In conjunction with a twin peaks model of financial sector supervision and regulation, a fixed penalty regime across the local financial services industry will likely be on the table.
Finance Minister Dr Nigel Clarke on Wednesday said the payment of fines in the financial services industry would become a feature of the Jamaican landscape, as it is in Australia, New Zealand, Canada, the US, and in more developed markets.
“When you have a financial structure where certain groups dominate the landscape, we cannot allow regulatory gaps to occur. We need a single financial services regulator that has a seamless ability to see the entire system,” Dr Clarke said.
Dr Clarke described the complaints of Jamaican consumers about financial institutions as a “cry for visible market conduct regulation.”
He was speaking at the 18th Regional Jamaica Stock Exchange Investments and Capital Markets Conference in Kingston on Wednesday.
“We hear about it, in terms of bank fees … and complaints come from time to time about other infractions in other areas,” he said.
And for that reason, a regulatory environment that protects Jamaicans is necessary, Clarke said.
In his address at the JSE conference, the finance minister reiterated the twin peak model of the Bank of Jamaica and the Financial Services Commission he announced on Monday during his Financial Sector Regulation Policy Address.
A twin peaks model employs two specialist peak regulators: one charged with maintaining financial system stability and the other with market conduct and consumer protection.
The current framework sees the Bank of Jamaica (BOJ) supervising deposit-taking institutions (DTIs) and the Financial Services Commission (FSC) with oversight for non-bank financial institutions.
The new structure will see DTIs, including commercial banks, building societies, merchant banks and credit unions, along with non-bank financial institutions comprising securities dealers, insurance companies and pension funds — consolidated into one institution, the BOJ.
A separate regulator, the FSC in this regard, will be designated to oversee market conduct and consumer protection for the full spectrum of financial services.
Clarke said the entity would “receive complaints and look into complaints, and where complaints are justified, action is taken.”
He is proposing that there be a change in the regime to apply fixed penalties on local financial institutions for offences.
He said: “A fixed penalty regime will allow us to have an enquiry to look into the matter, and if the entity is guilty of an infraction, a fine can be imposed right there and then.”
A fixed penalty is a set amount of money you have to pay as a punishment for an offence, without having to go to court, in which case the matter is not prosecuted.
“We are going to change the regime to have a fixed penalty regime where we don’t have to haul any institution before the court at huge costs associated,” Clarke said. “It takes three years to resolve and by the time the customer leaves Jamaica and has no justice.”
The Court currently imposes penalties through the Financial Services Commission Act, the Bank of Jamaica Act and the Banking Services Act. The sanctions include fines and or imprisonment for certain offences.
Meanwhile, concerning the new proposed framework, the FSC will be designated to oversee market conduct and consumer protection for the full spectrum of financial services.
Clarke also indicated that work on the draft Bill for Financial Service Consumer Protection continues, “incorporating the new direction with regard to consumer protection, with the view that a reformed FSC could take on this role”.
Clarke said the government would engage the industry on the finer details of the structure.
The twin peak model is being programmed for implementation within 18 to 24 months, during which time the BOJ and FSC will continue to operate separately with integrated management.