deposits 66.5% 69.1% 74.3% 105.0% 71.6% 63.8% 73.4% 72.9% 68.9% 68.6% 70.0% 72.9%
LiquidityAverage Domestic Currency Cash Reserve: Average Prescribed Liabilities 4 12.0% 12.0% 12.0% 12.0% 12.0% 12.1% 1.0% 1.0% 1.0% 9.1% 9.2% 9.3%Average Domestic Currency Liquid Assets: Average Domestic Prescribed Liabilities 4 37.7% 31.3% 29.8% 33.8% 32.8% 27.7% 10.7% 13.1% 12.0% 30.5% 26.7% 25.3%
Asset QualityProv. For Loan Losses:Total Loans (gross) 6.9% 6.8% 5.4% 33.9% 18.5% 2.4% 4.0% 4.1% 4.3% 6.7% 6.3% 5.1%Prov. For Loan Losses: NPL (3 Mths &>) 78.6% 99.7% 104.7% 73.5% 106.8% 143.3% 62.6% 58.7% 67.2% 75.2% 90.3% 95.6%NPL (3 Mths &>):Total Loans (gross) 8.8% 6.8% 5.2% 46.1% 17.3% 1.7% 6.4% 7.1% 6.4% 8.9% 7.0% 5.4%NPL (3 Mths &>): (Total Assets 1
+ Provision for loan losses) 3.7% 3.1% 2.5% 14.5% 4.5% 0.5% 3.1% 3.3% 2.9% 3.9% 3.2% 2.5%
Capital AdequacyDeposits + Borrowings: Capital (:1) 7.4 8.1 7.4 6.1 4.3 5.0 6.5 6.6 6.4 7.1 7.5 7.1Capital Base:Total Assets 1 10.4% 9.9% 10.7% 12.4% 17.9% 15.5% 12.3% 11.9% 12.3% 10.9% 10.5% 11.1%5 Capital Adequacy Ratio [CAR] 15.0% 12.9% 14.0% 12.3% 17.8% 15.8% 20.6% 18.2% 20.0% 16.1% 14.1% 15.1%NPL (3 mths &>):Capital Base+Prov for loan losses 28.4% 24.4% 19.0% 63.4% 20.0% 2.9% 21.8% 24.2% 20.6% 28.4% 24.1% 18.8%
Profitability6 Pre - tax Profit Margin (for the Calendar Quarter) 52.3% 11.9% 25.1% 0.7% -13.5% 12.4% 25.2% 28.7% 40.7% 48.4% 14.6% 27.7%Pre - tax Profit Margin (for the Calendar Year) 32.6% 21.6% 17.3% 5.1% -2.9% 12.8% 24.5% 22.9% 27.4% 30.8% 21.4% 19.0%Return on Average Assets (for the Calendar Quarter) 2.5% 0.4% 0.7% 0.0% -0.3% 0.3% 0.5% 0.7% 0.9% 2.0% 0.4% 0.8%Return on Average Assets (for the Calendar Year) 4.5% 2.6% 2.0% 0.4% -0.2% 1.3% 2.3% 2.0% 2.3% 3.9% 2.4% 2.0%7 Income Assets/Expense Liabilities 105.1% 102.1% 104.4% 102.1% 114.5% 120.9% 111.9% 110.1% 109.9% 106.6% 104.2% 106.0%
COMMERCIAL BANKS FIA LICENSEES BUILDING SOCIETIESSystem Total (aggregation of all 3
sectors)
ANNUAL PRUDENTIAL INDICATORS OF COMMERCIAL BANKS, LICENSEES UNDER THE FINANCIAL INSTITUTIONS ACT (FIA) AND BUILDING SOCIETIES
PUBLISHED PURSUANT TO SECTION 16 (6) OF THE BANKING ACT AND THE FIA AND REGULATION 49 OF THE BANK OF JAMAICA (BUILDING SOCIETIES) REGULATIONS, 1995
31-Dec-13
Notes:n.a. data not availablen/a not applicable
- Based on unaudited data submitted to BOJ by supervised institutions up to 31 January 2014. Prior years indicators may have revisions arising from amendments.
a Effective January 2004, the Bank of Jamaica revised its reporting requirements in line with International Financial Reporting Standards (IFRS) and in this regard the following change was effected: The composition of "Provision for Loan Losses" has been segregated into two (2) distinct components being: i) provision for losses computed in accordance with IFRS; and ii) any incremental provisioning necessary under prudential loss provisioning requirements (treated as an appropriation from net profits). Consequently, "Total Loans (net of prov.)" represents gross loans net of IFRS loan loss provisions per (i) above
1 Total Assets and Liabilities reflected net of IFRS Provision for Losses and include Contingent Accounts (Customer Liabilities for Acceptances, Guarantees and Letters of Credit).In keeping with IFRS, Total Assets and Liabilities were redefined to include Contingent Accounts.
2 Total Assets net of IFRS Provision for Losses and Contingent Accounts (Customer Liabilities for Acceptances, Guarantees and Letters of Credit). 3 Capital Base - Banks & FIA Licensees: (Ordinary Shares+ Qualifying Preference Shares+ Reserve Fund + Retained Earnings Reserve Fund + Share Premium) less impairment by net losses of individual institution. - Building Societies: (Permanent Capital Fund + Deferred Shares + Capital Shares + Reserve Fund + Retained Earnings Reserve Fund ) less impairment by net losses of individual society.4 Prescribed Liabilities include:
5 Capital Adequacy Ratio (CAR): Qualifying Capital (Tier 1 + Tier 2 capital items less prescribed deductions) in relation to Risk Weighted Assets and Foreign Exchange Exposure.6 Pre-tax Profits includes extraordinary income/expenditure and adjustments for prior period. Return on Average Assets is computed using pre-tax profits as well as assets before provision for losses (in accordance with IFRS) and including contingent accounts (Acceptances, Guarantees and Letters of Credit).7 Income Assets comprise FC Cash Reserves, Placements, Investments, Repo Assets and Loans less Non-Performing Loans (3 months & over). Expense Liabilities comprise Deposits and Borrowings including Repo Liabilities (from BOJ, Banks, OFI etc).
COMMERCIAL BANKSDec-11 Dec-12 Dec-13 Dec-11 Dec-12 Dec-13 Dec-11 Dec-12 Dec-13
Required Cash Reserve ratio 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 1% / 12% 1% /12% 1% / 12% Required Liquid Assets ratio (incl Cash Reserve) 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 5% / 26% 5% /26% 5% / 26%
** The requirements are differentially applied to societies not meeting the prescribed threshold of residential mortgage lending in relation to savings funds. Societies that meet the prescribed 'qualifying assets' threshold attract the lower reserve requirements indicated above. Societies which do not, are requested to meet the requirements which apply to commercial banks and FIA Licensees.
Financial Institutions Supervisory DivisionBank of Jamaica
FIA LICENSEES BUILDING SOCIETIES**
(i) deposit liabilities, (ii) reservable borrowings and interest accrued and payable on (i) & (ii).
1
BANK OF JAMAICA Nethersole Place
P.O. Box 621 Kingston, Jamaica
Telephone: 876 922 0750 Internet: www.boj.org.jm