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Ministry of Finance and the Public Service Fiscal Policy Paper 2017 77 | P a g e

financial products and services, which would enable them to save, invest and build economic wealth. The FIS">NFIS will focus on the following priority areas: MSME and agriculture finance, housing finance, consumer protection and financial literacy, and retail payment systems.

Enhancement of the Resolution Framework for Financial Institutions Preliminary work commenced with the drafting of a concept paper proposing a special resolution regime (SRR) for financial institutions. This concept paper will inform the drafting of a consultation paper, which is expected to be released for public feedback by end February 2017. An inter-agency technical working group of the Financial Regulatory Committee is drafting the papers, with technical assistance from the International Monetary Fund.

The proposed SRR for financial institutions will provide a framework for the orderly resolution of distressed financial institutions in order to protect financial stability whilst minimizing recourse to public funds. The proposed SRR is in keeping with international best practices promoted by the Financial Stability Board in its guidance document “Key Attributes of Effective Resolution Regimes for Financial Institutions”.

Financial Institutions Services Limited

During FY 2016/17, the FIS continued with the winding up of residual activities on behalf of FINSAC including selling remaining properties under its control. The following are some of its key achievements:-

 The audited financial statements for the year ended March 2016 for FIS and FINSAC were completed and submitted to the MOFPS in July 2016.

 The FIS sold the remaining 10 of the 31 Enchanted Gardens units, which netted $8.2mn. In addition, an agreement has been reached to sell the Mutual Life Warehouse Complex in Kingston which is expected to conclude by May 2017. The remaining properties in FINSAC’s portfolio are four ½ acre lots at Drax Hall, St. Ann and a 16-acre lot at Culloden, Westmoreland.

 A total of $48.0mn was collected from the sale of shares in various listed companies and another $12.0mn is anticipated from remaining sales by March 2017. Listed shares for dissolved companies will be transferred to the Accountant General by March 2017.

 The FIS has received seven (7) payments totalling US$3.4mn as at October 2016 under a settlement reached in 2013 regarding a property in St. Lucia which was owned by International Hotels (St. Lucia) Limited. There are three (3) remaining payments due in April 2017, October 2017 and April 2018, totalling US$1.3mn.

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June 12, 2021


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Ministry of Finance and the Public Service Fiscal Policy Paper Interim Report September 2017 52 | P a g e

products and services, which would enable them to save, invest and build economic wealth. The focus of the NFIS will be on the following priority areas: MSME and agriculture finance, housing finance, consumer protection and financial literacy and retail payment system.

Proposal for the enhancement of the Resolution Framework for Financial Institutions

The Consultation Paper proposing a special resolution regime (SRR) for financial institutions was completed by the inter-agency technical working group of the Financial Regulatory Committee with the technical assistance of the International Monetary Fund. The Consultation Paper was subsequently released for public feedback on February 28, 2017 and the resulting feedback was taken into consideration in drafting the Cabinet Submission. The Cabinet Submission was forwarded to the Cabinet in July 2017 for its approval of the policy proposal. The next step is to prepare and issue drafting instructions to the CPC to draft the relevant Bill.

The proposed special resolution regime for financial institutions will provide a framework for the orderly resolution of distressed financial institutions in order to protect financial stability whilst minimizing the recourse to public funds. The proposed SRR legislation will be in keeping with international best practices promoted by the Financial Stability Board in its guidance document “Key Attributes of Effective Resolution Regimes for Financial Institutions”.

Proposed Credit Union (Special Provisions) Act

The Cabinet Submission was prepared and submitted to the Cabinet in April 2017 for its approval of the proposal for the enactment of legislation to facilitate the supervision of credit unions by the Bank of Jamaica. The Cabinet approved the Policy in May 2017. Subsequently, drafting instructions were prepared and submitted to the CPC. The FRD received a preliminary draft of the Bill in July 2017.

Financial Sector Adjustment Company Ltd and Financial Institutions Services Ltd

During the review period, FINSAC Limited continued with the winding up of residual activities including selling remaining properties under its control. The following are some of its key achievements:-

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June 12, 2021


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Consultation Paper: Proposals for a Special Resolution Regime for Financial Institutions

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EXECUTIVE SUMMARY

The 2008 global financial crisis has ushered in several international regulatory reform

initiatives pursued to enhance the resilience and stability of the financial system.

Included in these reforms have been new capital and liquidity standards for Financial

Institutions (FIs). The objective of these reforms has been to improve the ability of FIs to

deal with market and economic shocks to maintain financial stability and protect the

real economy. Notwithstanding the resilience gained through regulatory reforms, failures

may occur. To deal with these failures in an orderly way, reforms have included

enhancements to the legal framework to provide mechanisms to resolve these FIs if

failure is imminent or does occur. The overriding objective of these arrangements for

resolution is to reduce the resort to public funds when failures occur while preserving vital

economic functions. The reforms recognize and distinguish systemically important

financial institutions because of their potential impact on the broader economy if they

fail.

The Financial Stability Board (FSB) was mandated by the G20 leaders with developing

robust alternatives to publicly-funded resolution of FIs. In light of this, the FSB recommends

that each jurisdiction establish a SRR. This should provide national authorities with

sufficient powers and tools to effect resolution while supporting the maintenance of

financial stability.

The underlying thesis of an effective resolution regime recognizes that the practise of

private owners taking profits in good times while nationalising losses during failures results

in unfair burden sharing by tax payers. The international standards advocate a range of

resolution tools aimed at limiting disruptions to the financial system with owners being

compelled to effect resolution measures including the cost of recapitalisation, with

recourse to the public purse being a last resort.

This Consultation Paper outlines proposals to enhance the current legal framework for the

resolution of regulated non-viable financial institutions (FIs) in Jamaica. The institutions

proposed to be within the scope of this framework include: financial holding companies

(FHCs), commercial banks, merchant banks and building societies regulated by Bank of

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June 12, 2021


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Consultation Paper: Proposals for a Special Resolution Regime for Financial Institutions

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longer viable (see Appendix 1). In particular, the alternative approach being

adopted by authorities is to ensure that the costs of resolution are borne first by

owners and shareholders with the use of public funds being a last resort.

1.5. The Financial Stability Board, (FSB),7 reviewed the weaknesses in the financial

regulatory framework that contributed to the 2008 global financial crisis.

Regulators in many instances did not have the tools to prevent or contain the

rapid contagion across global markets. In this regard, the FSB has put forward

the core elements necessary for an effective resolution regime for financial

institutions. These are referred to as the Financial Stability Board (FSB) Key

Attributes of Effective Resolution Regimes for Financial Institutions (KA)8. The FSB

encourages national authorities to align their framework with these standards in

the context of their national legal systems, financial market structures and sector-

specific considerations.

1.6. The FSB recommends that any FI that could pose a threat to financial system

stability if it fails, should be subject to an effective resolution regime. The

objective of the regime should be “to make feasible the resolution of financial

institutions without severe systemic disruption and without exposing taxpayers to

loss, while protecting vital economic functions through mechanisms which make

it possible for shareholders and unsecured and uninsured creditors to absorb

losses in a manner that respects the hierarchy of claims in liquidation.” 9

1.7. The FSB also recommends that an effective resolution regime should provide for

the timely and early entry into resolution before a financial institution is balance-

sheet insolvent and all equity has been fully wiped out. This should allow for the

7 The FSB is one of the key international standard setting bodies for financial regulators. 8 “The FSB’s decisions are not legally binding on its members; instead the organization operates by moral suasion and peer pressure, in order to set internationally agreed policies and minimum standards that its members commit to implementing at national level. As obligations of membership, members of the FSB commit to pursue the maintenance of financial stability, maintain the openness and transparency of the financial sector, implement international financial standards (including the 12 key International Standards and Codes) and agree to undergo periodic peer reviews, using among other evidence IMF/World Bank public Financial Sector Assessment Program (FSAP) reports.” Source: ...
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The proposed SRR will aim to establish a framework for the orderly resolution of distressed financial institutions in order to safeguard financial stability whilst minimizing recourse to public funds. Further, the proposed SRR legislation will be in keeping with international best practices promoted by the Financial Stability Board in its guidance document “Key Attributes of Effective Resolution Regimes for Financial Institutions”.

Financial Investigations Division

During FY 2017/18, the FID continued to pursue its mandates under the FID Act (FIDA) and the Proceeds of Crimes Act (POCA). Some notable achievements include:

 A Prior Options Review of FID as part of the strategic transformation being undertaken by the GOJ, resulting in a decision that FID should transition from a Division to a Department of Government.

 A public education programme advising the public of the J$1.0mn cash transaction limit on persons and institutions by way of amendments to the POCA in 2013 (i.e. section 101A).

 Consensus obtained with the Ministries of National Security and Justice on the development of regulations governing an Asset Incentivisation Scheme. This will entail part of the proceeds arising from post-conviction forfeiture being reserved and utilized specifically for law enforcement and the justice system.

 The FID led the co-ordination of Jamaica’s anti-money laundering framework to meet global standards. Some important measures that were undertaken to improve Jamaica’s framework in 2017 include:

 the issue of Ministerial Orders under the Terrorism Prevention Act (TPA), to bring certain non-financial professions under that Act;

 the passage of amendments to the Companies Act to deal with issues relating to beneficial ownership and bearer share warrants; and

 the expeditious obtaining of orders by the Office of the Director of Public Prosecution (ODPP) under the TPA in listing terrorist entities per the UN Security Council Listings.

 The FID sensitised approximately one hundred and seventy five (175) persons in eight (8) financial and non-financial institutions.

 The implementation of the electronic reporting system (goAML) progressed with the roll out of training to staff at FID and the financial institutions that are obligated to report suspicious and threshold transactions. The system is to go “live” in the 2nd quarter of 2018.

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June 12, 2021


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