FSC Executive Director Hails Jamaica’s Financial Regulatory Framework

Executive Director of the Financial Services Commission (FSC), Rohan Barnett, has attributed the insulation of Jamaica’s financial services sector from the contagion of the global economic downturn to the industry’s regulatory framework.
He said that the nature of the regulatory framework prevented the compromising of local institutions, consequent on the downturn which has resulted in the downfall of international financial entities like Lehmann Brothers and Merril Lynch.
Addressing Guardian Life Insurance Limited’s Stars Awards luncheon at the Terra Nova Hotel, Kingston, on Tuesday (Feb. 3), Mr. Barnett said that consequent on the framework, financial instruments which were heavily leveraged in other capital markets were not so advanced locally.
“Things that never made sense, but were sold wildly to investors, were not heavily leveraged in Jamaica, and that protected the institutions. So, from that perspective, score one for the regulator. I think (that for) the regulator and the regulated in Jamaica, their instincts were correct,” the FSC head stated.
Mr. Barnett, who represented Finance and the Public Service Minister, Audley Shaw, pointed out that Jamaica has a modern regulatory framework that provides a benchmark for other Caribbean countries. He added that it is continually being adjusted to keep pace with changes in international standards and practices.
He pointed out, however, that the current economic climate called for “creativity” within the financial sector, adding that “we don’t necessarily need to fall back and rely on the traditional regulations that remain on the books.”
He highlighted several pursuits which, he said, the FSC is collaborating with the Finance Ministry to implement. One such being the unit trust, on which there has been a longstanding moratorium.
“We are working to resolve that in the short run. We are very excited about the prospects of that happening within the first quarter of this year,” he said.
Mr. Barnett also said efforts are being made to re-establish the extent to which mutual funds can be issued by domestic issuers.
“There are a few hurdles, legislative and otherwise, that we have to overcome. But, given the incredible support that we have received from the (Finance) Minister, in this regard, I think that we have a real chance of getting that done this year, or significantly moving it forward,” he said.
Mr. Barnett said that investor education was another key area of focus from which the financial services industry can benefit. He said that investors must be educated to the extent of the venture or pursuit they are engaged in.
“We think (that) a lack of that education was the root cause of the patronage, in fact, the widespread proliferation of what we term UFOs, the unregistered financial organisations (in Jamaica). You will find that the more sophisticated your investors or policyholders are, the (more) likely they are to take advantage of the services and programmes that you offer,” he preferred.
In this regard, the FSC head is suggesting that industry stakeholders collaborate with the agency in a partnership that complements both sides and is not adversarial.
“I certainly don’t want to regulate in a vacuum. I don’t want to stand back and make rules that don’t apply and don’t help to drive your business and your industry, and move the process forward. At the same time, I don’t want you to put me in a position where I have to be unnecessarily aggressive in enforcing the rules. So, I think at the end of the day, the overall interrelation between the regulator and the industry has to be one that is complementary and cooperative,” Mr. Barnett said.