Banking Business through Authorized Agents
The Act specifically allows deposit taking institutions (banks, merchant banks and building societies) , with the prior approval of the Supervisory Committee, to appoint a person to act as agent to offer banking services such as deposits and withdrawals, bill and loan payments/repayments, account balance enquiries and collection of KYC and due diligence information. The intention here seems to be to encourage efficiency through authorized agency relationships.
Supervision of Financial Groups & Financial Holding Companies
The Act reinforces the existing requirements for consolidated supervision. It also introduces provisions expanding the supervisory realm to incorporate conglomerate supervision.
The Act defines “consolidated supervision” in relation to a financial group as meaning: (a) the supervision of the financial group on a consolidated basis; (b) the effective supervision of every licensee within a financial group, and (c) where the financial group is a part of a mixed conglomerate, the comprehensive review of the activities within the financial group.
Under the Act, a financial holding company shall be established and consolidated supervision shall apply where: a) two or more financial institutions operating in Jamaica are members of the financial group and one of them is a deposit taking institution; and b) a deposit taking institution operating in Jamaica is a member of a financial group and has branches or subsidiaries or control of companies outside of Jamaica. The Act then outlines structures that will afford the Supervisor the ability to better regulate and supervise financial groups. It will also allow the Supervisor to obtain a perspective of the financial condition of the wider group within which the deposit taking institution exists, in order to assess the risk that may be present to the deposit taking institution.
The Act also prohibits ownership structures of and within a financial group which, in the opinion of the Supervisory Committee, may impede consolidated supervision or effective supervision of a licensee. Notably, these ownership structures include structures that are established in jurisdictions with laws that hinder consolidated or effective supervision.
We have already begun to see entities within the financial services sector taking steps to restructure so as to facilitate effective supervision.
