Comprehensive Market Conduct and Consumer Protection Framework to Be Developed for Financial Sector

Bank of Jamaica’s (BOJ’s) recently introduced Automated Banking Machines (ABM) Service-Level Standards for deposit-taking institutions (DTIs), are consistent with the Government’s thrust to develop a robust and comprehensive market conduct and consumer protection framework for the financial sector.

This framework will ensure that, in addition to prudential regulation of all financial institutions by one regulator, another will monitor the market conduct of all financial institutions and effectively address issues concerning the protection of consumers of financial services.

Senior Deputy Governor, BOJ, Dr. Wayne Robinson, says this robust framework will be established with the implementation of the Twin Peaks model of financial sector supervision.

The Twin Peaks model, with a scheduled timeline for its legislation to reach Parliament by 2025, is now being developed by the Government and is coordinated by the BOJ and Financial Services Commission (FSC), in collaboration with the Ministry of Finance and the Public Service and several government departments, in consultation with key stakeholders.

This model will see the responsibility for prudential supervision and regulation of DTIs, inclusive of commercial banks, building societies, merchant banks and credit unions, as well as for non-bank financial institutions, such as securities dealers and pension funds, being vested in the BOJ.

The FSC will be responsible for regulating market conduct and consumer protection for the full spectrum of financial services.

The Standards, which were issued on April 2, are guidelines for the operation of ABMs by BOJ-regulated DTIs.

They address issues relating to the deployment of ABMs, accessibility and ease-of-use, availability of cash, ABM fees and charges, infrastructure maintenance and the management of disruptions, client safety and security, fraud minimisation, and financial education of ABM users.

Dr. Robinson tells JIS News that despite the availability of approximately 885 ABMs islandwide, “financial services customers have really been experiencing challenges in conveniently accessing cash from their banks”.

He says the problem “came to a head” in 2023, “due to a confluence of factors”, which spurred the BOJ’s decision to develop and introduce the Standards.

Among these factors, the Deputy Governor shares, were security-related issues: attacks on armoured security vehicles and teams, which created logistical issues with the timely restocking of ABMs, and vandalism of some machines.

“All of this was happening at a time when the banks were in the process of upgrading the [ABMs] and their systems to accept and dispense the new [polymer] bank notes. Therefore, customers and the banks… faced a real problem. It was a concern for us, here at BOJ, and also a concern for the Government,” Dr. Robinson tells JIS News.

He points out that in the absence of the Twin Peaks model framework being pursued, for which development and implementation “will take time”, and given the urgent nature of the problem(s) at hand, “as a first step in developing his framework where we can provide adequate protection that addresses consumer needs, the Bank decided to begin to roll out these guidelines for service-level Standards”

“What we have set out to do… is to have a set of workable and, importantly, measurable service-level Standards, covering a range of customer-related issues. The Standards seek to minimise fraud or risks or incidents of fraud; they cover issues such as fees and charges, the deployment of machines, the security of the machines and the customers and, importantly, address issues relating to accessibility, particularly for the physically challenged,” Dr. Robinson outlines.

He informs that the Standards were jointly developed by the BOJ and FSC, with assistance provided by external market conduct experts from Australia.

“Importantly, they also reflect a culmination of a series of consultations with members of the Jamaica Bankers Association who, I will say, are also seized with the urgency of the problem. So, the Standards are very comprehensive and seek to address both critical pain points, and importantly, they seek to improve the customer experience,” Dr. Robinson adds.

Meanwhile, BOJ Deputy Governor, Dr. Jide Lewis, says a robust framework for monitoring DTI adherence to and compliance with the Standards is being implemented.

“Banks/DTIs are required, on a monthly basis, to submit to BOJ, detailed information on the performance of each of their ABMs across their network. That information will cover things such as whether or not those ABMs were operational during the reporting period, the percentage of time they were non-operational, information around cash availability – how much cash it dispensed [and] received – and also in terms of their recovery time, how long did it take for ABMs to be serviced in such a way that [they were] available to the public,” he outlines to JIS News.

Dr. Lewis, who has responsibility for the BOJ’s Financial Institutions Supervisory Division, indicates that this information will be aggregated and shared with the public on a monthly basis with a two-month lag.

“But we, at the Central Bank, would have that information one month after the results have been submitted,” he adds.

A statement issued by BOJ on the day the Standards were promulgated indicates that the DTIs have a nine-month transition period within which to bring themselves into conformity with all the new ABM guidelines.

Dr. Robinson says the BOJ deemed this timeline reasonable and a feasible window “for them to be in a position to start meeting the majority, if not all of the Standards”.

“It doesn’t mean that we are waiting on nine months to see improvements; in fact, we are already seeing improvements, for example in ABM up times. This is a comprehensive set of reforms and it will take time for the banks to implement systems and procedures to address some of these issues. So, they have a number of measures in place already but it’s going to take time to implement a number of others,” he further tells JIS News.

Meanwhile, Dr. Lewis highlights provisions under the Banking Services Act (BSA) to address non-compliance by DTIs after the nine-month transition period has expired.

“So, at that point, what we will be doing is seeking to do detailed reviews of each DTI in relation to their adherence to the guidelines. If we find widespread non-adherence, they will come under increased supervisory scrutiny, which could include onsite examinations. We’ll be looking, not just at what we see onsite but we will be using information that we have gleaned from the public to inform those reviews… where we review,” he tells JIS News.

The Deputy Governor informs that the BSA allows the Central Bank the latitude to effect certain actions where widespread non-adherence/non-compliance/non-conformity has been determined, noting that this falls in the area of safety and soundness.

“The BSA does allow us to, first, apply warnings to entities for them to address issues that are found in our onsite reviews. Secondly, it would allow us to issue directions to entities where we see widespread [non-adherence],” Dr. Lewis indicates.

He explains that widespread non-adherence may relate to, among other things, instances of weaknesses in internal control environments unearthed during reviews.

“So, this is where they may have policies and procedures which are not being followed, or weakness in their governance. So, is the Board aware of what is happening with this particular distribution channel? Are they holding senior management accountable for their ability to address the issues that are popping up?” the Deputy Governor shares.

Dr. Lewis adds that if widespread non-functioning of ABMs is discovered, “warnings, directions and follow-up actions will be taken”.

Meanwhile, Dr. Robinson tells JIS News that the DTIs have been “very supportive” of the Standards, noting that the Jamaica Bankers Association has indicated so publicly.

“We have been seeing improvements, certainly compared to the experiences last year… and when you look at the data that was published, you will see those improvements. A number of banks have met the benchmark for the number of ABMs in operation and also met the benchmark, in terms of the uptime,” he adds.

The guidelines are contained in a document, ‘Minimum Automated Banking Machines Service-Level Standards to Strengthen Consumer Protection for Customers of Deposit-Taking Institutions’, which has been published on the BOJ’s website, www.boj.org.jm.