FINANCIAL STABILITY REPORT - Bank of Jamaica
FINANCIAL STABILITY REPORT 2018
2019 Bank of Jamaica Nethersole Place Kingston Jamaica
Telephone: (876) 922 0750-9 Fax: (876) 967 4265
Email: library@.jm Website:
Twitter: @CentralBankJA Facebook: @CentralBankJA YouTube: Bank of Jamaica
ISSN 0799 3617
Bank of Jamaica Financial Stability Report prepared pursuant to subsection 34R of the Bank of Jamaica Act.
This publication available on the BOJ website at: ().
Printed in Jamaica
CONTENTS
CONTENTS BANK OF JAMAICA | FINANCIAL STABILITY REPORT | 2018
ABBREVIATIONS AND ACRONYMS
i
FOREWORD
iii
1. FINANCIAL STABILITY OVERVIEW
1
2. MACRO-FINANCIAL RISKS
2.1. Overview
4
2.2. Global developments
4
2.3. Domestic environment
5
2.4. Measures of financial cycle
7
2.5. Measures of direct and indirect exposure concentration
9
2.6. Measures of interconnectedness & systemic Importance
10
Box 2.1 The Effect of Capital Flows on Key Financial Stability Measures in Jamaica
12
3. FINANCIAL SYSTEM DEVELOPMENTS
3.1. Overview
14
3.2. The financial system
14
3.3. Deposit-taking institutions
14
3.4. Non-deposit-taking financial institutions
19
Box 3.1 Problem Assets Management, Provisioning Requirements and Accounting for
Expected Credit Losses
29
4. FINANCIAL SYSTEM SECTORAL EXPOSURES
4.1. Overview
31
4.2. Household debt and deposit-taking institutions' exposure
31
4.3. Deposit-taking institutions' exposure to corporate sector debt
33
4.4. Public sector debt & deposit-taking institutions' exposure
34
4.5. Non-deposit-taking financial institutions' sector exposure
36
4.6. Exposure to other assets
37
4.7. Pension industry exposure to government's securities, equities & real estate
38
5. RISK ASSESSMENT OF THE FINANCIAL SECTOR
5.1. Overview
39
5.2. Risk exposure assessment for deposit taking institutions
39
5.3. Liquidity funding risk assessment for deposit taking institutions
40
5.4. Market risk assessment of deposit taking institutions
41
5.5. Interest rate risk assessment for deposit taking institutions
42
5.6. Foreign exchange risk assessment for deposit taking institutions
42
5.7. Credit risk assessment of deposit taking institutions
43
5.8. Risk exposure assessment for securities dealers
45
5.9. Liquidity funding risk assessment of securities dealers
45
5.10. Interest rate risk assessment of securities dealers
46
5.11. Foreign exchange risk assessment of securities dealers
47
5.12. Evolution of risk indicators ? life and general insurance companies
47
5.13. Foreign exchange risk assessment of insurance companies
48
5.14. Market and interest rate risk assessment of insurance companies
48
5.15. Liquidity funding risk assessment of insurance companies
49
Box 5.1 Predicting Bank Failures in Jamaica ? A Logistic Regression Approach
51
Box 5.2 Cyber Risk and its Impact on Financial Stability
54
CONTENTS BANK OF JAMAICA | FINANCIAL STABILITY REPORT | 2018
6. PAYMENT SYSTEM DEVELOPMENTS
6.1. Overview
56
6.2. Key developments in payment systems
57
6.3. Assessing financial sector exposure to financial market infrastructures
62
6.4. Evaluating interconnectedness & systemic importance
63
Box 6.1 Updated Guidelines on Electronic Retail Payment Services and Summary Activities
65
GLOSSARY
67
ABBREVIATIONS AND ACRONYMS BANK OF JAMAICA | FINANCIAL STABILITY REPORT | 2018
i
ABBREVIATIONS AND ACRONYMS
ABM ACH
Automated Banking Machine Automated Clearing House
AFSI BAMLGFSI BINS BIS BN BOJ BPS CAR CD CIS CISS CPI
Aggregate Financial Stability Index Bank of America Merrill Lynch Global Financial Stress Index Benchmark Investment Notes
Bank for International Settlement
Billion
Bank of Jamaica
Basis Points
Capital Adequacy Ratio
Certificate of Deposit
Collective Investment Schemes Composite Indicator of Systemic Stress Consumer Price Index
CRE
Credit Risk Exposure
CSD
Central Securities Depository
CY D-SIB DTI DVBP EMBI+ ERPS FSC FSI
Calendar Year Domestic Systemically Important Bank Deposit-taking Institution Dollar Value of a Basis Point Emerging Market Bond Index Electronic Retail Payment Services Financial Services Commission Financial Soundness Index
FSR FSSC FX
Fiscal Stability Ratio Financial System Stability Committee Foreign Exchange
FUM
Funds Under Management
GDP
Gross Domestic Product
GI
General Insurance
GOJ
Government of Jamaica
GOJGB Government of Jamaica Global Bonds
GWP
Gross Written Premium
HHI
Herfindahl-Hirschman Index
ICs
Insurance Companies
LI
Life Insurance
JDX
Jamaica Debt Exchange
JSE LSCRI MaFI MCCSR MCT
Jamaica Stock Exchange Large-Value System Concentration Risk Index Macro-Financial Index Minimum Continuing Capital and Surplus Requirements
Minimum Capital Test
MiPI
Micro-Prudential Index
NDTFI Non-Deposit-taking Financial Institution
NDX
National Debt Exchange
NIR
Net International Reserves
NOP
Net Open Position
NPL
Non-Performing Loan
POS REER ROA ROE RTGS RWA SD SIFI The Bank VIX WTI
Point-of-Sale
Real Effective Exchange Rate
Return on Asset
Return of Equity Real-Time Gross Settlement System Risk-Weighted Assets
Securities Dealer Systemically Important Financial Institution Bank of Jamaica
Volatility Index
West Texas Intermediate
ABBREVIATIONS AND ACRONYMS BANK OF JAMAICA | FINANCIAL STABILITY REPORT | 2018
ii
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